Advice for companies to deal with changes to holiday pay entitlement

Law at Work (LAW) is this week urging business leaders to prepare ahead of reports that unions are launching bids to help their members claim for holiday pay owed potentially as far back as 1998, following a key EU legal ruling earlier this year which opened the door to such claims.

The European Court of Justice has ruled that employers should take into account commission, and potentially bonus payments and overtime, when calculating holiday pay, rather than just basic pay following a test case between British Gas and one of its salesmen backed by Unison.

Workers will now be able to claim for owed holiday pay dating as far back as 1998 under the Working Time Directive. There are reports the Unite union, which has a membership of 1.4 million, is preparing to help their members launch claims against employers and that the Unison union has updated officials on the case.

Donald MacKinnon, Director of Legal Services at LAW explained that employers need to take these changes seriously. He said: “The case could lead to a flood of claims that would see employers hit with huge bills, potentially leading to some bankruptcies in the UK. The ruling also sets a precedent that could see other allowances included in holiday pay calculations, such as overtime and performance related bonuses.”

This article is published courtesy of HR magazine and was written by Law at Work (LAW) 


Professional wage growth to extend into 2015


Wage growth in professional services roles is set to continue into 2015, according to research by professional recruiters Robert Half.

The 2015 Robert Half Salary Guide, based on data from the company’s recruitment databases and appointment information, revealed that salaries for professional roles have risen by 2.6% over the past year.

The role that is predicted to see the biggest increase in pay for 2015 is regulatory accounting manager within financial services, with a potential uplift of 5.9%. In technology, it is predicted salaries for chief information security officers could rise by 5.7%.

The report also looks at recruitment trends for entry-level roles. It suggests the hardest entry-level job to fill is HR assistant, with 30% of HR managers admitting to difficulties in hiring. This is followed by office management (27%) and logistics support (25%).

Robert Half director of corporate accounts Clive Davis told HR magazine that as candidates have more choice in the job market, employers may need to look at offering “the whole package” to attract top talent. In an earlier study, it was predicted HR professional salaries could rise by 10%.

“HR directors will be looking at how to make sure their company is an all-round great place to work,” he said. “It’s no bad thing. Factors such as enhanced pensions are being looked at by an increasing number of employers now to help them stand out from the crowd.”

Davis added that prospects for jobseekers are positive.

“Compared to two or three years ago they have a lot more options,” he said. “And that increased employment is helping to drive up wages. It’s set to continue well into 2015, but beyond that it gets harder to predict.”


Be prepared for the upcoming introduction of Shared Parental Leave with the new ACAS guidance

ACAS has recently published a good practice guide for employers and employees on Shared Parental Leave, and has provided various supporting materials including standard letters and policies.

Shared Parental Leave is designed to give more flexibility on how to share child care in the first year following birth or adoption. From 1st December 2014 parents of babies due, or children placed for adoption, on or after 5 April 2015 will be able to share a “pot” of leave and can decide to take time off together or take it in turns.

Key Points to note:

  • Employees are only entitled to Shared Parental Leave if they satisfy the continuity of employment test and their partner satisfies the employment and earnings test. The continuity of employment test requires the individual to have worked for at least 26 weeks at the end of the 15th week before the child’s expected due date/matching date. The employment and earnings test also requires a certain length of employment; in the 66 weeks leading up to the baby’s expected due date/matching date the individual must have worked at least 26 weeks and earned an average of at least £30 a week in any 13 weeks.
  • Employers should be reminded that, unlike maternity or adoption leave, the new Share Parental Leave does not need to be taken in one continuous period and can be started and stopped multiple times. The new legislation entitles parents to submit a minimum of three notices booking periods of leave (although you may decide to allow your employees more).
  • Each notice to book Shared Parental Leave can be for either a ‘continuous block’ or multiple ‘discontinuous blocks’ (meaning the employee asks for leave over a period of time with break between the leave where the employee returns to work). Eligible employees have a statutory right to Shared Parental Leave in a continuous block and an employer cannot refuse it.
  • The new rules do not remove the entitlement to maternity, adoption or paternity leave and your employees may decide not to opt in to Shared Parental Leave.
  • Shared Parental Pay has also been introduced. If your employees satisfy the criteria for Shared Parental Leave and the mother of the child serves a notice to reduce their entitlement to statutory maternity pay/ adoption pay/ maternity allowance the maternity pay could be shared or given to the employee’s partner.

Should you have a Shared Parental Leave Policy?

