Managing Employee Sickness Absence – Best Practice Guide

All employers should be prepared to expect a certain level of sickness absence. Most employees will need to take time off work at some point due to illness or injury. An effective and fair process for managing sickness absence appropriately can reduce levels.

Sickness or Unauthorised Absence

It is important to distinguish between cases involving genuine sickness absence and unauthorised absence. Absences for reasons other than genuine sickness (or other authorised absence) can be dealt with as misconduct under an appropriate disciplinary procedure. Instances of genuine sickness absence where an employee has failed to comply with required reporting procedures can also amount to unauthorised absence and warrant potential disciplinary action.

How to Manage Employee Sickness

Many employers find management of employee sickness absence to be problematic and costly. The impact on businesses can be severe and debilitating. It is therefore essential sickness absence is actively managed otherwise the problem can fester.

Effective management of sickness should include the following:

  • Written Policy or Rules – A written policy will ensure employees understand the standards required of them, giving them less opportunity to argue they were unaware of their obligations to report absence. It will also give fair warning of any procedures that could apply if absences become problematic.
  • Monitor and record – It is important to set up systems to assist in obtaining an accurate picture of the levels, patterns of and reasons for sickness absences. Some smaller employers accept a certain level of sickness absence without recording it, which means once the levels or frequency become a problem they have insufficient data to back up any decisions that need to be made.
  • Keep in touch – It is important to strike a balance between acceptable levels of contact to offer support and gather necessary information, and giving the employee time and space to recover without pressure. Contact guidelines can be set but should have the flexibility to take into account the nature of the condition or illness, the employee’s feelings and requests and the nature of the employee’s role and position. Additional caution is required where the absence is related to, or exacerbated by workplace stress or they have alleged workplace bullying or harassment. Employers should avoid a scenario where they have not had any contact with employees (other than submission of medical evidence) for long periods of time.
  • Prevent the employee from feeling isolated – Thought should be given to whether or not to invite employees on long term sickness to work related social events, training or other employment related meetings. Sick employees should be able to obtain information relevant to their employment and the business, so consider sending written communications on changes and developments.
  • Request updates on medical condition – Employees should be encouraged to update the employer on further information or changes regarding their condition. The onus is on the employer to seek information rather than the employee to provide it.
  • Paper Trail – File notes of all contact meetings or telephone calls with sick employees should be retained and referred to before making any decisions.
  • Return to Work Interview – ACAS recommends return to work interviews take place in all cases. However, employers should consider the administrative and management burden of this and ensure any process is capable of being applied consistently.
  • Consider the need for medical advice – This may be obtained with a view to seeking a recommendation on reasonable adjustments that can be put in place or to establish a likely return to work date. In almost all cases where ill health dismissal is being contemplated, up to date expert medical advice will be an essential ingredient for a fair dismissal decision.
  • Manage with a view to facilitating a return to work.
  • Be mindful of discrimination – An employee with a medical condition may satisfy the definition of a disabled person within the Equality Act 2010. There is also a positive duty on employers of disabled employees to make reasonable adjustments to remove any disadvantage they suffer as a result of their disability.
  • Ensure consistency – Some employers may find it useful to include trigger points at which a formal procedure will kick in, for example a certain number of occasions of absence within a 12 month period or single absences of more than a certain number of days. Written absence triggers will give a level of certainty to employees and assist managers to deal with absence consistently.
  • Dismissals – Ill health capability is a potentially fair reason to dismiss an employee but it is vital to follow a full and fair procedure and avoid discrimination. Any decision to dismiss must only be made after full consideration of reasonable adjustments.
  • Employees who attend work while sick may pose a health and safety risk. Employers have a duty to provide a safe working environment and must evaluate situations where they are (or should be) aware an employee is sick or on medication that may affect their ability to safely perform their duties. Where a potential issue is identified the employer should consider a temporary suspension from some/all duties pending appropriate medical advice.

 

EHRC research reveals ‘worrying’ levels of pregnancy discrimination

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More than one in 10 (11%) female employees have been dismissed, compulsively made redundant where others in their workplace were not, or treated so poorly they felt they had to leave their jobs after maternity or pregnancy, according to research from the Equality and Human Rights Commission (EHRC).

