What to do about holiday pay?


The European Court of Justice (ECJ) has issued its much anticipated decision in the case of Lock vs British Gas. As many predicted, the court held that commission payments must be taken into account when determining holiday pay.

The European Working Time Directive gives employees the right to four weeks’ paid annual leave. However, it does not confirm which elements of a worker’s remuneration should be included in holiday pay, or how it should be calculated each time leave is taken.

A salesman on a basic salary with variable commission brought a tribunal claim in respect of the commission he could not earn while on leave. The ECJ held that commission payments should be included in calculating holiday pay, as otherwise workers may be deterred from taking annual leave.

What about other payments?

Although this case only refers to commission payments, other types of payments, such as overtime, may have to be treated in the same way.

The Lock judgement referred to sums “linked intrinsically to the performance of tasks that the worker is required to carry out” under his or her contract. This is arguably wide enough to include voluntary overtime, where it is frequently available and there is a degree of reliance by both parties that such overtime will be offered and accepted.

How should holiday pay be calculated?

The ECJ in Lock has referred this question back to the UK tribunal. Under the UK Working Time Regulations, the holiday pay of workers with no normal working hours is calculated as an average over the previous 12 working weeks. It remains to be seen what approach the tribunal takes in respect of workers with normal working hours. It may well adopt the same calculation, but could equally choose a different reference period or another method entirely.

The judgment only applies to the four weeks’ holiday provided by the European Working Time Directive. It does not cover the additional entitlement provided by the UK Working Time Regulations (currently a further eight days for full time workers) or any further entitlement in an employee’s contract. It applies to all workers, not just employees.

What is the practical impact?

Employers need first to consider the cost implications. They will have to identify which of their workers may be entitled to recover holiday pay arrears, and the amount in each case.

Claims may go back years if a series of occurrences can be established. The precise starting point remains to be established, but could be as early as 1998, when the Working Time Regulations were implemented, or later depending on where the claim is raised (five years before the last deduction in Scotland, six in England). Accurate personnel records will be essential.

Employers will then have to decide if it is prudent, and indeed affordable, to address the issue now or to wait and see what claims are made. Unions are likely to want to begin a dialogue about potential resolution immediately.

It will also be necessary to change payroll systems to recalculate holiday pay in future, and businesses may have to consider ways to offset enhanced payments to workers by amending or removing other benefits.

This article is published courtesy of HR magazine and was written by Brian Campbell (pictured), a legal director in the employment team of law firm Brodies


One in four ‘exaggerate’ expenses claims


One-quarter of employees have knowingly “bent the rules” when filing expenses claims, according to research by Webexpenses.

The survey of 1,000 UK office workers also found that one-fifth said they do not feel guilty about exaggerating claims.

Men are more likely to intentionally file inaccurate claims – 28% have admitted to doing so compared to 22% of women. One-third of 16- to 24-year-olds have submitted false claims, ­making them the least honest age group.

Meals at meetings and travel expenses were some of the most common items people admitted to lying about. Nearly half (42%) said they would claim for the mileage to a client meeting and then back to their home rather than their company’s headquarters.

Workers in arts and culture sectors are the worst offenders. Almost three-quarters (72%) have made exaggerated claims compared to just 7% in the legal sector.

One-quarter of employees agree that the longer they have been with a company the more likely they are to try and get away with inaccurate claims. This may be because 70% say their submissions have never been checked or verified.

Webexpenses chairman Michael Richards told HR magazine the problem can be exacerbated if it goes unchecked early in an employees’ tenure.

“A lot of it is about the culture,” he explained. “If people come in and see others doing it they will automatically follow suit. There’s an element of people not wanting to rock the boat. But often people claiming expenses are more senior, so it becomes difficult to challenge.”

Richards advocates a zero-tolerance approach to false claims. He adds that HR has a big part to play in implementing this.

“The line managers are maybe too close to their team so it will be harder for them to challenge this,” he explained. “It has to come from the top to be successful. HR needs to support leaders in making sure exaggerating claims is not part of a company’s culture going forward.”


Unite opens NHS strike ballot over pay


Unite is opening a ballot on strike action today, following widespread anger over pay in the NHS.

The ballot will run until 26 September and will determine whether the union’s 100,000 NHS members will strike this autumn. The union claims 1.3 million health workers in the UK have seen their pay fall by 15% in real terms since the coalition came to power in 2010.

The pay deal in April of this year saw England’s 600,000 NHS staff receive a 1% pay increase, with health secretary Jeremy Hunt ignoring the recommendation of the Pay Review Body to offer a living wage increase to lower-paid workers.

