You’re paid how much?!

Anna Moyle

 

If you’re a woman reading this…

… could you use your time better if you stopped and instead flicked through the job vacancies at Channel 5, Unilever UK or Ocado?

Why do I ask this, and why them?

The answer is that they are 3 of the very few companies (just 14% of larger employers) that have a gender pay gap figure in favour of women.

April 2018 was the first time that large (250 employees or more) private and public sector employers were required to make public their gender pay gap figures.

By the time the deadline had passed at midnight on 4 April more than 10,000 employers had published this data.

Nobody was surprised to learn that men are paid more than women.  The figures show that 3/4 of large employers pay their male employees more.  There is not a single sector where women can expect to be paid more than (or even the same as) men.

We’ve known for a long time that what women get paid, or rather don’t get paid, is an issue.  The Equal Pay Act was introduced in 1970 so has a claim as the oldest employment related legislation on the books (now incorporated into the Equality Act 2010).

But be careful before jumping to conclusions.  The aim of Equal Pay legislation is to ensure women are paid the same as men if they are carrying out work of equal value.  However the gender pay gap data does not measure this.  Instead, it reveals the salary gap between men and women based on median pay.

In other words if the men and women working at Ryan Air (a company that reported one of the largest gender pay differences) stood in separate lines in order of salary, the woman in the middle of her line earns 71.8% less than the man in the middle of his.

So the gender pay gap data says more about the preponderance of women in part time work and of men in more senior positions than it does about whether employers are breaking the law on equal pay.

So before you resign and apply to work at Unilever UK you need to factor in that their figures reflect the number of men in lower paid manufacturing jobs.  Ryan Air’s gender pay gap (albeit high even for the aviation industry) is also evidence of the fact that only 8 of its 554 highly paid pilots are women compared to 2/3 of its cabin staff.

Employers will have to publish the same information this time next year (and every year thereafter) so we should be able to monitor their progress, or lack of it.

However, 10% of large employers have still not complied with their obligations to publish data.  Commentators are also concerned that the ECHR does not have sufficient resources or powers to force reluctant employers to publish or punish them if they refuse (although its first investigation is apparently due to start in June 2018).

The system may not be perfect and the figures only reveal part of a complex picture, but no other country has initiated such a comprehensive data collection exercise on this issue.

The CEO of the Fawcett Society (which describes itself as the UK’s leading charity campaigning for gender equality and women’s rights) sees gender pay gap reporting as a “game changer” no less because it forces employers to look at themselves and understand their organisations and it prompts employees to ask some hard questions”.

The Equality Act in 2010 made it difficult for employers to enforce the (once common) contractual provisions designed to prevent employees from discussing pay.  With gender pay gap data easily accessible and the higher media profile being given to such issues, employers need to be prepared to have far more conversations with their (usually female) employees questioning their pay when compared with colleagues of the opposite sex.

Those conversations may not be easy for the employer. Just ask the BBC.

In the meantime the rest of us will be watching Ryan Air…

Compensation (and shared parental things) made (slightly) easy(ier)

WynLewis

For those of you who like to know such things, these are the new rates for the main statutory payments and for the new capped amounts for compensation from 6th April 2015 onwards.

The exception – one wonders why, but let’s thank the Government anyway for this extra layer of complexity – is that the SMP, SAP and ShPP rates apply from 5th April 2015 (i.e. one day earlier).

             

SMP/SAP/ShPP:

up to £139.58 (from £138.18) per week.
MA:

up to £139.58 (from £138.18) per week.
SSP:

       

up to £88.45 (from £87.55) per week from 6 April 2015.
National Insurance:

the lower earnings limit applying to NICs, below which employees are not entitled to SSP, SMP, SPP, SAP and ShPP, will increase to £112 (from £111) per week.
Week’s Pay:

up to £475 (from £464) (maximum)
Basic Award:

up to £14,250 (from £13,920) (maximum)
Compensatory Award:

up to £78,335 (from £76,574) (maximum)

                                       
And, for those of you who are puzzled (who isn’t?) by the Byzantine rules of Shared Parental Leave and Pay, you’ll be pleased to know that BIS has published an online calculator to help work out the entitlements to time off and pay on the birth of a child, taking account of existing maternity and paternity leave rights under the new shared parental leave scheme which will apply to babies due on or after 5 April 2015.
It’s here:  https://www.gov.uk/government/news/calculate-your-leave-and-pay-when-you-have-a-child   Enjoy.