If this figure is replicated across the population as a whole, as many as 54,000 women across the UK could be losing their jobs each year due to pregnancy, the EHRC suggests.

More than four out of five (84%) employers said that supporting pregnant workers and those on maternity leave is in the interests of their organisations, but only 66% of mothers felt that their employer supported them willingly during pregnancy and when they returned to work.

EO of Working Families Sarah Jackson said that nobody should face discrimination and anyone that does should be supported to confront it.

“When women are forced out of work it’s a dreadful waste of skills and talents which this country needs,” she said. “The research also shows the reality gap.  Employers would like to get it right and know that they need to do better in order to retain the talents of their pregnant women and new mothers.

“Organisations often have good intentions and the right policies but unless line managers are properly trained in maternity rights and are supported in their management of pregnant women and new mothers this is where it can, and often does, go wrong.”

The research also found around 20% of new mothers experienced harassment or negative comments from their colleagues, employer or manager when pregnant or returning from maternity leave.

When mothers were allowed to work flexibly, around half reported negative consequences such as receiving fewer opportunities at work or feeling that their opinion was less valued. One in 10 (10%) were discouraged by their employer from attending antenatal appointments.

In the wake of these findings, some experts have called on the government to investigate. Enei chief executive Denise Keating called the findings were “highly disappointing”.

She added: “For a new mother, money is tight and time is tighter, and we would suggest that new mothers who are being forced out of their jobs are being let down by the justice system, with the current time limits and employment tribunal fees acting as a barrier to justice for these women. We would call on the government to investigate whether employment tribunal fees in these cases are justified.”

Deputy chair of the EHRC Caroline Waters announced plans to launch an initiative to bring this issue into the public eye. “This research reveals the worrying levels of discrimination and disadvantage at work that women still face today,” she said. “Not only is discrimination unlawful, but it is also bad for business.”

English employment law abroad

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When does an employee who does not ordinarily work in the UK have UK employment rights?

Since the requirement for a person to ordinarily work in the UK for the purposes of bringing an unfair dismissal claim was removed from the Employment Rights Act in 1999, English courts have struggled to determine the answer to this question.

The courts have consistently shied away from setting out an exhaustive test, instead defining various categories to cover most situations while making it clear that there might be scenarios that would not fit neatly into any of those categories.

A “connection” test has evolved to determine whether or not, in any particular situation, a claimant ought to be allowed to benefit from unfair dismissal and discrimination rights protection. Essentially the question asked by the court is whether the employee’s connection with Great Britain is sufficiently strong that Parliament would have regarded it as appropriate for the court to hear the claim.

However, the position will not always be clear and the appropriate test to apply may differ according to the employment right claimed. What steps can employers take to minimise the risk of claims arising when the position of a particular employee is unclear?

Firstly, employers should ensure that contractual arrangements are clearly drafted and reflect the reality of the employee’s situation. For example, if a staff member is being seconded to the UK from another jurisdiction on a temporary basis this should be reflected clearly in the secondment agreement or other arrangement entered into between employer and employee.

Conversely, if an employee is transferred overseas on a permanent basis with no intention of returning to the UK, make this clear in the documents and ensure that a new employment contract reflecting the new place of work is entered into, rather than leaving the UK contract in place. Staff may seek to put pressure on an employer to retain the UK contract for the purpose of providing UK-related benefits. Even if it is possible for the employee to access UK benefits after permanently relocating, make sure that the contract reflects that there is no intention for the individual to return to the UK.

It’s important to understand that the legal position may differ according to the entitlement being claimed. For example, while the courts have moved towards a “connection” test in relation to unfair dismissal and discrimination, some legislation will use a different test to determine whether an employee has UK rights. Under the Pensions Act 2008, an employer’s obligation to auto-enrol an employee into a pension scheme applies to all employees who work or ordinarily work in Great Britain.

When taking action that might give rise to a claim (such as dismissing someone) consider following the basic elements of a fair process under English law, even if the employee is based in a jurisdiction where this is unnecessary. In the US, where employees are employed ‘at will’, it’s unusual for an employer to follow a fair process as set out in the British ACAS Code. But it might be wise to do so if the employee has a UK connection.