The Welsh Assembly agreed to pay all NHS staff in the country the living wage, along with a one-off £160 payment. However, there is still disagreement on the terms of the deal, so Welsh NHS workers will be included in the ballot.

A similar arrangement was agreed in Scotland, with low-paid staff receiving an extra £300 per year to take their salary up to living wage. As a result there will be no industrial action there.

Unite head of health Rachael Maskell accused Hunt of treating NHS workers “with contempt” in the dispute over pay.

“Our members have an opportunity from today to vote in favour of industrial action and send a stark message that the health secretary should sit down with the unions and listen to our proposals for fair pay for the biggest workforce in the UK,” she said.

She also stressed that any industrial action would take into consideration “concern for patient care”.


Work Foundation calls for stronger RPA legislation


Lancaster University’s Work Foundation has criticised the government’s “watered down” implementation of the Raising the Participant Age (RPA) policy.

In the paper Staying Power: Making the raising of the participation age a policy success the body calls for stricter rules around keeping those between 16- and 19-years-old in training.

Under current rules, which came into effect in the summer of 2013, young people are required to stay in education or training until the academic year in which they turn 17. From summer 2015 this will be extended to 18.

The paper focuses on the loosening of the legislation around RPA that makes participation by young people effectively voluntary. It also highlights a decrease in funding levels (down from £7.7 billion in 2010/11 to £7 billion in 2012/13) as a worrying trend that will take away the financial incentives for young adults to stay in education.

Lanacaster University Work Foundation researcher and author of the paper Beth Foley told HR magazine “short-term” thinking, along with funding pressure, is behind the government’s decision to decrease the money being put into the project.

“The effect of not being in education or work at a young age can have a profound impact on someone’s whole career,” she said. “So in the long-term there are savings to be made through not paying out benefits to those who struggle to find work. It can also be made up in potentially higher tax revenues in the future.”


Gender pay gap for managers rises to 34% in 40s


Female managers earn on average 34% less than their male counterparts by the time they reach 46, according to research by the Chartered Management Institute (CMI).

The 2014 National Management Survey is based on the pay data of almost 70,000 employees in executive positions, collected in conjunction with XpertHR. It suggests the pay gap for managers increases dramatically with age.

For those aged between 26- and 35-years-old it stands at 8%, and jumps to 23% for the age group between 36 and 45. At 46, the gap of 34% persists until retirement age (65), when it increases very slightly to 35%.

Bonus payments are also significantly higher for male executives, who receive an annual average of £53,010 compared to £41,596 for women.

The pay discrepancy means female managers would have to work on average 14 years more than their male colleagues to earn as much over a typical working life.

CMI chief executive Ann Francke called on companies to pay women and men “on the basis of their performance”.

“Lower levels of pay for women managers cannot be justified, yet our extensive data shows the pay gap persists, with many women hit by a mid-life pay crisis,” she said. “We have to stamp out cultures that excuse this as the result of time out for motherhood and tackle gender bias in pay policies that put too much emphasis on time served.”

Shadow minister for women and equality Gloria De Piero added the figures paint a “depressing picture” for women in the UK.

“We should be closing the pay gap for women at all stages of their working lives but instead we see pay inequality worsening for female managers as they progress and for working women across the country,” she said.


Pre-determining Disciplinary Outcomes

Mr J Linwood (J) v British Broadcasting Corporation (BBC)

J was appointed by the BBC as its Chief Technology Officer (CTO) in April 2009. Included in the remit of his role was the Digital Media Initiative (DMI), a project set up by the BBC to enable all of its programming to be entirely digitised. DMI was fraught with problems and following several reviews of the project, in April 2013 it was recommended that it be scrapped altogether. The overall cost to the BBC – and thus the taxpayer – was £98.4m.

J was subsequently informed that he was to be the subject of a disciplinary process and following a series of hearings between May and July 2013 was summarily dismissed. J exercised his right to appeal, but in January 2014 was informed that he had been unsuccessful. J therefore brought an unfair dismissal claim before the Employment Tribunal. He argued that he had been made a “scapegoat” for the failure of DMI and that the procedure followed was “substantively and procedurally unfair”.

The Tribunal noted that the BBC took such an expensive fiasco very seriously and there was held to be a cultural expectation within the corporation that those involved with failed projects such as this would resign. It was clear the BBC Executive Board were expected to “find a culprit” for DMI who would then quietly step aside.

Internal BBC correspondence was used as evidence that J had clearly been earmarked as this culprit and that it was essentially predetermined that he was to lose his job through either resignation or dismissal. J’s line manager (P) had even gone so far as to talk to a recruiter about finding a temporary CTO to replace J. All of this took place before formal disciplinary proceedings had begun.

