If an employer deducts the cost of traing from a departing employee's pay, can it fall foul of the minimum wage regulations?
In DLA Piper’s latest case report, the Employment Appeal Tribunal (EAT) considered whether or not national minimum wage legislation was breached when a deduction was made on termination of employment for the repayment of the cost of a training course.
National minimum wage and training costs
Commissioners for Revenue and Customs v Lorne Stewart plc
When determining whether or not an employee has received the national minimum wage, certain payments and deductions must be taken into account when calculating the employee’s average hourly rate of pay.
Regulation 33(a) of the National Minimum Wage Regulations 1999 provides that “any deduction in respect of conduct of the worker, or any other event, in respect of which he (whether together with any other workers or not) is contractually liable” should be excluded when calculating whether or not the employee has received the national minimum wage.
The question in this case was whether or not the deduction of the cost of the training course should be taken into account when calculating the employee’s average hourly rate for the purpose of calculating the national minimum wage.
HR analytics offers huge opportunities for organisations, but getting started can be daunting. Michael Carty reports from last week’s CIPD HR analytics conference.
HR can and must “seize the data”. This is according to Dr Giles Slinger of OrgVue, host of the CIPD HR analytics conference in London.
HR analytics involves using multiple HR metrics to gain insights and inform decisions. It can create “an opportunity for HR to take a new role in the business world,” Slinger told delegates. Through analytics, HR can use data to help drive organisational success. This in turn can help build HR’s strategic influence.
The apparent complexity of HR analytics can be off-putting to many in the profession. But it need not be.
The independent body that advises the Government on the national minimum wage has recommended that the adult rate, which applies to workers aged 21 and over, should increase to £6.70 from October 2015.
With the Bank of England forecasting the consumer price index (CPI) for 2015 at 0.5%, this above-inflation increase in the minimum wage would be the largest rise in real-terms wages in eight years.
Commenting on the recommendation, David Norgrove, chair of the Low Pay Commission (LPC), said that he believed “the continued recovery, and, in particular, the impressive growth in employment of the low paid, should this year allow a further increase in the real and relative value of the minimum wage.
Individual claims are thought to be worth around £36,000 each, although the highest could be worth more than £100,000, it has been reported. In total, it could face costs of almost £10 million if the claims are successful.
The employees were excluded from a bonus scheme that paid out around £160 million in shares to 2,000 of its permanent workers in 2013.
A group of around 30 workers will be the first to seek compensation, having approached law firm Leigh Day, which has also acted on behalf of Asda workers on equal pay claims.
The lawyers claim that the Sports Direct employees on the zero hours contracts are due more than £1 million in compensation after missing out on the bonuses. All of them have a minimum of five-and-a-half years’ employment at the company, despite being on the controversial contracts.
A further 268 workers have approached workers’ rights group Pay Justice to seek compensation on their behalf, and are thought to have worked for the company for even longer.
This is not the first time the sports retailer has come under scrutiny for its hiring practices. Last October, it was forced to rewrite all job adverts and employment contracts after an employee brought a claim for sex discrimination, unfair treatment and entitlement to holiday pay.
It stands to reason that, as the overall employment market returns to health, then demand for HR professionals will also increase. Whether you are looking for a new role in 2015 or just want to know what the key trends will be, Personnel Today has picked out five key areas that will influence HR recruitment this year.
According to several research reports in the past 12 months, skills shortages in the UK are hampering productivity and holding back the pace of recovery.
At the end of last year, Kevin Green, chief executive of the Recruitment and Employment Confederation (REC), said that there were 43 areas of skills shortage, compared with just nine in 2013.
In his look ahead to 2015, CIPD chief economist Mark Beatson echoed these concerns, warning that the UK’s productivity puzzle remained an urgent issue for policy makers.
In November, the Government put forward recommendations to deal with skills gaps in its “Growth through people” report, including greater integration between schools and employers, and greater access to secure work as opposed to low-paid, fixed-term jobs with few future prospects.
HR professionals have a role to play in this through effective workforce planning and taking a longer-term view of progression at work, rather than only looking to fill roles when they are vacant.
Employers such as Barclays and Nationwide are already bridging the gap between school and employment through apprenticeship and other youth employment opportunities. Employees can see where these early roles will take them, rather than using them as stopgaps to another career.