Ultimately it will never be possible to determine every case definitively, so employers should be wary of claims arising from employees who have some connection with the UK, and alter their normal approach accordingly when dealing with these individuals.

This article is published courtesy of HR magazine and was written by Stefan Martin (pictured), an employment partner at international law firm Mayer Brown

Will changes to childcare prove to be child’s play?

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Childcare voucher schemes are being phased out in favour of a government system. So how can HR engage with parents?

This autumn the government will begin to overhaul the way working parents receive and pay for childcare in the UK. This will not only impact on working families, but also on employers who offer family-friendly choices as a key part of their benefits strategy.

The first change is the new Tax Free Childcare (TFC) system, announced in the 2014 Budget, which will replace the existing employer-supported childcare voucher system.

Currently working parents can claim vouchers through their employer worth up to £243 per month per parent, to help towards the cost of childcare until their child turns 16. Employees pay for the vouchers out of their pre-tax and national insurance income, often via salary sacrifice.

The new TFC scheme has been opened up to the self-employed, single parents and couples as long as both are in work. It won’t be provided through employers but from the government directly, through an online account.

Eligible families will get 20% of their annual childcare fees paid by the government, so for every 80p paid in by the parent or carer, the government will contribute 20p, up to a maximum of £2,000 annually per child until they are 11-years-old or 17 for children with disabilities.

Employers locked out

Government information on the phase-in of TFC is fairly vague so far, with autumn this year being targeted as a start date. But, crucially for employers, once TFC opens for business the childcare voucher scheme will close to new applicants and they will no longer be able to offer it as a benefit.

“It’s important companies tell working parents that if they aren’t yet on childcare vouchers, they should sign up before it’s too late. They can always move onto TFC later but they can’t move back once the current voucher scheme is closed,” says Iain McMath, chief executive of Sodexo Benefits and Rewards.

With employers being taken out of the loop under TFC, there is some concern that HR won’t help employees understand which is the right scheme for them and will potentially lose touch with their needs.

“We’re telling our clients to point their employees to a site like www.tax-free-childcare.info  to get the right information,” McMath says.

Chair of the Childcare Voucher Providers Association (CVPA) Fiona Shields says HR staff should use the change as an opportunity to show they care.

“Employers are going to have differences in their workforce because some will be receiving childcare vouchers and others won’t so they really need to understand TFC,” she adds.

“I’m also concerned that many employers don’t yet realise that as the number of their staff on childcare vouchers drops, so will the savings they make on National Insurance. They need to prepare for all this.”

HR concerns

Parental Choice founder Sarah-Jane Butler echoes Shields’ concerns: “Half of the HR professionals we have spoken to weren’t even aware that the employer-supported scheme was due to close to new applicants.”

And Butler says that with the new scheme requiring claimants to re-register every three months, the administration may seem too much for busy working parents, who simply won’t apply.

“Eventually there could be a whole lot of new parents on lower pay who aren’t getting any help at all, and people who can’t afford childcare will simply stop working,” she warns.

Head of policy, research and communications at Working Families Julie McCarthy agrees and says that without offering the right support to working parents businesses risk losing or not attracting the right talent.

She adds: “Childcare vouchers are a way for HR departments to get to know and understand their working parents’ issues. Once TFC is introduced they may become disengaged, close their voucher schemes and not even know who their parents are.”

Stay engaged

HR teams must think of new ways to stay relevant, she says: “They can develop a parents’ network or provide online signposting for things like babysitting and child minders.”

Some believe that employers may see the situation as a good opportunity to withdraw their voucher schemes. MD of Crossland Employment Solicitors Beverley Sunderland says “most well-written policies will state that a scheme can be withdrawn at any time”. Sunderland says she often receives enquiries from employers unhappy about having to continue to provide vouchers to someone on maternity leave, for example.

“I anticipate the current scheme will disappear once the TFC starts,” Sunderland says, adding: “It’s an administrative headache and we’ll see companies begin to pass the buck to the government-run scheme.”

But L’Oréal UK’s senior HR rewards officer Suzanne Lunnon says the firm won’t close its scheme, delivered in partnership with Parental Choice.