Despite his obvious lack of impartiality, P also named himself in charge of the investigation and hearings and even after standing aside he was heavily consulted. The Tribunal described his attitude throughout as “unrelentingly and exclusively negatively biased” against J. The two individuals put in charge of the disciplinary and appeals process respectively were inexperienced in such matters and confused as to the underlying law, with the Tribunal recognising that they were clearly out of their depth in such a situation.

Specific instances of a complete lack of fair procedure were noted in detail:

• J requested a postponement of one of the disciplinary meetings, in part due to pre-arranged family leave and in part because he had only just been provided with some 3000 emails relating to his case. The meeting was instead brought forward by a day.
• When finally presented with all of the 16,000 documents relating to the case against him, J was given just one working day in which to assess them before his next disciplinary hearing.
• Having been rushed through the initial disciplinary procedure, J was then effectively in limbo for some seven months between his appeal and the production of the final outcome letter.

The Tribunal found in favour of J, subject to a 15% finding of contributory negligence. This was allocated as 10% due to J’s not calling for an in-depth review of DMI at any stage throughout the life of the project, and 5% to J’s complete denial that he was even partially culpable for the project’s failure.

This case is a helpful reminder that pre-determining the outcome of disciplinary hearings can provide evidence to a Tribunal of an unfair dismissal. Employers should also remember that any internal emails relating to a disciplinary hearing or issues has to be disclosed in legal proceedings. As the BBC learned, emails stating the outcome of the hearing before the internal processes will cause embarrassment during a Tribunal hearing. In addition, Disciplinary hearings should also be conducted in a fair, impartial and reasonable way to ensure fairness to an employee and ensure that in the event a Tribunal claim is lodged, it can be successfully defended.

This article has been drafted on HR Legal Service’s behalf by Ward Hadaway Law Firm. Ward Hadaway Law Firm is one of HR Legal Service’s strategic legal advisory partners and provides certain services to our customers through a range of different Legal and HR support services offered by ourselves to the corporate market.

The content of this article does not constitute legal advice and it should not be relied upon. Specific legal advice may be required to address your specific circumstance.

NEDs drive growth in law firms



UK law firms with at least one non-executive director (NED) on their board have seen revenue grow by one-third more than those without, according to figures released by executive search firm Edward Drummond.

The research is based on comparing the growth in revenue of the UK’s top 100 law firms since 2010. It found that companies with at least one NED have grown by an average of 12%, compared to 9% for companies without.

Almost one-quarter (24%) of law firms now employ one or more NED on their board.

Edward Drummond director Neill Fry told HR magazine choosing a NED with “strong commercial expertise” is crucial to driving growth.

“A director with a strong commercial background brought into a top law firm is likely to open up opportunities for introducing potential new clients, but they can also provide fresh perspectives on how the firm can access new lines of work,” he said.

Fry added that the study highlights the need for legal firms to “improve their management structures”.

“Law firms that have good corporate governance structures certainly aren’t exempt from failure, but they are more likely to have stringent processes for making strategic decisions,” he said.

“An NED can provide constructive challenges to the firm’s strategy and objectives – as well as acting as a vital sounding board – which can really help to support the firm’s growth.”

Dan Watts, also a director at Edward Drummond, told HR magazine firms are realising just having a strong CEO isn’t “the holy grail” of commercialism any more.

“To get someone in just for a few days a year often works well for both parties,” he said. “Having someone with strong commercial experience – sometimes within the FTSE 100 – can really drive growth through commercial experience.”


Shared Parental Leave – Are You Ready?

The coalition government’s much anticipated shared parental leave rights are set to be introduced for babies expected from, or children placed for adoption from, 5 April 2015. This means that employers can expect to receive queries and requests from expectant parents any time now.

The aim of the new rights is to introduce a more flexible system for both parents to take leave on the birth or adoption of a child. The mother-focused system of maternity leave of up to 52 weeks and shorter paternity leave rights will essentially become optional.

Parents wishing to share their parental leave and pay between them will need to “opt in”, in the absence of the opt-in the default position will be the existing right to maternity leave or adoption leave.

How will Shared Parental Leave work?

In very basic terms, the new system will allow a mother to curtail her maternity leave and any associated pay and put her remaining entitlement into a shared pot. The same applies for primary adopters in respect of their adoption leave and pay.

This shared pot can then be distributed between both parents as shared parental leave and pay.

The existing compulsory maternity leave requirements will remain in place (for most employees 2 weeks) but after that all of the remaining leave can be put into the shared pot. This means that up to 50 weeks of shared parental leave is available.