The new ACAS guidance sets out a summary of the new rules relating to Shared Parental Leave and also offers guidance on Shared Parental Leave policies. ACAS advises employers to have a policy or workforce agreement relating to the new leave to ensure consistency in making and responding to notifications regarding Shared Parental Leave.

ACAS recommends policies to include a general statement advising that the employer will accept all notices for a continuous period of leave and will consider all requests for discontinuous leave. Policies should then be specific and state the amount of notifications to book available to employees, how employees should inform their employers of their entitlement to Shared Parental Leave, and how a notice to book leave will be handled.

Other considerations for Employers

Line managers should be made fully aware of the rights and entitlement of employees wanting to take Shared Parental Leave, and you should make sure they are aware of the procedures for dealing with Shared Parental Leave so they can be properly equipped for any requests.

You should also consider advising your line managers to arrange informal discussions with employees that become pregnant or are matched for adoption, in order to raise the option of Shared Parental Leave. Having open discussions with employees can help make arrangements that suit the employer also. Workplace practices will vary and Shared Parental Leave should fit into the usual practice. It is perfectly acceptable for an employer to suggest arrangements and periods which suit the organisation better than the original request and see if the employee agrees.

The ACAS guidance offers useful examples of Shared Parental Leave situations and how you may want to handle them. The guide explains practical situations such as what happens should a parent cease caring for the child, if there are multiple births and if the child is born early, to name only a few.

Be prepared for the upcoming changes and review the guidance to ensure your company will follow the best practice proposed by ACAS. If you would like assistance with preparing Shared Parental Leave Policies do not hesitate to contact us.

This article has been drafted on HR Legal Service’s behalf by Ashfords LLP Solicitors. Ashfords LLP 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.


Drug Testing in the Workplace: the Difficulties for Employers

Recent reports suggest that since 2010, the number of UK employers conducting workplace drug testing has increased by up to 470%. Drug testing has traditionally been limited to safety critical roles. However, it is becoming more common across a wider variety of sectors (such as retail, professional and financial services). According to the latest Global Drug Survey, within the last 12 months 20% of British respondents have gone to work whilst coming down from drugs. It is hardly surprising then, that businesses are upping the ante.

Under current legislation, employers must have an individual’s consent to test for drugs. Consent provisions are often included in an employer’s contracts of employment or staff handbook. However, an employer can also ask an employee to take a drug test where there is reason to suspect that s/he is acting under the influence. If an employee unreasonably refuses to give their consent in such cases, they may face disciplinary action and possible dismissal for failing to follow a reasonable management instruction and/or gross misconduct.

Companies are under an overriding statutory duty to ensure a safe working environment for their staff. Therefore, if an employer does not deal appropriately with a drug taking employee, affected staff may be able to issue proceedings against them for breach.

But drug testing does not indicate whether an individual’s ability to do their job is affected, nor does it evidence a safe working environment. It simply highlights what substances a person has in their system. The active ingredient in cannabis, for example, can remain detectable days after an individual has smoked it meaning that they could have had a joint on Friday, but test positive at work on Monday, even though their performance may be unaffected at the time of testing.

There is also evidence to suggest that eating poppy seed bread could result in someone testing positive for opiates, but what is an employer to do? The employee’s performance may be completely unaffected but, technically, this person will have failed the test, even though they have not taken any drugs.

The difficulty is that drug use may (or may not) affect an individual’s performance, behaviour or conduct in the workplace in the same way that enjoying a few glasses of wine, experiencing a difficult break-up, partaking in a religious fast (such as Ramadan) or having a baby may do so. In each of these examples, an employee’s productivity and their ability to concentrate may be affected; they may suffer from fatigue or mood swings. Where (and how) does an employer draw the line?

It is becoming increasingly difficult for businesses to navigate this minefield, and the current popularity of “legal highs” is likely to complicate matters. Employers therefore need to take great care, and there are a number of factors which you would be well-advised to consider, before drug testing any employee:

  • Have well-drafted consent provisions in your contracts of employment and staff handbook.
  • Define what you regard as drug abuse. Is it the use of illegal substances? Or the misuse of prescription drugs and medications too? What about the use of “legal highs”?
  • Consider whether to adopt a “zero tolerance” or a “cut-off” approach (whereby an individual with drugs in their system under a certain level will not be disciplined).
  • Have clear policies and procedures in place, which explain when drug testing will be required and the procedure for such testing.
  • Follow these policies and procedures consistently across all levels of your organisation so as to guard against allegations of favouritism, marginalisation or discrimination.
  • Ensure that testing is no more intrusive than necessary to achieve its purpose.
  • Be aware of your obligations under the Data Protection Act regarding the collection and processing of sensitive personal data.
  • Seek appropriate legal advice so as to mitigate the risks of discrimination, assault and/or breach of trust and confidence allegations being levelled against you, as well as claims for constructive unfair dismissal.