The company’s HR director, UK consumer products division Vanessa Palmer adds: “If anything, we will see more initiatives coming in now for our working parents. The voucher change is one that we need to manage and support our working parents through but it won’t drive a reduction in our overall support.”

Oberthur Technologies UK HR director Helen Ridler says it also has no plans to remove its scheme and will help as many staff onto the current one as possible before it closes. “We have a good take-up and it’s regrettable that it’s going to be subsumed by this new government scheme,” she adds.

The government claims TFC will support double the number of households currently using the  voucher system and enable more parents to work by helping them meet rising childcare costs.

Free childcare hurdles

Furthermore, the government has brought forward its manifesto pledge to double free childcare in the UK to 30 hours per week for three- to four-year-olds. Pilots will begin in September 2016.

But childcare providers say the system is already woefully underfunded and the Pre-School Learning Alliance is warning of a “meltdown”, with grant funding for the current 15 free hours already falling 20% short and many nurseries forced to charge ‘top-up fees’.

David Cameron has admitted the policy will indeed take time to get right and has ordered a funding review.

McCarthy says: “It would be churlish not to welcome 30 free hours, but from a provision and quality point of view the funding review will be key. Parents are confused about all this and that doesn’t help employers.”

Meanwhile the focus will be on the launch of TFC, with parents, childcare providers and employers all hoping that the scheme is well bedded-in before any further ‘free’ childcare is implemented.

 

How a ‘Brexit’ could impact on employment law

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The promise of an EU referendum on the horizon leaves many wondering what the impact on UK employment legislation could be.

The incoming government’s promise of an in/out referendum means the future of Britain’s EU membership is uncertain. And if the country votes to leave, there are a number of questions over the manner of the exit and how the UK’s relationship with Europe will continue.

Leaving the EU could provide opportunities to rethink various areas of employment regulation, but in reality the scope and the desire for change could be limited.

Among the areas that could be affected are working time and agency working, according to Hogan Lovells partner and head of employment practice Elizabeth Slattery. Regulations on record keeping, restrictions on working time and the 48-hour week, and rules around holiday pay, are areas that have been criticised by employers and likely targets for change if the rules set by EU directives become open to repeal.

Another example of legislation that could be affected is the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE), which was adopted to implement the European Acquired Rights Directive. According to Slattery, employers could be keen to make it easier to change the terms and conditions after a transfer. This would allow businesses to be properly harmonised in the eyes of some, avoiding those uncomfortable situations where a takeover or merger leads to employees with different terms and conditions sitting next to each other.

Collective consultation could also be affected, with changes to either the threshold for consultation or the time period. And while a “big rollback” of discrimination legislation is unlikely, Slattery predicts that employers will want to address the current lack of a cap on discrimination compensation.

Some areas of employment law, while being based on EU legislation, would be unlikely to change. It would be unlikely that any scaling back of parental leave would be acceptable politically or desirable for employers, Slattery predicts.

It is early days in terms of knowing what kind of approach to its relationship with the EU the UK would favour in the event of a ‘Brexit’. But the likelihood of some kind of trade agreement means it’s unlikely total freedom to rework employment law would be the result. “It is not going to go into freefall,” says CIPD employee relations adviser Mike Emmott.

The UK may decide to follow the examples of Switzerland and Norway in forging a new trade relationship with the EU, opting to stay in the European Economic Area or the European Free Trade Area.

Such an arrangement would mean the UK would still be bound by EU employment law. “The UK will have to comply with EU laws but wouldn’t be involved in their development,” Slattery says.

Employment law has not been among Cameron’s priorities in negotiations. Nor, despite some appetite for change in the areas highlighted above, is it employers’ greatest priority, Emmott adds. Appetite for change is likely to be limited even if change is possible, he predicts.

“Employers are not anxiously looking forward to the opportunity to throw legislation overboard,” he says, adding that it’s hard to think of “big ticket” items that would see pressure for change.

Dispute resolution could however be one such area, according to Emmott. But the coalition government’s work in this area has helped address many employer concerns here already. “The last government has taken off the table the one area that has been a source of grumbling among employers,” he says.

More details about what Britain’s relationship with the EU would look like as a non-member state will emerge as the referendum approaches. But for now big changes to employment law look unlikely.