 

Is Robin Hood alive and well? Clawbacks and bonuses

WynLewis

Have you ever wished that you could require an employee to pay back a cash bonus or give back an award of shares or some other form of variable remuneration (let’s call all of these a “bonus award” for the purposes of this blog) when things haven’t worked out as well as your organisation had hoped, or if turnover or profits are down, or if staff have misbehaved or underperformed?

Alternatively, have you ever breathed a sigh of relief when you saw your bonus award actually sitting in your bank account, rather than in the “vested, but not yet received” column of your mental bank account, and knew that it was now yours to use in all the ways you had promised yourself?

Your wish (as an employer) is increasingly likely to be granted or imposed; but your concern (as an employee) about whether you can go ahead and deal with your bonus award without worrying about having to pay it back is not just a nightmare, but is increasingly likely to become a fact.

This dilemma is, of course, the problem child of different parents. Those parents include the need for financial prudence and the curbing of risk-taking and short-termism since the 2007/08 global financial services crisis; the taking into public ownership of banks that still remunerate their staff at a level that most UK employees only dream of; and the bursting of the house price bubble and its effect on unemployment, inflation and economic failure, etc. Their child is the “Reward for Failure” backlash.

This has, meanwhile, manifested itself in various Remuneration Codes, which require major financial institutions to have remuneration policies that promote effective risk management by enabling a bonus award to be paid or to vest only if it is justified by reference to corporate and individual performance; and that an unpaid or unvested bonus award can be reduced in advance. These are called “malus” arrangements and are likely to be expanded with effect from 1 October 2014.

But further changes in the way in which bonus awards are payable are likely from 2015 onwards for companies that are regulated by the Prudential Regulation Authority (the spin-off from the Financial Services Authority that now supervises the day-to-day way in which banks, building societies, credit unions and insurers etc do business). These changes will supplement malus arrangements with clawback arrangements that (if the PRA’s proposals from March 2014 are implemented) should be in place with effect from 1 January 2015 in relation to all bonus awards that are made after that date, as well as to bonus awards that have been made before that date, but haven’t yet vested. Any clawback arrangements should also be able to “bite” on up to 6 years’ worth of bonus awards. The PRA’s consultation closed in May 2014, so any required changes are likely to be confirmed soon.

The big difference, of course, is that a malus arrangement can adjust a bonus award before it is paid or awarded, whereas a clawback arrangement can do so after it has been paid or awarded. Hence the nightmare: if I have to return the money, must I also return the Porsche that I bought with it?

All of this may be all well and good as a matter of principle. But what’s the legal and HR position? What do you (as an employer) need to do; and what you need your employees to do?

For regulated employers, particularly if you are in the financial services sector, you might expect things to be fairly simple:

  • Many employment contracts will already have a provision that enables a change to terms and conditions to be made;
  • Even if there is no such provision, the fact that the change is required by the PRA as a regulator should trump anything else;
  • Anyone who resigns and claims that a change amounts to a constructive unfair dismissal would probably lose, because “illegality” is a potentially fair reason to dismiss, and not implementing the change might be illegal, so the change will be required in order to avoid this; and
  • A contractual provision that permits a change to be made should also trump any claim that non payment of a bonus award amounted to an unlawful deduction.

So rich bankers probably won’t have much traction, even if they are contractually in the right. Even then, it’s doubtful that their concerns would attract much sympathy.