This article was published courtesy of HR magazine and was written by Francesa Lopez, employment lawyer at Kingsley Napley LLP.

Living wage debate heats up


The living wage is a contentious issue in business and parliament. But why are SMEs reluctant to join the crowd?

Marc Cowan has a very clear mantra when asked about the importance of paying the living wage to staff: “we’re alive so pay us a living wage”.

Cowan is one of the union reps for the Ritzy cinema in Brixton. He has helped to lead a campaign during 2014 to force the cinema’s owners Picturehouse (a subsidiary of Cineworld) to pay all staff the London living wage of £8.80. Media and entertainment union BECTU were involved in fighting for the agreement.

A deal was reached in September that will see employees’ pay rise from £7.24 an hour in 2012 to £8.80 by September 2015. The agreed rate of £8.20 is below the current living wage, but Cowan vows to fight on for a wage that matches inflation.

He believes that paying a living wage is a question of seeing employees as individuals – and appreciating their contributions.

“Even now that the staff have had this small pay rise you sense a feeling of being valued more,” he says. “And people do work harder. The evidence shows when people are paid a living wage, productivity increases as well as happiness.”

But he admits that the Ritzy staff have more freedom to protest than some, as they are likely to face less “backlash” from the public for disrupting services.

And for every example where people do win an increase in pay, there are plenty more where staff are still being paid below what some think is acceptable.

Into the mainstream

Campaigns such as the Ritzy one mean “moving [the issue] from the sidelines to the mainstream” in 2014, according to Living Wage Foundation chair Michael Kelly.

Currently in the UK, 912 companies have a living wage accreditation, awarded to those who pay their entire workforce the living wage, or to those committed to implementing it in future.

It is also en vogue to support the living wage in Westminster. Opposition leader Ed Miliband pledged that Labour would raise the minimum wage to £8 per hour across the next parliament. However, with inflation this is likely to remain lower than the living wage.

Additionally secretary for business, innovation and skills Vince Cable said in the House of Commons that in 2014 we have entered a “new phase” on addressing low pay, with the living wage at the fore.

But what is it about today’s climate that means some of the best-known companies in the country and politicians from every party are falling over themselves to be involved in the living wage discussion?

Kelly, who is also head of living wage at accredited company KPMG, believes people are waking up to the problem of  “in-work poverty”, where employees on full-time hours still cannot make ends meet.

In June of this year Nestlé became the first UK manufacturer to agree to pay its 800 contractors living wage from 2017, meaning suppliers will earn the same as the 8,000 permanent staff who are already paid it.

The company’s UK and Ireland group HR director Matt Stripe says the decision “immediately felt right”. He adds that large corporates like Nestlé have a responsibility to lead from the front on issues like this.

“It’s important to set a standard and engage people,” he explains. “It’s fundamentally the right thing to do. It gives everyone a sense of pride in the company they work for, which is incredibly powerful.”

The problem with SMEs

Despite the vocal support of big business, the economic recovery and a rise in employment, the number of employees on living wage hasn’t increased.

The latest Work That Pays report (released by the Living Wage Commission in June 2014) shows that the number of employees earning less than the living wage has jumped from 3.4 million in 2011 to 5.2 million in 2014.

So why is this number getting higher? One explanation can be found by drilling down into the nature of the companies that are creating new jobs.

According to the Federation of Small Businesses (FSB), SMEs currently employ 24.3 million of the 30.6 million British people in work today. The Confederation of British Industry (CBI) SME Trends Survey of August 2014 revealed that 35% of SMEs increased their headcount in the three months to July 2014, the fastest growth since 1998.

The Forum of Private Business is a body that looks after the interests of SMEs in the UK. Its chief executive Phil Orford believes that financial pressures put on small employers over the past 12 months – including auto enrolment – mean many smaller companies can’t afford to lift their salaries to living wage levels.

“There is pressure on businesses to raise wages, but we shouldn’t forget that the private sector is supporting record numbers of employment at present,” he says. “A rise in the national minimum wage to the living wage would cost a typical micro business more than £20,000. In the present climate, with the cost pressures already mentioned, that sum of money is simply unaffordable and undesirable for many companies.”