The Budget: employment law implications

George Osborne has delivered his first majority Conservative Government budget. We have summarised the key employment points arising from it.

National Living Wage

The Conservatives in the lead-up to the election said that they supported increases to National Minimum Wage. In the budget they went further than this by introducing a National Living Wage.

This will involve a premium payment for workers over the age of 25. The first premium will be set in April 2016 at 50p which will increase the National Minimum Wage for over 25s to £7.20.

The Low Pay Commission has been asked to make recommendations for National Minimum Wage increases in 2016 and 2017 and National Living Wage going forward in order to prepare businesses for the increases. It is thought that the National Living Wage will increase to £9 by 2020.

To help businesses with the increasing wages, the Employment Allowance is set to rise from £2,000 to £3,000 which cuts the National Insurance businesses and charities pay.

Termination Payments

The Government plans to consult on simplifying the tax and NIC treatment for making termination payments. A consultation will take place in Summer 2015.

Salary Sacrifice Schemes

The Government has noted that these schemes have become very popular, resulting in increased costs to the tax payer. The Government will monitor this.

IR35 Review

HMRC will consult on reforms for IR35 legislation. Personal service companies are criticised as being seen as vehicles to avoid tax through disguised employment. The consultation will be released shortly.

Sunday Trading

The Government has committed to consult on devolving powers to local authorities and city mayors to decide on hours of Sunday trading (within stipulated parameters). This will clearly be something that retailers will be keeping a close eye on and is likely to have employment law implications.

Apprenticeships

The Conservatives have always expressed their commitment to delivering more apprenticeships in the UK, 3 million more to be precise.

The budget has announced that funding for these apprenticeships will be put in the hands of the employers.

A levy will be introduced on large UK employers to support all post 16 apprenticeships. The funding provided will ensure that each employer can meet their individual needs.

Reactions

The National Living Wage has divided opinion. Trade Unions and business leaders are happy with some elements of the budget but not others and not surprisingly they don’t like the same things.

The GMB union leader, Paul Kenny welcomed the National Living Wage but condemned the Government for “taking away money from working families without any guarantee that they will be better off.” At the same time as the introduction of the National Living Wage, the Government has also announced reductions in tax credits and many commentators predict that lower to middle income families will be less well off due to these reductions, despite the introduction of the National Living Wage.

The Government hopes that by introducing what many consider as a high minimum wage that this will mean that employers will introduce pay increases across all grades of staff, but there is of course no guarantee of this and it places a big emphasis on employers. Some commentators have pointed out that while the Government has challenged employers in the private sector to increase wages, George Osborne in the budget placed a fixed pay increase of 1% on public sector workers for the next four years.

CBI director general John Cridland commented that “This is a double-edged budget for business. Firms will welcome measures to balance the books and boost investment, but they will be concerned by legislating for wage increases they may not be able to deliver. This is taking a big gamble that the labour market can absorb year-on-year increases of an average of 6%.”

Overall opinion is mixed as there are both positives and negatives for employees as well as employers.

The National Living Wage will likely have the biggest impact on employers by creating a new bracket for the over 25’s. The Office for Budget Responsibility believes it will cause businesses to recruit more employees under the age of 25 to avoid the increased layer of pay.

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.

 

Government forges ahead with strike reforms

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Reforms to minimum turnouts in strike ballots and time limits on mandates for industrial action will go ahead as planned with the unveiling of the government’s Trades Union Bill today.

Strikes affecting “core” public services will need the support of 40% of union members to go ahead, while union ballots will also need a turnout of over 50% for any resulting strike action to be considered valid.

Under the law, votes in favour of striking would also become invalid once four months had passed. Other measures are likely to see the removal of current restrictions on using agency workers to cover for strikers, and efforts to tackle “intimidation” of non-striking workers.

CBI deputy director-general Katja Hall said: “We’re glad the government has brought forward this Bill, as the CBI has long called for modernisation of our outdated industrial relations laws to better reflect today’s workforce and current workplace practices.

“The introduction of thresholds is an important, but fair, step to ensure that strikes have the clear support of the workforce.

