Pension Auto Enrolment – Pension Crisis?

Pension auto enrolment is forging ahead, a government initiative that began in October 2012 with the largest companies required to implement the statutory process. Workers will automatically be enrolled into a pension scheme organised by their employer which can be a company pension scheme provided it meets certain criteria or NEST (National Earnings Saving Trust) which is scheme set up by the government.

The government has introduced pension auto enrolment to solve the pension crisis as workers in the UK are not saving enough money for their old age. With pension auto enrolment workers are automatically enrolled into a pension scheme by their employers but have the right to opt out. Every three years they will once again be auto enrolled unless they opt out. Apparently the signs are good that many employees are taking up pension auto enrolment. Currently 3% of salary is paid into each employee’s pension pot (2% contribution by the employee topped up by 1% from their employer). This will eventually rise to a maximum of 8%.

However a recent Channel 4 Dispatches programme “What’s Your Pension Really Worth?” has questioned whether if even 8% will be sufficient to build up satisfactory contributions for a person to live on. It contained interviews with older people who consider property to be a better investment, however, for the majority of employees in the UK that is an impossible dream so their only option is to pin their hopes on saving into a pension.

However it is possible that many people, even if they have saved into a pension pot, will not be able to afford to retire and will have to continue to work. Research done recently showed that 1 in 7 workers believe they will never be able to retire. Statistics produced by the Office for National Statistics’ Labour Market Survey showed that in January to March this year almost one million pensioners are still in employment. This perhaps shows that it is important to start saving for a pension early. The trouble is young people have so much else they want to spend their money on – going out, clothes, a mortage, a family, etc.

There are many barriers to creating a healthy retirement fund. Under automatic enrolment rules, companies only need to ensure that 8% is paid in from earnings between £5,668 and £41,450. No contributions need come out of earnings above this amount.

Lower charges would also help. But the millions of workers put into the Government’s flagship auto enrolment scheme, NEST, are unlikely to see fees reduced for many years. NEST was recently hit by £1.4m of fraud and has a huge loan to pay back the government.

Time will only tell whether pension auto enrolment has hit the mark with the pensions crisis, however, in its current format, the signs may not be good.

HMRC Cracks Down on Unpaid Internships

HMRC is to crack down on unpaid internships it has recently announced. It has revealed that it is targeting 200 employers who have advertised unpaid internships recently to ensure that they are paying the minimum wage. This is part of a government initiative so that young people know their rights to pay and what they can do if they feel they are being exploited. HMRC will be sending out letters to these companies and will carry out targeted checks.

HMRC is warning to name and shame those employers who are flouting the national minimum wage legislation. They may also be liable for a £5.000 fine if they are in breach. HMRC has revealed that since April 2013 it had issued penalties to 466 employers for failing to pay the national minimum wage. Since October 2013 this is currently £6.31 for those aged 21 and over.

Employers who take on interns or individuals looking for work experience therefore need to be paid the national minimum wage at least.

The Guardian reported the contents of the letters will read “If you have got things wrong, but you put them right now, we will not charge you a penalty. If you wait, and we select you for a check and discover the problem, we may charge you a penalty of up to £5,000 and you may be publicly named and shamed by the Department of Business Innovation & Skills as an employer who isn’t paying the national minimum wage.”

The Government has announced that it is also launching a poster campaign and a video offering guidance to young would-be interns.

Frustration of Contract in Employment

Frustration of contract occurs where it is impossible for that contract to continue. In employment that means that the employment contract ends. Frustration will occur only where the circumstances that lead to the consideration to terminate the contract were unforeseen and it is impossible to continue the employment relationship. Furthermore it will have not been the fault of either party. Reasons for frustration could include imprisonment, death and devasting illness. Where a contract is found to be frustrated each party is discharged from future obligations under the contract and neither party may sue for breach. Frustration automatically ends the contract. There is no dismissal in law so no need for notice to be given by either party.

Where prison is concerned an employee sentenced to fairly short terms may be able to argue that there is no frustration if the employment contract allows for other absences of a similar duration such as long term sickness absence. Indeed if the statutory or contractual notice period that the employee is entitled to is approximately as long as the prison sentence the contract would not necessarily be frustrated. Where an employee has been bailed, it will not necessarily amount to a frustrating event. It is the conviction that counts.

Also the cost of replacing the imprisoned employee would need to be considered. An employer could not be expected to incur substantial costs keeping a job open if it would be reasonable of them to stop employing an employee by reason of frustration.

If the contract contains an express clause detailing the circumstances that could lead to frustration then indeed that frustration would not occur as it would have been foreseen.

Where illness is concerned, it must be a really serious condition (permanent incapacity) with no prospect of recovery. In a ruling which clarifies the interplay between disability discrimination rules and the doctrine of frustration, Warner v Armfield Retail & Leisure Ltd [2012] the Employment Appeal Tribunal has ruled that where a worker was laid low by a serious stroke, rendering him incapable of carrying out the functions of his job, his employer was entitled to treat his contract as at an end.