But the position may be more tricky for employers in different industry sectors, for which there will be no regulator’s requirement to make any changes, so not all of the bullet points above will apply.

Of course the “drip feed” effect of regulated companies on unregulated companies (many of which will, in any event, be quoted companies, or private companies whose shareholders are themselves regulated companies or high-end private equity houses that will already be subject to malus and clawback or, if not, want to “do the right thing”) is well documented and is likely to result in similar changes to their own terms and conditions of employment. The same effect is likely in relation to large players in the non-profit sector (who are regarded as holding on trust the charitable funds they collect from the public and the grants they dispense on behalf of Government). For these reasons, the clawback clause may become a general feature of all employment contracts for senior executives.

There are, however, at least five problems for HR professionals:

  • Any change to terms and conditions will normally require consent, especially if it relates to such a fundamental term as remuneration. This is a standard technical requirement of any variation to any contract, whether or not it’s a contract of employment. In this context, why should executives, like turkeys voting for Christmas, agree to these changes? If they won’t agree, then, unless an employer is willing to risk that a valued employee may not care about still having a job, there would have to be a notice of dismissal with a contemporaneous offer of re-engagement (on new “claw-back-the-bonus award” terms) to make the change effective, or (which would be ironic and partially self-defeating) a bonus payment as consideration for agreeing to the change

  • It’s difficult to recover money that has already been paid (unless it is set off against bonus awards that might have been payable in future years – which is itself a speculative exercise) because in most cases it will either have been spent or committed elsewhere (will there be an expectation that employers will have to sue their employees if they don’t repay what is due?)
  • There could be significant tax and NIC consequences that would have to be worked through (does the repayment obligation refer to the net amount received, or to the gross amount?);
  • Whether a clawback that’s triggered when someone leaves and goes to a competitor could be regarded as a draconian penalty clause or a trade restriction, and be unenforceable anyway;
  • How badly will imposing these changes affect employee relations, given that bonus awards are sensitive and there will be suspicion about whether employers are acting in good faith, requiring some careful strategy and communications.

You’ll see that all of this has the potential to become messy. So, employers, think carefully – and do take some advice – before doing anything you might regret later.

The changes to flexible working – nuisance or opportunity?

CarolineLeaver

On 30th June 2014, more employees will have the right to request flexible working.  Currently, an employee needs 26 weeks’ continuous employment, and the request must be to care for a child 17 years or younger (18 years if they are disabled) or for an adult. 

As from the end of this month, the only requirement is to have 26 continuous weeks’ employment, and the request can be to do anything from caring for a child to improving a golf handicap.  How will this affect the workplace?

Ultimately, this change is good for business: firms will be able to retain their best staff.  And it’s good for our economy: a modern workforce is a flexible workforce

Nick Clegg (Deputy Prime Minister) 12th November 2012

The workplace now is a different place to what it was only a few years ago.  Then, if an employee was on holiday, they were pretty much uncontactable and the first few days back would involve catching up on emails (or snail mail and faxes!) and on what had happened in the office whilst they were away.  Now, most office-based employees (based on a straw poll of colleagues, friends and family) regularly check emails on their phones whilst away and are up to speed on their return.  It is also far harder to ‘switch off’ outside office hours (with the exception, perhaps, of France, where there is a trend to require employees not to deal with work matters outside their contracted working hours) and there is a greater expectation on employees to ‘make themselves available’.

In light of this, it is not surprising that the quid pro quo is a right to have greater flexibility about how employees work – for example, by a change in working hours or place of work.

Although the extended right to request flexible working starts on 30th June 2014, many employers have agreed flexible working for all for some time, and things are not all bad.  There are in fact a number of reports and surveys to support the benefits of flexible working:

  • Productivity increased – CISCO in 2010 reported that employees who worked from home were 50% more productive than in the office and Sainsbury’s saw a 65% increase in bread sales in one store when staff developed their own flexible working schedule to meet customer demand.