Alison Robb, group director for people, customer, communication and commercial at Nationwide, sympathises with SMEs that do not have the resources to put into increasing wages immediately, but urges all employers to look at the long-term picture.

“I appreciate not everyone is in a position to do this today,” she says. “But people should look at the business case, including the higher calibre of employee it is possible to attract with the living wage.”

But Cowan questions small employers that claim not to have the resources to pay their staff living wage when they are “continually expanding”. “It’s not that the money isn’t there, it’s that the money isn’t allocated to be there,” he says. “It’s an issue with business models rather than it being the case that they simply can’t pay the living wage.”

Two camps

In the current climate there are two types of employer in the living wage debate. There are the large corporates who see it as a tool to aid attraction and engagement and the smaller companies who have a decision to make around their profits versus their staff’s happiness and financial wellbeing.

For the first group it is easy to see large numbers adopting the policy over the next year and encouraging others to do so. But for smaller employers it seems a case of taking each company individually.

For Picturehouse Cinemas it would appear that the money was there. But only time, and the results of further campaigns, will reveal whether this is true for all employers.


‘Lack of clarity’ stalling pensions reforms


A lack of information on proposed pensions reform is preventing providers from making changes in time for the implementation date of April 2015, according to NAPF chairman Ruston Smith.

Speaking at the NAPF’s annual pensions conference in Liverpool, Smith urged the government to make the details of the reforms clearer to avoid leaving providers and employers on the back foot next April.

“There’s no denying the proposition is exciting and compelling for savers,” he said. “But for those of us at the sharp end who have to deliver this, April’s not far away.”

Speaking at the same event, Association of British Insurers director general Otto Thoresen warned that “the reality of what happens in April 2015 may be very different from people’s expectations”.

He added that experts in the pensions industry are reluctant or unable to prepare for April 2015 until government makes more information available.

“If you take guidance guarantee as an example, only when we know what’s coming in April will we know what needs to be done,” he explained.

Group pensions director at Whitbread Lesley Williams said due to thestrict implementation timelines, employers may not be able to have the schemes they would like in place.

“I would one day like to see a way that we can provide employees with incomes from our workplace schemes, but come next April we won’t have the infrastructure in place to administer that,” she said. “And I’m concerned this will affect how schemes are run in the future.”


Employers urged ‘not to panic’ on shared parental leave


Employers shouldn’t panic about the technicalities of shared parental leave. Instead they should see it as a positive benefit for their staff, according to Working Families chief executive Sarah Jackson.

Jackson was commenting on the Acas guidance released yesterday, which provides legal guidance to families and employers who will be engaging with the new form of leave.

Figures from the Department for Business, Innovation & Skills (BIS) suggest around 285,000 working couples will be eligible to take advantage of the benefit from 5 April 2015.

From this date working couples will be able to share the 52 weeks of maternity leave and 39 weeks of pay that the mother is currently entitled to.

Jackson told HR magazine that even though some of the details of these arrangements can “seem horrible”, employers should not bury their heads in the sand.

“To the employers I would say ‘don’t sweat the details and don’t panic’. By the time employees come to you with the forms the decisions will actually be fairly simple. There is plenty of advice out there for employees and employers alike.”

Acas head of information and guidance Stewart Gee added that the organisation has worked with employers, unions and family groups to help everyone understand shared parental leave.

“We advise employers and employees to start early with discussions to ensure that they can agree the sort of arrangements that work best for business and families,” he said. “We are also running training courses to help employers prepare for the legal changes.”


Treasury to relax pension rules further


Measures expected to be announced by chancellor George Osborne later today will see savers able to take money from their pensions pots in more than one instalment, some of which is tax-free.

The changes are due to be included in the Taxation in Pensions Bill and will be in place by April 2015. The main policy announcement is that savers will no longer have to take their tax-free allowance within 18 months of becoming eligible for their pension income (typically at age 55).

This means savers will effectively be able to withdraw any amount from their pension savings at any time during retirement, 25% of which will be tax-free.

Under current rules those 55 and older may take up to 25% of their entire pot as a lump sum within 18 months, but then any further withdrawals will be taxed at a rate of 55%.

Ros Altmann, pensions adviser to the Treasury, predicted the changes “will be very popular” among savers, as it’s a further move away from relying on products such as annuities.

But Hargreaves Lansdown head of pensions research Tom McPhail warned increasingly loose regulation could lead to a “retirement car crash”.

“Millions of pension savers are being encouraged to withdraw their money at will,” he said. “Managing longevity and investment risk is complicated. Many professionals struggle to get it right, so the idea that at least some inexperienced investors won’t get it wrong is recklessly naïve.”


