National minimum wage (NMW)
On 21 June the government named over 200 employers who had failed to pay some of their staff national minimum wage. This naming scheme was paused in 2018 whilst the government evaluated its effectiveness, but following the review report published in February 2020, the scheme has resumed.
We believe most employers do not intend to fail to meet their legal obligations and have inadvertently failed to pay minimum wage for one of the following reasons:
- Deducting pay for work costs which reduced their legal earnings (paying for training, parking, uniforms etc.);
- Unpaid overtime (which erodes the hourly rate);
- Failing to check for impact birthdays before processing payroll (a birthday may move individuals into a different NMW bracket).
The NMW rates take effect at the beginning of April every year, but increases are publicised months in advance to allow businesses to plan for those increases.
To ensure that you don’t fall into the trap of becoming a named and shamed employer who is paying below legal minimums to any of your employees, take action to review your processes. Not only do you have to pay back arrears and face financial penalties (capped at £10,000 per worker), but your reputation is likely to be affected and cause issues in retaining and recruiting employees and, potentially, clients.
Employment Law Reform
In May the government tabled an amendment to replace the current sunset clause in the Retained EU Law (Revocation and Reform) Bill. Instead, a list of retained EU laws which the government intends to revoke was published. The Secretary of State for Business and Trade has stated that the government “will not reduce workers’ rights and protections, nor will we repeal maternity rights”.
On 10 May the ‘Smarter regulation to grow the economy’ policy paper was published which announced significant employment law reform. After many years of legal challenges, the government has indicated it intends to make changes in relation to the calculation of holiday pay, as well as reforms to working time records, electing representatives in a TUPE transfer and non-compete clauses.
The government has still to consult on any proposals so specific details and when they will take effect have yet to be confirmed. However, some of the changes the government is expected to legislate for are:
- following the opening of a government consultation on reducing post termination non compete clauses 2.5 years ago, it is now proposed that non-compete clauses will be limited to a maximum of 3 months, significantly less than the average we see with many of our clients;
- make changes in relation to holiday pay to reduce the complexity and administration required to calculate holiday pay legally;
- remove the requirements for working time records to be kept;
- allow companies with fewer than 50 people, where any transfers will affect less than 10 employees, to consult directly with individuals rather than elect employee representatives.
If these changes go ahead, basic changes will be required to employment contracts and employee handbooks as a minimum.
The changes to non-compete clauses will also make employer’s efforts to keep employees engaged and motivated far more critical than it already is as individuals will have far greater freedom to change jobs. Employers who do not currently have garden leave clauses in their contracts may consult to introduce this as a different way of restricting certain individuals following notice being served.
Part of the proposals in relation to streamlining what is required to calculate holiday pay is the merging of the annual leave allowance which came from the EU i.e., 4 weeks, with the additional 1.6 weeks added when the UK confirmed their legislation to enact this requirement. Currently, holiday pay for the first 4 weeks must be paid based on average qualifying earnings (unless the contract of employment states otherwise), although the vast majority of employers appear to pay all annual leave at the averaged rate due to the administrative burden of splitting this out. The government is currently consulting on having a single rate of pay as it is acknowledged that the different rules which currently apply (to EU and UK holiday leave entitlement) makes this more difficult for employers. We’ll keep you posted, so watch this space!
An Increase in Redundancies Expected
In May, ACAS published the results of a survey on redundancies which showed that 30% of employers are likely to make redundancies within the next 12 months. The survey found that 41% of employers with at least 250 employees, and 20% of employers from small and medium sized (SME) businesses, responded to the survey to say they were likely to make redundancies within the next 12 months. This is significantly higher than the 30% of large employers and 10% of SMEs that said they were likely to make redundancies in 2022.
If you are considering any reductions to your workforce, it is important to ensure any redundancy process is managed carefully to reduce the impact on individuals, both those who stay and those who may ultimately be made redundant, as well as managing any potential risks to the business. If you would like to discuss the potential of making redundancies and what process may be required, please get in touch.