From a recruitment perspective, a pressing need to address these issues will fuel demand for professionals with experience in leading youth employment initiatives and also those who have led diversity projects and widened…
With the ability to manage and interpret data becoming increasingly vital for HR professionals, new analysis from XpertHR Benchmarking reveals the five most valuable HR data sets for 2015.
The slide show above displays the five most frequently accessed HR metrics by users of XpertHR Benchmarking over the past year – including the mean, median and upper/lower quartiles – plus an overview of the headline readings on these metrics from XpertHR’s key benchmarks dashboard.
How should employers account for commission and overtime when calculating an employee’s holiday pay? In this live webinar, Darren Newman helps employers make sense of their legal obligations regarding paid annual leave.
Drawing together important holiday pay cases from the UK courts and Europe, including last year’s Bear Scotland case, Darren explains how employers should now be calculating their employees’ holiday pay. He also offers practical guidance on handling issues where legal uncertainty remains.
In addition to providing an essential round-up of the law on holiday pay, key areas covered will include:
· overtime and commission – calculating holiday pay and the impact of recent case law;
· the effect of sickness absence on paid annual leave;
· in what circumstances employees can carry over their annual leave; and
· holiday pay on termination.
This 60-minute webinar, presented by XpertHR in association with Personnel Today, includes a live Q&A session, allowing you the chance to ask Darren your questions.
More than one in three workers plan to change job this year, double the proportion with the same ambition last year, according to new research.
It is important that employers realise that it’s likely they will have to work harder to keep their talented employees” – Charles Elvin, ILM
A survey by the Institute of Leadership and Management (ILM) suggests that 37% of workers and managers plan to leave their current jobs, a significant increase on 2014 (19%) and 2013 (13%).
Three-fifths (59%) of those polled said that increased opportunity of progression was their motivation for seeking a new role. A similar proportion (56%) said better pay was their reason.
Charles Elvin, ILM chief executive, said: “The New Year is always a popular time for workers to look ahead. With an improving economy and more fruitful job market, it is important that employers realise that it’s likely they will have to work harder to keep their talented employees.
“This means prioritising managing the talent pipeline within the organisation to make sure staff have opportunities to develop and progress.”
Profound changes to the demographic of working people are taking place. Employers should not ignore this and must ask themselves how they will adapt and provide for an ageing workforce.
The Office for National Statistics predicts that there will be 3.7 million more workers aged between 50 and state pension age over the next decade. During the same period, there will be 700,000 fewer working people aged between 16 and 41.
Training and development
A recent survey of small to medium-sized businesses showed that most employers agreed that training and skills development is critical in ensuring that mature employees can work effectively up to the age of 60 and beyond. They also agreed that such training represented a good return on investment because those employees are more likely to remain engaged with the business.
When it comes to training and development, employers should always comply with their legal obligations on age and disability under The Equality Act 2010. They should offer training and development to their whole workforce rather than targeting a particular age group. ACAS guidance states that an employer should avoid stereotypes and not make assumptions about an individual’s needs based on their age or length of experience.
An Age UK report in 2013 said that, for the first time, the number of people aged 65 and over who had used the internet had overtaken those who had never used it. Stereotyping older workers as not being “tech-savvy” for example may be factually incorrect as well as being discriminatory.
An employer might come across resistance to training from older employees, who may think there is little point in engaging with training and development so close to retirement. ACAS guidance confirms that employees do not have to undertake further training, but that if their performance is below what an employer would expect of them, then the employer can insist that they undertake it.
An employer does not have to tolerate an employee who is not performing satisfactorily. The key here is that where there is an underperforming employee, an employer should challenge the behaviour and not be afraid of going down the disciplinary route, while at all times treating employees consistently.
Some businesses are offering pre-retirement training, where they inform employees of things they may need to think about in the run up to retirement, such as financial planning, benefits and pensions or maintaining a healthy lifestyle. An employer needs to be careful not to only target people they consider are close to retirement.
Health care and age at work
According to the Department for Work and Pension’s “Fuller Working Lives” document, half the people aged between 50 and state pension age have a long term health condition. The Mental Health Foundation says that depression affects one in five older people and that 70% of new cases of depression in this age group are related to poor physical health.