Each employee will be entitled to take shared parental leave consecutively or concurrently, as long as the total period doesn’t exceed the period that is jointly available to the couple in the shared pot.

The new scheme will require both parents to participate in early discussions with their respective employers regarding how they intend to divide their shared parental leave pot, serve the appropriate notices and provide evidence if the employer requests it.

Other points to note

• Mothers or primary adopters who do not have partners who qualify for shared parental leave may still decide to opt in to the shared parental leave system to give them more flexibility regarding the dates they take their leave.
• The existing right to up to 10 keeping in touch days will be enhanced by up to 20 further days which attach to the period of shared parental leave.
• From 1 October 2014 a new right for partners of expectant mothers to attend up to 2 ante-natal appointments with the mother will be introduced. This right is to unpaid time off.
• From 5 April 2015 primary adopters will be given a new right to paid time off to attend adoption appointments. The partner of the primary adopter will be entitled to unpaid time off to go with them.

Next Steps

The final draft of the regulations have been laid before parliament and government guidance has been published on the new rights.

Employers should consider commencing the process of updating policies and procedures and training managers in preparation for the introduction of the new rights.

Payroll systems may also have to be reviewed to ensure that the administrative arrangements for paying for any shared parental leave are in place.

The shared parental leave system is going to be complex and undoubtedly will face teething issues. Most commentators do not expect take-up to be particularly high when the rights are first introduced as it will take time for people to become familiar with the concept. In addition, historic take-up of similar rights has been low. For example, the right to additional paternity leave which was introduced in April 2011 was only used by 0.6% of eligible employees.

This article was written by Nina Robinson, a practicing solicitor and Head of Legal Services at HR Legal Services.

Employers may face extra costs over pension cap charges

pension saving

The financial impact of pension cap charges on employers and the pensions industry may be significantly higher than first thought, according to pensions experts Hargreaves Lansdown.

In the Budget earlier this year George Osborne announced a charge cap on commission payments of 0.75% for all pensions schemes. The cap is intended to reduce the amount scheme members pay to third parties and increase the total in their pot.

The Department for Work and Pensions (DWP) issued figures at the time estimating the change in legislation would cost the pensions industry £195 million.

Recently two of the largest providers, Standard Life and Scottish Widows, announced they have put aside £260 million to cover the charges between them. This suggests the cost to the whole industry will be much higher than the original DWP prediction.

This increased cost will also spread to employers, according to Hargreaves Lansdown head of pensions research Tom McPhail.

“Employers will no longer be able to enjoy the support of advisers paid for by commission,” he said. “These businesses will either have to pay a fee for the support services that they used to get from commission-paid advisers or move their scheme elsewhere.”

McPhail added that the overall disruption caused by a cap on charges will be “far greater” than first anticipated.

“We’re going to see market participants dropping out, possibly within only a year or two of putting an auto-enrolment solution in place,” he said. “It is inevitable that in some cases, particularly for medium-sized employers, additional fees will have to be paid to cover the cost of this work.”

Government announces supplier of new Health and Work Service

The Government has announced that Health Management Limited (HML), a Maximus company, which is reported to be the UK’s largest occupational health provider, will be the supplier of the new Health and Work Service (the service) which is to be launched later this year.

What does the service do?

The aim of the service is to help employers and employees manage sickness absence and help people return to work faster. It was created to replace the now abolished Percentage Threshold Scheme which enabled employers to reclaim statutory sick pay from HMRC.

The service will initially be introduced on a phased basis beginning in the North of England, the Midlands and Wales with a full national roll-out expected by May 2015.

Employees on sick leave will be referred to the Service by GPs and HML will then supply:
» an occupational health assessment when an employee reaches (or is expected to reach) more than four weeks’ sickness absence;
» a case manager, designated to each employee to support them through the assessment and who will design steps to get that employee back to work;
» a return to work plan; and
» general health and work advice for GPs, employers and employees via the telephone and a designated website.

How does the service benefit employers?

If successful, the service is expected to:
» reduce sick pay costs to employers and increase efficiency and output; and
» reduce the number of employees leaving employment owing to sickness absence and thus reduce the hours which employers have to spend on recruiting new staff and the associated costs of this.

What happens now?

The Government is due to meet with HML to discuss the service in further detail and ultimately decide on an official implementation date. We will keep you informed as to any announcement regarding this.

This article has been drafted on HR Legal Service’s behalf by Ward Hadaway Law Firm. Ward Hadaway Law Firm is one of HR Legal Service’s strategic legal advisory partners and provides certain services to our customers through a range of different Legal and HR support services offered by ourselves to the corporate market.

The content of this article does not constitute legal advice and it should not be relied upon. Specific legal advice may be required to address your specific circumstance.