Workplace stress could cost billions


Employees who feel under pressure and unsupported could cost the economy billions in lost time.

People who are starting employment now will be expected to work until later in life, always be contactable and deal with an ever-increasing onslaught of data every day.

So is this sustainable? Will we reach a point where the strains of work become too much to manage over a long period? Employee benefits specialists Unum decided to explore these rather worrying questions in its Future Gazing report.

The report is based on a survey of 1,000 employees from the IT, accounting, media, law and retail sectors. It looks at the evolution of “workplace care” and how it will shape workers’ experiences up to 2030.

One of the biggest trends highlighted in the paper is the need to manage employees effectively while they are coping with the demands work places on them.

Almost one-third (32%) are concerned that both internal and external factors will affect the amount of time they will be able to carry on working, leaving the economy with a potential shortfall of £44 billion due to lost working time.


Solutions to reduce workplace attrition include synchronising lunch-breaks of employees from the same social groups (23%) and brainstorming sessions to share the burden of workplace pressures (66%).


Unum CEO Peter O’Donnell told HR magazine employees entering the world of work today will be subject to a very different set of values to those prevalent in the 20th century.

“It’s time for wellbeing to be brought into the boardroom as an issue,” he said. “Led by the HR director it’s something that executives have to start taking seriously, for all their employees’ sakes. We’re in a technological age where people are expected to open emails at any time. It’s important with this level of exposure employers take measures to future-proof their workforce.”


Helping HR to navigate auto-enrolment


More than 4.5 million people now have a workplace pension after auto-enrolment − marking for some the very first time they have saved. However, with only 2% of employers currently providing a workplace pension, the reforms have barely scratched the surface.

With the NAPF’s annual conference almost upon us (15-17 October 2014), what do pension schemes and employers need from the next government in order to provide pensions that millions of people can rely on for a comfortable retirement?

It is crucial the next government continues to maintain the consensus and momentum that has underpinned auto-enrolment so far. The millions of people working for small- to medium-sized employers who will be automatically enrolled after the 2015 general election deserve the same access to pension saving as those who have already been enrolled.

And workers agree. Our research found that 69% of employees felt relieved once they started saving for a pension. And 57% agreed that they trust their employer to pick a good pension scheme and manage it for them. Only 5% disagreed.

This is reflected by the fact that currently fewer than 10% of workers who have been automatically enrolled have exercised their right to opt-out – far lower than original predictions. Again, this is good news, but it’s vital that the work starts now – when organisations with as few as 60 employees begin staging – to ensure that employees of SMEs continue to see the benefit of saving into a pension.


Auto-enrolment at the sharp end is a topic for discussion at the NAPF annual conference. SMEs and managers will discuss the challenge of introducing workplace pensions in small- and medium-sized organisations, and highlight lessons the panel has learned for the rest of the SME community.

NAPF research from 2013, Automatic enrolment one year on, carried out with some of the UK’s largest employers, found that while employers increasingly see the importance of offering good quality pensions, the preparations can be daunting. And this will only be magnified for small- to medium-sized organisations that may have never provided a workplace pension scheme, and need to find out what they have to do, where to go for more information and when they need to seek specialist advice.

Often the nuts and bolts of communicating and explaining auto-enrolment falls to the HR professional, especially in SMEs. Generally the HR department is the first point of contact for staff members with queries about pensions and is often responsible for disseminating information about pension changes to other departments. For many employers, pensions form part of the wider reward package, and communicating this to staff and prospective employees also comes under the HR remit.

But planning for auto-enrolment can be complex and while they do not need to be pensions experts, HR practitioners need to know the touch points for their department. For example, the choices available for their pension scheme, how workers are enrolled, how best to communicate the changes, and how to administer the process.

To help HR professionals, the NAPF annual conference includes a stream dedicated to the pensions and employee benefits space. Partnered by HR magazine, sessions will cover a whole raft of issues including the pensions reforms introduced in the Chancellor’s 2014 Budget, workers’ decision-making, case studies from across the globe and employers’ attitudes to the older worker – all from the perspective of HR and employee benefits professionals.

There are many factors to consider when delivering good quality workplace pension provision, but the conference will be an opportunity to come together with other HR professionals, employers, trustees and the wider pensions and employee benefits industry, to reflect, debate and plan how best to do this.

Plenty to consider, plenty to do – see you in Liverpool.

This article was published courtesy of HR magazine and was written by Joanne Segars (pictured), chief executive of the NAPF