Health and wellbeing initiatives from employers will generally benefit a workforce, but on the basis of the statistics above, these initiatives will have a significant impact on older workers. It is important to note that when we are talking about health and wellbeing we are not just talking about the health and wellbeing of the employee themselves, as they might also be caring for elderly relatives, for example. According to the TUC study “Age Immaterial”, 49% of women over the age of 50 are caring for a parent, while 39% are caring for a child. With changing demographics, it is more common to see “sandwich” carers, who care for a parent as well as a child or grandchild.
The obvious burden for employers providing healthcare benefits to employees is the cost involved, but lost working days, staff turnover and lower productivity cost the UK economy up to £26 billion each year. This equates to roughly £1,000 per employee. This seems to be a good statistic to use to get the attention of a sceptical finance director. BT reported in 2012 that its mental wellbeing strategy had led to a reduction of 30% in mental-health-related sickness absence.
If you are an employer planning to positively engage with the health and wellbeing of your workforce, make sure you do so in a non-discriminatory manner. The initiative should be rolled out across the entire workforce and not targeted at particular age groups.
Age discrimination in goods and services
The Equality Act prohibits discrimination by service providers as well as by employers. For example, if an employee is sent on a training course and they experience discrimination by a trainer, this may give rise to a course of action against the training provider. Alternatively, if the individual is not allowed to go on that course, this may give rise to a claim against the employer for failing to give an employee access to that service. This raises the key question of who is responsible for any alleged discrimination.
After the default retirement age was abolished, employers feared a wave of age discrimination claims if they were unable to provide health insurance, life insurance and income protection benefits for employees aged over 65, either because such benefits were not available or because they were particularly costly. The Government listened to these concerns and there is an exemption in the Equality Act which states that it is not discriminatory for an employer to fail to provide insurance services with a third party in respect of employees who reach or who are over the age of 65 or state pension age.
This hard-edged exemption does not apply if the employer is itself in business as an insurer. Employers who self-insure will need to show that the curtailment of cover at age 65, or state pension age if higher, is justified. The hard edged exemption saves an employer the difficulties of attempting to justify their position on the grounds of cost (which is still legally problematic).
Pension, retirement income, death benefits and age at work
A survey from financial website This Is Money found that those closest to retirement manage their finances most conservatively, but once they retire, they tend to be less conservative with their spending.
Many employers predict they will play a greater role in providing for and assisting with the retirement planning of their workforce. A recent survey from Pensions Insight found that 38% of employers felt a very high responsibility for the financial wellbeing of their workforce and 71% will be making changes to the retirement options for their defined contribution arrangements.
This year’s Budget “controversially” announced that from April 2015, individuals over the age of 55 will be able to withdraw their entire defined contribution pension pot. There are some interesting parallels to be made with Australia, where a similarly flexible system was introduced 20 years ago. The Murray survey in Australia showed that half of those surveyed took their entire pension in a cash lump sum and a quarter of those had actually spent it all by the age of 70. So, in Australia they seem to be potentially going in the opposite direction to the UK, although there are discussions to introduce caps on the amount individuals are allowed to take out of arrangements.
Businesses (for example, Yorkshire Water) are finding that employees who previously had defined benefit pension provisions but have switched to defined contribution have to stay in the workplace longer to effectively make up “the savings gap”. Employers in the UK face an ever increasing “defined contribution workforce” that is going to need to work flexibly to care for their parents, but will also have the financial responsibility for children and grandchildren.
Employers are facing new challenges as a result of an ageing workforce, flexible working rights and benefit provision. However, an ageing workforce brings with it new opportunities. So long as an employer ensures it does not act in a discriminatory manner, providing training and development, healthcare and wellbeing initiatives and reviewing benefits provision for workers will benefit older workers, the workforce and the economy as a whole.
Few employers will have missed the publicity surrounding November’s ruling by the Employment Appeal Tribunal (EAT) on holiday pay and overtime (Bear Scotland Ltd v Fulton and other cases). It was the latest instalment in a line of cases that have looked at what must be included in holiday pay under the UK’s Working Time Regulations (WTR). Christopher Fisher and Nicola Thomson of Mayer Brown International LLP look at the questions that remain unanswered following the judgment.