  • Stress reduced – in a survey of 24,000 IBM employees those with workplace flexibility worked an extra 19 hours per week before reporting the same levels of stress as office-based staff.

  • Cost savings – BT estimates that 75% of its staff are on flexible work schedules and the cost savings are valued at over £70m a year.

  • Recruitment and retention – PwC’s 2010 report ‘Managing Tomorrow’s People’ found that the top benefit sought by professionals in the UK was flexible working.

Those employers who find flexible working enhances their businesses see flexible working not just as a policy, but as a different way of working for all.  However, flexible working will not suit all roles in a business and each request must be considered on a case by case basis.

There are some key elements to consider when looking at flexible working in your business:

  • Infrastructure – ensure you have the IT that allows employees to work outside of the office with ease.  If an employee who is working from home one day a week cannot get onto the IT system then this arrangement will not work and will be frustrating for both employer and employee.

  • Communication – have a consistent approach and do not neglect face to face meetings.  An issue with employees working from home is that there is less face time with the team. Spontaneous ‘chats around the water cooler’ can be very productive and by not being in the office, this can be lost.  Ensure that the lines of communication are open between colleagues as well as line managers and reportees – try ‘Skype’ ‘face time’ and regular meetings as a team in the office.

  • Establish clear rules and expectations – flexible working is often one-way and is criticised for being inflexible i.e. the person leaves the office at 1pm leaving unfinished work to be picked up by disgruntled colleagues.  It is important to lead from the top and agree new ways of team working so that this type of scenario is avoided and that any issue like this is picked up quickly and dealt with before it becomes a much bigger problem.

  • Reviewing – don’t forget that any changes can be made on a trial basis and then refused if they don’t work out; but that any changes that are then confirmed will permanently change the employee’s terms and conditions from then on (unless there is a further agreement).

Now that the right to request flexible working is extended to all, what about competing requests for flexible working? How are they to be dealt with?

What if on a Monday morning, three reports carrying out the same role ask for part-time working?  One employee has requested it in order to look after her child who is 18 months old, another has requested it because he is finding the daily commute harder now that he is 65 years of age, and the third would like time to work on a volunteer basis for a charity helping disadvantaged urban foxes. 

If the employer is unable to accommodate all the requests, should they give preference to requests from certain groups i.e. parents?  The Government decided against prioritising, as this would not show that flexible working is for all, not just parents and carers, and could be counterproductive.

So, as there is no scope for prioritising requests, an employer can take into account any features of a flexible working request that it wishes, such as caring obligations or accommodating a disability, that may limit the employee’s ability to vary the working arrangements they have requested.  This is unlikely to allay fears among employers that they can leave themselves open to allegations of discrimination where they prioritise some requests over others.

The Acas Guide makes the following observations and suggestions:

  • When an employer receives more than one request, it is not required to make value judgments about the most deserving request. It will need to look at each request on its merits in the context of its business.
  • Requests should be considered in the order in which they are received. It may be possible to grant all of them. However, before making a decision the employer will need to consider the impact on its business of doing so. The employer will also need to remember, having accepted the first request, to take account of the changes this will make to the business context when looking at the next request.
  • Alternatively, the employer might want to have a discussion with each of the employees to see whether, with some adjustment or compromise by all of them, each can be accommodated. If this does not provide a solution, the employer may want to consider the position of those members of its workforce that already work flexibly and consider whether with some adjustment or compromise on their part (should they be willing to vary their arrangements) everyone can be accommodated.

Inevitably in the above scenario the employee who cares for disadvantaged foxes is unlikely to have their request granted over and above the other two employees who could have potential sex and age discrimination claims against the employer.   However, perhaps in the future, the working world will have moved on even further so that concerns over competing requests are a thing of the past.

Collective Consultation – the latest instalment on when to do so

Anna Moyle

When will employers who want to make redundancies have to consult on a collective basis?

We don’t know.

