Cost of living crisis
Inflation is now at its highest rate in over 40 years, largely contributed to by the continually rising prices of utilities, food and fuel. We are hearing from a variety of businesses, from small, local firms to multi-national corporations, about how they are approaching the cost of living crisis by providing additional financial support to staff.
This varies widely from one off payments varying between £500 and £2000, to commitments to pay differing monthly amounts over the next few months, with one committing to pay top up payments up to July 2023.
Recognising the financial pressures on employees and the ongoing pressures on recruitment and retention for every business, many similar schemes have been widely reported including:
- Amazon (employing c. 34,000 – UK) are paying some of their workers £250 in October and again in December
- Atradius (employing c. 426 – UK) paid employees (including interns and those on temporary contracts, but excluding Executive Managers) £1,600 in October, meaning 99% of the workforce received the payment. This followed pay increases of between 4.75% and 7.25% in April.
- Barclays brought forward their annual pay review from March 2023 to August 2022 for 35,000 lower paid staff and increased this groups pay by £1,200 per annum.
- Cartwright & Butler, a local business in Yorkshire employing 50 people, committed to additional monthly payments which will equate to £1,800 per year for all employees, in addition to pay rises.
- Despite reporting a £99 million half year loss, John Lewis (employing c. 80,000 – UK) have paid £500 to full time staff and a pro rata payment to those working part time. In addition, they have increased their entry level pay by 4%.
- MoneySuperMarket (employing c. 860 – UK) gave half its workforce a one-off payment of £2,000 in September. The payment went to all employees earning £55,000 per annum and below.
- Virgin Media 02 are giving support payments to all employees whose basic salary is £35,000 or below. A first payment of £400 will be made in November followed by another £400 in January 2023 and £100 per month every month thereafter until July 2023.
It has recently been reported that King Charles III has committed to support the hundreds of individuals employed at Royal Palaces across the UK, with one off payments in November. Those earning under £30,000 will receive £600, between £30,000 and £40,000 the payment will be £400 and over £40,000 to £45,000 a £350 payment will be made.
Non Cash Support
Not every business can commit to the type of payments reported by the various companies noted, but many are looking at what they can do in terms of helping to ensure their employees feel valued in an attempt to raise morale and increase retention in a time of high demand for workers:
Hays Travel have introduced a Thank You initiative where all employees are entered into a monthly prize draw. Winners so far have won a car and a choice of cruise worth up to £5,000. The September prize was for the winner’s bills and mortgage payments to be covered by the Company until March 2023!
The prizes on offer from Hays Travel are not achievable for all, but for organisations who cannot commit to monthly payments to assist staff, they could consider a similar prize draw with more manageable prizes, perhaps including supermarket vouchers. (Ensure you work with your tax experts to understand any tax implications for employees if providing any additional payments or gifts).
Other non-cash support can include efforts to ensure staff feel that their employer is understanding of the difficulties they may be facing. Different employees have different circumstances, so it’s not always easy to know how the cost-of-living crisis may be impacting on each individual. People may appear well paid but have significant outgoings for a variety of reasons i.e. care costs for children or parents. Some employees may be significantly impacted by the cost of travel to work and increased flexibility around working from home could support them. Others may be impacted most by the rising costs of utilities and may wish to work in the office full time to reduce the requirement to heat their home. Employer flexibility around remote working proved to be effective during the lock down period of the pandemic and could be useful again during this time of extreme and conflicting demands on employee finances.
Work pattern
As employees grapple with the continuing increase in cost of living, some who wouldn’t have considered it previously, may be looking at taking a second job to boost their income. Primary employers could consider that a consolidated working week for their employee, for instance carrying out contractual hours over 4 days, may support an employee in this situation, to take a second job on the 5th weekday and allow them to be mindful of the Working Time Regulations and continue to have appropriate weekly rest so they don’t suffer any subsequent drop in performance. Given the increasing number of individuals considering this option, it is recommended that employers review their contracts in relation to the requirement for employees to request approval for secondary employment. This ensures you can follow a process to ensure that any proposed secondary employment will not create any conflict of interest for your organisation.