“Placing time limits on ballot mandates is an important measure to ensure industrial action is limited to the original dispute and not extended to other matters.

“We welcome the consultation on modernising picketing rules.  Intimidation or harassment of individuals is never acceptable – and we want to see the current Code of Practice put on a statutory footing and penalties increased to drive out bad behaviour.”

Tougher regulation on strikes was a component of the Conservative manifesto before the election in May.

Business secretary Sajid Javid said: “These changes are being introduced so that strikes only happen when a clear majority of those entitled to vote have done so and all other possibilities have been explored.”

He added: “Trade unions have a constructive role to play in representing their members’ interests but our one nation government will balance their rights with those of working people and business.”

The government’s proposals have been criticised by unions, with TUC general secretary Frances O’Grady saying the bill “is a slippery slope towards worse rights for all”.

 

Companies forced to reveal gender pay gap

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Companies with more than 250 employees will be forced to disclose the gender pay gap in their workplaces from next year.

Prime minister David Cameron said that he wanted to “create the pressure we need for change” to help drive up female workers’ wages, and to close the pay gap between the genders “within a generation”.

He also said that the new living wage, introduced in the budget, “will primarily help women, who tend to be in lower paid jobs.”

“It will help close the gender pay gap,” he said. “But we need to go further, and that’s why introducing gender pay audits is so important.”

The announcement builds on the last government’s ‘Think, Act, Report’ scheme, which encourages employers to discuss what they are doing to promote gender equality around business issues such as pay and recruitment.

It comes at the same time as new figures show that the FTSE 100 has met its target, set by Lord Davies in 2011, of ensuring 25% of all board members across the index are women.

Clare Lyonette, from the University of Warwick’s Institute for Employment Research, said that while the news is welcome, there is still a long way to go before equality is reached. “The Equality and Human Rights Commission has been calling for these changes for years,” she said.

“The legislation needs to ensure transparency and a real culture change within organisations, otherwise this may become just another tick-box exercise.

“There are also additional issues to address to ensure that women do not fall behind men in the workplace, such as the quality of part-time jobs and the full-time/part-time pay gap; the prohibitive costs of childcare; and any residual gender discrimination within organisations, whereby women are seen to be less committed to work than men.”

“However,” she added, “this is certainly a step in the right direction.”

CBI deputy director general Katja Hall agreed there were wider issues, such as occupational stereotypes, that also needed tackling, and said that careful thought would need to be given to how this legislation is rolled out.

She said: “Addressing the gender pay gap is the right priority – and we should set a target for reducing it. While we believe publishing pay gap data could be misleading, we will work with the Government to ensure that rules on what is published are flexible enough to be relevant to each company.

“To see real progress, however, we need to challenge occupational stereotypes by encouraging more women into male dominated industries and investing in careers advice.”

CMI chief executive Ann Francke welcomed the news but urged companies to do more than report on average pay rates. ”Given that the gender pay gap is widest at the top, it is vital that companies track pay across different job levels,” she added.

Heather Jackson, founder and chair of an Inspirational Journey, agreed that execution is key. She told HR magazine: “The intention is great, but it’s how we execute it that will decide the outcome.”

She added: “This is not about alienating men. It’s about doing the right thing.”

Acting Labour leader Harriet Harman first discussed powers for the government to force companies to reveal their gender pay gap, but the coalition opted for a voluntary approach.

When only five companies volunatarily published their gender pay gap (Genesis, Tesco, PwC, AstraZeneca and Friends Life), the Liberal Democrats argued for mandatory reporting. The Conservatives included in their manifesto a promise to enforce the policy for companies with more than 250 workers.

Budget 2015: Living wage a ‘big gamble’, says CBI

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Chancellor George Osborne’s summer budget has been described as a “double-edged budget for business” by the CBI, which called the announcement of a £9 an hour compulsory living wage by 2020 a “big gamble”.

CBI director-general John Cridland said: “Firms will welcome measures to balance the books and boost investment, but they will be concerned by legislating for wage increases they may not be able to deliver.

“The CBI supports a higher skilled, higher wage economy, but legislating for a living wage does not reflect businesses’ ability to pay. This is taking a big gamble that the labour market can absorb year-on-year increases of an average of 6%.”