But the European Court of Justice has been asked to consider the Woolworths case.

So we still won’t know for some time.

The Court of Appeal has referred the case of USDAW v Ethel Austin Ltd  to the European Court of Justice. The case is more commonly known as “the Woolworths Case” and is potentially of great significance to any employer who may want to make 20 or more employees redundant.

Depending upon what the ECJ says, such redundancy exercises may be far more likely to trigger the requirements of collective consultation, and employers may have to consult for longer, and more widely, before any redundancies can take effect.

To recap: when Woolworths and Ethel Austin went into administration in 2008 it was necessary to make most of the work force redundant. Current UK legislation (TULCRA 1992) requires an employer to consult on a collective basis when it is “proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less“. In line with what had been accepted practice for many years each Woolworths store was considered to be “one establishment”. As a result there would only be a requirement to consult collectively in those stores that had more than 20 employees. In fact the administrator did not carry out any consultation at all. However, it was only those employees who worked at the larger stores (i.e. with 20 or more employees) who were found by the employment tribunal to be entitled to protective awards (of between 60 and 90 days’ actual pay). This meant employees who had worked out of the smaller stores, which were sometimes only a short distance from the larger stores, missed out. The USDAW union appealed on behalf of these employees.

Following a hearing in May 2013, the Employment Appeal Tribunal ruled that employers should not be able to dodge collective consultation obligations by scattering redundancies around different locations. This decision was reached on the basis that the words “at one establishment” in TULCRA are inconsistent with the relevant EU Collective Redundancies Directive 98/59/EC and so a purposive interpretation should be applied to TULCRA. The immediate result of the EAT’s decision was that 1,210 former employees of Ethel Austin and 3,233 at Woolworths became entitled to a protective award. With these companies having gone into administration, and the tax payer  being liable for the bill, the government appealed.

The Court of Appeal has decided to ask the ECJ to consider 2 distinct issues; the construction of the relevant provisions of the EU Collective Redundancies Directive (in particular the meaning of “establishment”) and whether the Directive has direct effect against the Secretary of State. It is likely that the ECJ will hear the case at the same time as another one dealing with similar issues and referred by the Northern Ireland Industrial Tribunal (Lyttle and Others v Bluebird UK Bidco 2 Limited).

What the ECJ says will be of great importance for all employers with 20 or more employees, so watch out for further updates. In the meantime, when deciding whether the requirement to consult on a collective basis has been triggered, prudent employers should disregard the issue of whether or not the employees at risk are based at the same location.

 

Zero hours contracts still in the news

Anna Moyle

Anyone who read my last blog on zero hours contracts may have been surprised to hear recently that a bill aimed at banning the use of such contracts will shortly have its second reading before parliament. Don’t worry. The Zero Hours Contracts Bill is a private members bill and so is unlikely to become law.

The Government is still seeking views on the use of such contracts until 13 March and has already indicated that it is not minded to ban the use of such contracts.

For anyone interested in these things the wording of the private members bill is now available to read, here:-

 http://services.parliament.uk/bills/2013-14/zerohourscontracts.html

Guest Briefing Note – Cummings Law on Taxation of Partnerships and LLPs

CarolineLeaver

We are delighted that Cummings Law has contributed to our Briefing Notes this month.  Cummings is a boutique law firm specialising in funds and fund management, offering a dedicated, bespoke legal service. The firm also provides legal advice on financings, both secured and unsecured and offers specialised legal advice for start-ups, existing funds and fund managers.

Cummings’ have prepared a briefing note on taxation of Partnerships and LLPs – Guest Briefing from Cummings Law on HMRC taxation of Partnerships and LLPs.  New Legislation is being introduced in the draft Finance Bill 2014 affecting the taxation of partnerships and LLPs, including changing the treatment of a salaried member from a member to an employee where the following conditions are met:

  1. the member will perform services for a ‘disguised salary’ i.e. fixed or variable salary if, in the case of variable, the variation is without reference to or in practice unaffected by the profit or loss of the LLP,
  2. the member has no significant influence on the affairs of the LLP, and
  3. the member’s contribution to the the LLP is less than 25% of the ‘disguised salary’ which it is reasonable to expect that the LLP will pay to the member in the relevant tax year.