Employee Assistance Programmes
Employee Assistance Programmes (EAP) will typically include a phone line and web accessed, confidential support across a wide variety of topics, including health, wellbeing and financial advice. This can help employees deal with personal issues which may adversely impact their work performance. Life Insurance is a fairly low cost and widely provided benefit in the UK and many providers give you access to an EAP as part of your membership. If you have this insurance and don’t currently have free EAP services with it, this may be the time to review your provider in order to have this additional benefit for staff at no extra cost to the business.
Overall, in the current economic climate where employees may be dealing with increasing pressure outside of work, their employer demonstrating an acknowledgement of the current crisis and the impact on its employees, is valuable in terms of helping retain staff and recruit new employees. Now is a time when it is important to communicate with individuals on a case-by-case basis and maintain flexibility in your approach to support.
Holiday Pay
When an employee takes a holiday, some employers still struggle to identify what pay they should receive. In 2015, following a number of court decisions, legislation surrounding the payment of holiday pay was clarified in relation to the rate of pay that an employee is due when they take a holiday. The clarification confirmed that workers must be paid at the rate of “a week’s pay” for each week of their statutory annual paid holiday entitlement. Under the Employment Rights Act 1996, a week’s pay is how much money an employee would be paid under their current employment contract if they worked their normal working hours for a week. This means that in addition to basic salary, this should include regular pay elements such as overtime, bonus, commission and any other applicable allowances for going offshore or being on-call, for example.
In the UK, the Working Time Regulations 1998 state that all employees must receive at least 5.6 weeks paid holiday per annum, this is made up of 4 weeks paid holiday entitlement which is derived from EU law, and 1.6 weeks paid holiday entitlement which is derived from UK law.
EU law stipulates that the 4 weeks of paid annual holiday entitlement allowed for must be calculated based on the employee’s normal remuneration i.e. their average qualifying earnings over a 52 week reference period. For the additional 1.6 weeks, these findings do not apply.
At the time the legislation was clarified, many employers chose not to apply the average qualifying earnings rule as required by law. This is now being increasingly challenged by employees, resulting in the requirement to review and process any backpay to avoid claims for unlawful deduction of wages. In some cases these back payments go back for the full 2 years allowed for, and is dependent on the duration of breaks between periods of holidays taken by an individual. If you have concerns that you may not be processing holiday pay appropriately and need support in relation to updating documentation and planning a process to correct any underpayments, please get in touch.
IR35 Reform
In our Q3 update we covered the fact that in the governments ‘mini budget’ on 23 September 2022, it was announced that the changes to IR35 rules introduced to the public sector in 2017 and the private sector in 2021 would be repealed. However, a short time later this announcement itself was repealed by Jeremy Hunt when he replaced Kwasi Kwarteng as Chancellor of the Exchequer.
Employment Tribunal
A part time teacher with 24 years’ service at a private school, was summarily dismissed by email without any process being following, after she replied to email correspondence which had been sent to all staff on Saturday 11th December 2021 advising their attendance was essential at a meeting on Monday 13th December 2021, a non-working day for the employee concerned, to advise she could not attend the meeting as she had plans to meet her sister who was travelling for this purpose on the 13th. Further correspondence on the matter continued and in an email on Sunday 12th December, the owner of the school, who had taken it over in 2017, responded with an email stating ‘resignation accepted’. Following a response from the employee to clarify she had not resigned, the owner of the school advised that the email was formal notice that her employment would cease and she would be paid up to the February half term but was not required to attend at the school again. On 13th December the teacher asked via email for a statement of reasons for her dismissal, no response was received. A further request for this information and confirmation that she would receive payment for her full statutory notice was made on 16th December with the line manager copied in as well as the owner, with an additional notification that she wished to appeal the decision. The owner responded that day advising the teacher she would be paid in accordance with her contract, a document he had issued in 2020 and which remained under dispute, but failed to comment on the reasons for dismissal or right of appeal.