Osborne also announced plans to cut corporation tax to 18% by 2020, which he claimed would help companies pay higher wages. Cridland said while the tax cut was “a welcome surprise”, “tax reductions for employers don’t appear to match the businesses most affected by a rise to £7.20 in the national minimum wage next April – a 7% increase”.

Other employment experts expressed concern about how the living wage figure of £9 an hour was reached, with Eversheds partner Simon Rice-Birchall asking: “Where does the Low Pay Commission sit in all of this?”

“The LPC as an independent body conducts extensive research into the annual report it submits to government setting out its recommended level of national minimum wage, the last figure of which was £6.70 per hour,” he said. “While the chancellor made express reference to the LPC taking responsibility for rises in future, there was no such reference to its participation in the fixing of the new figure.”

Head of living wage at KPMG Mike Kelly welcomed the news, calling it a “brave move”. “For employers who are concerned at whether the increased payroll costs will be fully offset by reduced corporation tax and national insurance contributions, our experience has seen lower absence, increased productivity and a more engaged workforce,” he added.

For others the announcement does not go far enough. Graham Salisbury, head of HR at ActionAid UK, an accredited living wage employer, told HR magazine that while Osborne’s news was a step in the right direction he was concerned it would only benefit those aged over 25.

“The fact that this will only be paid to over-25s rather undermines any claim the government can make about being committed to workers – especially young people – receiving a living wage,” he said.

“Had the chancellor announced that the government was committed to paying £7.85 per hour [the figure used by the Living Wage Foundation] to all employees regardless of age that would have made things far less confusing.”

Salisbury also said the policy could bring a new level of complexity. “The terminology is now bewildering. We’ve got minimum wage, (official) living wage, (new) living wage, and London living wage. It’s hardly surprising that people are confused,” he pointed out.

The Living Wage Foundation, which campaigns for organisations to pay staff an independently calculated living wage of £7.85 an hour outside London and £9.15 in London, said the budget had highlighted some important questions.

Living Wage Foundation director Rhys Moore said: “Is this really a living wage? Without a change of remit for the Low Pay Commission, this is effectively a higher national minimum wage and not a living wage.”

He added: “What about London? These changes will not help the 586,000 people for whom even the 2020 rate announced today would not be enough to live on now.

“What about the two million under-25s who are not covered? And do the tax credit changes announced mean that the living wage needs to be higher to make sure people have enough?”

Hot topic: skilled workers migration cap, part two

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After the government’s immigration cap for non-EU skilled workers was hit for the first time in June there have been proposals to raise the qualifying salary thresholds for migrants, to introduce a time limit on declared skill shortage areas and to create a skills levy on visas to boost funding for apprenticeships. Is this good news for British workers? Or is it bad news for the UK skills shortage?

HR magazine asked two experts for their opinions.

Kevin Green (pictured), chief executive of the Recruitment and Employment Confederation (REC), writes:

“The UK has a skills crisis. Our data shows most businesses have limited capacity to expand because they can’t find the talented people they need. Across the UK employers are looking for more engineers, programmers, accountants and nurses. This is already holding back growth and the situation is being made worse by immigration policy.

Despite the clear need for more talent, the last coalition government introduced a cap on the amount of skilled migrants from outside Europe. In June the cap was reached, so thousands of workers with the skills we need were turned away.

And the government is considering measures that will make the situation worse. The Migration Advisory Committee is likely to propose measures like increasing salary thresholds for some occupations; raising the minimum salary level that migrants would have to be paid in order to be considered for sponsorship; limiting the length of time occupations can be classed as having ‘shortages’; and introducing a ‘skills levy’.

We recognise vocational qualifications and careers advice must be improved. However, this investment will take time to implement and our businesses need skilled people now. Our nation’s future prosperity will be constrained by a lack of talent.

A sensible immigration system is needed to provide an interim solution. The government should: reinstate the two-year post-study work visa for STEM graduates; expand the Shortage Occupation List; implement a streamlined, low-fee Tier 2 visa application process for SMEs.

The government must fix the immigration system to enable UK businesses to recruit global talent. This talent will accelerate economic growth and create jobs for British workers.”

Read the first part of this hot topic here.