This will have an impact on professional firms and property companies where it is not unusual for the salaried partners to be treated for tax purposes as self-employed yet receive a fixed salary but in every other way treated as an employee.  Under these new rules the LLP will be required to pay Employers NI and the employee will be taxed at the appropriate rate.  However, the cost of employing the salaried member will be deductible from the LLP’s profits.

Taxation of termination payments – work longer and save tax?

WynLewis

Could employers save some money, and could employees save income tax, if the recommendations of the Office of Tax Simplification (“OTS”) about the taxation of termination payments are followed?  “Don’t Hold Your Breath” is the current answer.

The OTS is a little-known Government-sponsored department.  It was set up in 2010.  Its purpose is clear from its name.  The fact that it exists is regarded by many people as a Good Thing.  It comprises a small group of experts, with its core team being supplemented or changed every so often, depending on whatever the OTS is focusing on at the time.

Recently the OTS published an interim report that covers Termination Payments.  Whereas the tax treatment of Termination Payments had, for many years, been relatively straightforward (tax free up to £30k, with only basic rate income tax and no NICs being deducted from the excess) it has become increasingly complicated to apply.

Those complications include: the applicability of the 0T Code since April 2011; the need to distinguish between a payment as genuine compensation for loss of office and a PILON; whether to deduct NICs; the foreign service rule; how to treat a payment being made on (or when thinking about) retirement, or in exchange for signing up to new restrictive covenants, or on redundancy; whether a Termination Payment is actually damages for breach of a contract and how this affects its treatment; how the value of non-cash earnings (such as benefits) should be added into the taxable element of any termination arrangement; when to issue the P45 (and the consequences of that timing); and how to set out all of this in a document that doesn’t itself cause additional problems.

All of these bring their own challenges to employment lawyers, HR professionals and tax personnel, including HMRC itself, which many employers find less than helpful and often slow or uncommercial in circumstances when quick guidance is needed.

The OTS has acknowledged all of these complications (and some others too).  It has also suggested that the £30k limit be increased to more than £70k to be more representative of what the £30k exemption meant when it was first increased to that amount some 25 years ago in 1988.  But it has also noted that the reduction in tax revenue that would result from increasing the exempt amount might result in a need to introduce NICs (as well as pay income tax) on the amount that exceeds the tax free slice.

Has the OTC done anything more than this?  No, it hasn’t.  Because it can’t.  But it has recommended that the entire policy behind having an exemption should be clarified.

Whether a simplification of the tax treatment of Termination Payments will fall under the Government’s general desire to cut red tape remains to be seen.  There is also an election looming in the next few years, so increasing tax free payments to people who might be regarded as undeserving “fat cats” might not be politically astute.

Wages: up, up and away (in part):

WynLewis

 The latest increase in the National Minimum Wage took effect from 1 October 2012.  These changes tend to made annually, following recommendations from the Low Pay Commission.  There are four types of minimum wage.  These (and their hourly rates) are as follows: (1) the standard adult rate (workers aged 21 or over) increases from £6.08 to £6.19; (2) the development rate (workers aged between 18 and 20 inclusive) stays the same, at £4.98; (3) the young workers rate (workers aged under 18 but above the compulsory school age who are not apprentices) stays the same at £3.68; and (4) the apprenticeship rate (apprentices under 19 years of age or those aged 19 and over in the first year of their apprenticeship) increases from £2.60 to £2.65.  For those employees (such as in catering and leisure) who provide staff with free accommodation, some of its value (known as the “accommodation offset”) has increased from £4.73 to £4.82.  But remember that you cannot offset more than the accommodation offset limit