Holiday pay and overtime: XpertHR resources
The EAT found that regular overtime, which employees are obliged to perform if requested by the employer, should be included for holiday pay purposes. Despite the attention the decision has received, this core aspect of it was not really a surprise.
Previous European cases had already made clear that regular payments which are “intrinsically linked” to work carried out must form part of holiday pay (eg allowances paid to pilots for time spent flying, and monthly commissions received by sales people).
The ruling has, however, left a number of unanswered questions, which make it difficult for employers to assess whether or not they are affected and what action to take now.
Are all forms of overtime covered?
The decision applies to overtime worked sufficiently regularly, such that it is part of an employee’s normal pay. What is “sufficiently regular” is not clear, but there must be a difference between the employee who works beyond their core hours every week and the one who works the odd extra hour here and there over the course of a year.
The decision also looked only at compulsory overtime, ie overtime which an employee cannot refuse. This raises the question of whether or not voluntary overtime (which can be refused) would be excluded from holiday pay. This seems unlikely, though it may be more often the case that voluntary overtime will be worked less frequently and so will not be “sufficiently regular”.
How do we calculate the overtime to be included?
The EAT did not explicitly deal with this point in the Bear Scotland cases but, in another case that looked at including commission in holiday pay (Lock v British Gas Trading), the European court said that it is for the national courts to work out what reference period is appropriate in order to achieve a “representative” average. Under the WTR, the reference period for calculating pay for workers with no normal working hours is 12 weeks, but such a short period may not produce a representative average, particularly in businesses with seasonal peaks of activity. It does not necessarily follow therefore that a 12-week period should be used, and in the Lock case, the Advocate General suggested a 12-month period might be more appropriate.
Is there a risk of back-pay claims?
It had previously been suggested that claims for underpaid holiday could go back several years (perhaps even to 1998, when the WTR were introduced). However, the EAT in Bear Scotland ruled that such claims will not succeed if there has been a gap of three months or more between holiday underpayments. Given that overtime only needs to be included in the first 20 days of statutory holiday (the “Euroleave” element required by the Working Time Directive) it is generally thought that a three-month gap will not be difficult to find in any particular holiday year. So, the judgment limits significantly the prospect of large back-pay claims.
It had been thought that Unite (which acted for some of the employees in the Bear Scotland cases) would appeal this aspect of the decision but they have since announced that they will not be doing so.
Are there other payments to be included in holiday pay?
The test laid down by the European cases is that any payment that is “intrinsically linked to the performance of tasks under the contract” should be included in the calculation of holiday pay. In the Lock case mentioned above, this was found to include commission regularly received by a salesman working for British Gas. The unanswered question is whether or not this extends to other forms of variable pay such as bonuses. This is likely to depend on how closely linked the bonus is to the hours worked by the employee, but there is bound to be further case law in this area.
What can employers do now?
Given the uncertainty which remains over the impact of many aspects of the Bear Scotland case, it is difficult for employers to come to a concluded view on what they should do. There are, however, some questions that employers can now investigate to assess the impact on their business:
· Does any part of the workforce perform regular or frequent overtime and/or receive commission or other regular payments liable to be within the scope of the case law?
· Are there different groups of employees, some working regular overtime and some working ad hoc infrequent overtime? Will you treat them differently? Or is that going to be administratively too difficult (despite the additional cost of including everyone)?
· What is the cost impact of including the additional payments in the statutory four-week holiday going forward?
· What reference period will be most representative to produce an average and how, in practice, will your payroll systems cope with such a change?
Employers may want to consider carrying out investigations such as these in conjunction with their in-house or external lawyers in order that any conclusions drawn can remain legally privileged.
However, by taking these steps, employers can gain a fairly good picture of what they are likely to have to do going forward, there are still good reasons for waiting before coming to a final position. First, in light of the Bear Scotland cases, the Government has set up a taskforce to look at the impact on businesses. Second, the Lock case is due to return to the employment tribunal early next year to consider issues such as what is an appropriate reference period for calculating the average commission to be included in Mr Lock’s holiday pay.
The conflict between the European case law and the wording of the WTR has left employers in a difficult and unsatisfactory position – the UK tribunals having effectively amended the WTR so that they comply with the European case law. It must be hoped that the Government taskforce will quickly produce some guidance for employers on the numerous unanswered questions that currently remain.