Government Rate increases from 6 April 2023
When considering the potential time and cost implications of following a robust process to manage absence, performance, redundancy etc., it’s important to consider the impact on individuals, the reputational impact within and out with the company, but also, the potential time and costs associated with defending any claim which may be more likely to come if things are not handled appropriately and with due consideration.
Compensation limits and weekly redundancy payments have increased to:
- Limit on a week’s pay for calculating redundancy and unfair dismissal basic award: £643
- Maximum basic award for unfair dismissal and statutory redundancy payment (30 weeks’ pay subject to the limit on week’s pay): £19,290
- Maximum compensatory award for unfair dismissal – subject to a maximum cap of a year’s pay: £105,707
Statistics on tribunal claim awards from 2021/2022
|2021/2022||Highest award||Mean award||Median award|
|Sexual orientation discrimination||£88,362||£32,360||£28,384|
We are seeing a rise in grievances raised in relation to sexual harassment and/or discrimination, disability and race discrimination. We recommend you review your policies and what actions you have taken as an employer to educate your workforce about what is and isn’t acceptable and expected in terms of their behaviours and what they may challenge or report if they see this in others. Tribunals will look at vicarious liability and consider whether the employer could have done any more to prevent or deal with the issue being raised.
If you would like to chat this through generally or in relation to any specific concerns, or you have policies which you believe should be reviewed or you would like drafted to kick start a review of these areas in your organisation, please get in touch.
A recent employment tribunal was held to hear the claim of pregnancy discrimination and unfair dismissal by a stable groom who claimed her employer, a leading female racehorse trainer, had terminated her employment and evicted her from her tied accommodation when they discovered she was pregnant. The claimant also advised that she had been forced to sign an agreement and was told it was binding. The agreement stated that she would leave her job and bungalow in return for a reference, wages and a letter to the council to help her secure accommodation.
The employer believed that a tribunal claim could not be raised because this agreement had been signed.
The details of the case were that the employee was 16 when she commenced employment in February 2019, she completed an apprenticeship with a mark of distinction and was retained in employment and provided with shared accommodation. She later became pregnant in June 2021, but there was no evidence of any issue with her performance until there was an altercation in September 2021, in which the father of her unborn child smashed the window of her accommodation and she was subsequently invited to disciplinary for gross misconduct. The employer alleged that her relationship with her partner had a ‘disproportionate effect on your ability to carry out your role and for others to have the confidence in you that is necessary…….for those reasons I believe that we need to bring your employment to an end….’. Following this, the employee’s access to her accommodation was blocked and therefore she would be pregnant, homeless and jobless at 18 years old.
In reviewing all the specific details of the case the judge found there was no credible basis for the disciplinary allegations brought and confirmed their opinion that the employer acted in bad faith and applied illegitimate pressure on the employee to induce her to conclude the terms of the separation agreement, a COT3 in this case.
In any settlement (COT3 or solicitor’s agreement), the specific wording is very important and ‘templates’ and/or blanket statements may not be appropriate or upheld by the tribunal if tested. It is essential, whether dealing with an employment lawyer or the ACAS advisor, to ensure all details of the situation are appropriately discussed and covered to ensure any potential future claims are understood and adequately covered. In all cases, we recommend getting legal advice from an employment lawyer even where you are concluding the settlement via a COT3 with ACAS.
Employers who have reached the stage of having a protected conversation with an employee and offering a settlement, can believe that the employee has no option but to accept the offer made. However, employees are never obliged to accept a settlement or COT3 and therefore the employer should always be prepared for what alternative process they will follow if that happens.
In this case, the judge declared the settlement agreement be ‘rescinded and set aside’, due to the employee having been put under pressure to sign it and ACAS not having been fully aware of all potential aspects of claim i.e., pregnancy discrimination, in order to advise the employee and draft the settlement appropriately.