During the tribunal the owner made claims that the teacher would have received written warnings for her conduct previously if he had done things by the book, but failed to produce evidence to support his criticisms of the teacher. In his evidence the owner did confirm that despite a comprehensive policy being in place which noted the need for investigation etc., he did not think an investigation or hearing was necessary, he did not consider any alternative actions and that he did not confer or discuss the matter with anyone else as “I am the employer, the person that pays your wages, I’m top of the line manager”.
The tribunal found that the shortcomings in the respondent’s approach were wide ranging, with failures to gather evidence, allow the claimant to represent herself or properly consider and make findings regarding the failure to attend the meeting. No mitigating factors were considered, it was found that a reasonable procedure would have properly considered whether the details demonstrated that the employee had failed to comply with reasonable instructions taking into account all relevant factors. The tribunal found that the short notice request for the employee to attend a non-specific meeting on her day off and after she had finished for the end of term was not a reasonable request.
The tribunal ruled that dismissal was outside of the range of reasonable responses by an employer for an employee’s failure to attend a meeting at short notice on her day off, therefore her claim of unfair dismissal was successful. When considering whether the dismissal had been in the range of reasonable responses to the conduct issue, the tribunal took account of the fact that an appropriate process was not followed, the employer failed to provide written details of the reasons for dismissal, consider any other sanctions and did not confirm that minimum statutory notice of 12 weeks would be given. None of these matters were corrected by the employer as the employee was not provided with the right to appeal.
In addition to the finding of unfair dismissal the tribunal found that there had been breach of contract as the statutory minimum 12 weeks’ notice had not been provided.
It is yet to be reported what has been awarded to the employee who made the claim in this case, but it demonstrates how tribunals view an employer’s failure to act reasonably. The employer in this case claimed there had been various issues with the employee over the previous 4 years, however, there was no evidence of this. This demonstrates the importance of appropriate documentation of any conduct or capability issues. If you are in any doubt about how best to deal with a situation or how to appropriately document discussions and actions, please don’t hesitate to get in touch.
2023 changes
The usual set of rate increases will take place next year, most of which are effective from April:
- National Minimum Wage (NMW) and National Living Wage (NLW) rates will increase on 1 April 2023. The Real Living Wage rates (currently £10.90 across the UK and £11.95 in London), which are currently paid on a voluntary basis by 11,000 employers across the UK, typically increase from November each year, although this was brought forward in 2022 due to the cost-of-living crisis. The new NMW and NLW rates will be as follows:
| Rate from April 2023 | Current rate (April 2022 to March 2023) | Increase | |
| National Living Wage | £10.42 | £9.50 | 9.7% |
| 21-22 Year Old Rate | £10.18 | £9.18 | 10.9% |
| 18-20 Year Old Rate | £7.49 | £6.83 | 9.7% |
| 16-17 Year Old Rate | £5.28 | £4.81 | 9.7% |
| Apprentice Rate | £5.28 | £4.81 | 9.7% |
| Accommodation Offset | £9.10 | £8.70 | 4.6% |
- It is expected that increases to Family leave pay and Statutory Sick pay will be announced in December 2022. Family leave pay increases are normally effective from the first Sunday in April and Statutory Sick pay from 6 April.
- The Health and Social Care Levy which was introduced 6 April 2022 was processed as an increase to national insurance contributions (NICs). However, when HMRC has made appropriate changes to their IT systems, the new tax will become a 1.25% surcharge replacing the NIC increase.
- For organisations with a headcount of 250 or more employees, gender pay gap reporting deadlines will be 30 March 2023, with a snapshot date of 31 March 2022 for public sector employers, and a 4 April 2023 deadline for private sector and voluntary organisations, with a snapshot date of 5 April 2022.