The worker’s role as a construction site manager had required a high level of mobility and decision-making ability. His stroke had greatly affected his ability to get about and his dexterity, co-ordination, memory and concentration were also substantially impaired. Although his employer had initially treated him well, granting him sick pay above his contractual entitlement, he was eventually sent his P45.

The worker claimed unfair dismissal, breach of contract and disability discrimination. However, in the light of medical evidence that he was highly unlikely ever to regain a full capability to perform his former roles, an employment tribunal ruled that his employer had been entitled to treat his contract as frustrated.

Ruling on the worker’s challenge to that decision, the Employment Appeal Tribunal (EAT) found that there had been no error of law in the tribunal’s conclusion that the employer had not breached its duty to make reasonable adjustments and had been entitled to treat the purpose of the contract as unachievable.

The tribunal had also found that the contract’s termination was a proportionate means of achieving a legitimate aim. However, in allowing the worker’s appeal in part, the EAT noted that the tribunal had not dealt with his arguments that he had been treated less favourably within the meaning of the Equality Act 2010, in that the employer had failed to carry out any form of procedure, however rudimentary, to test his capabilities prior to dismissing him. That issue was remitted to the tribunal for fresh consideration.

Frustration of contract in employment is very rare due to the vast amount of legal protection available to an employee and employers should tread carefully when using this as a defence. Factors which the courts will typically take into account when determining if a contract has been frustrated in long-term ill health absence cases will be the nature of the job role itself, the employee’s length of service, the length and effect of the illness, whether any wages had been paid, whether the employee needed replacing and whether it was reasonable for the employer to wait any longer for the employee to return to work.

Employers Not Paying Out Employment Tribunal Awards

Research commissioned by the government has discovered that many employers are not paying out employment tribunal awards to successful claimants. The research was done by IFF Research – Payment of Tribunal Awards 2013 . It seems that currently rogue employers can get away with murder.

The research discovered many employers refused to pay. Therefore the government are considering bringing in new powers for judges to demand up front deposits from employers unwilling to pay..

If a company has stopped trading it can be difficult for claimants to get their money. At the moment with redundancy payments the Insolvency Service http://www.bis.gov.uk/insolvency can pay certain elements. The government will be looking at how such issues can be resolved.

If an employers fails to pay a claimant can pursue payment via either the county court or via the fast track scheme can access the services of a high court enforcement officer to act on their behalf. It appears that many claimants were not aware of enforcement.

According to the research 49% of claimants get paid in full with 16% being paid in part. Therefore more than a third receive no money at all and this includes even after enforcement action has been taken. Reasons for non-payment were the company was insolvent, the employer refused to pay or the employer could not be located.

Movember – Raising Awareness of Men’s Health In the Workplace

The month of November has arrived and with it the worldwide campaign of Movember which raises awareness of men’s health through growing moustaches over the month to provide funds for initiatives related to prostate and testicular cancer and men’s health. My own husband is joining in the fun with his workplace which should be quite interesting! In the eighties many men had moustaches, but these days they can be a rare sight and are certainly not generally “on trend” these days.

Movember began in 2004 in Australia and is now a world-wide event during November. It encourages men (which the charity refers to as “Mo Bros”) to get involved, Movember aims to increase early cancer detection, diagnosis and effective treatments and reduce the number of preventable deaths. Besides getting an annual check-up, the Movember Foundation encourages men to be aware of any family history of cancer, and to adopt a healthier lifestyle

The Movember website promotes the benefits to employees as including fun and enjoyment in the workplace, mixing with colleagues, providing a sense of achievement, uniting departments and adding to team spirit, For employers Movember provides benefits to them which include employee engagement, adding to staff retention and providing a fun workplace. There is lots of information on the website about prostate and testicular cancer and men’s mental health which appear to be taboo subjects in the male macho world. However they need to talked about to raise awareness and men need to know what to look out for. Movember allows promotion to happen in a fun way which may appeal more to the male psyche.

Movember can be an opportunity for employers to promote men’s health and well being in the workplace. Men are notoriously bad at managing their health. They are less likely than women to go to their GP particularly regarding delicate and personal problems. Employers can therefore play a big part in helping to combat men’s shyness and reluctance to discuss what they may consider to be embarrassing matters. However the consequences of ignoring men’s health problems can lead to serious illness and even death. My son’s friend, who is only 28, was recently diagnosed with testicular cancer and is now undergoing treatment. Thankfully in this day and age the condition is 99% treatable so the outcome is good.

Employers’ can promote the fun and generate awareness through encouraging competitions – the hairiest, the biggest, the curliest moustache for example and giving a prize to the winner with a donation to the charity. Last year Movember raised £27m for prostate and testicular cancer initiatives which is fantastic news.

Whilst some employers may have policies on facial hair and its prevention, they do need to be fair, reasonable and justified. In 2000 Disney abandoned its policy of banning moustaches and allowed them provided they were grown in full away from the workplace. The ban had begun in the 1950s when Disney wanted to be distinguished from fairgrounds and despite Walt Disney himself sporting a moustache. Then in 2012 Disney allowed beards and goatees in the workplace. McDonalds currently has a policy of requiring staff to be clean shaven for hygiene reasons. They will only allow beards for religious reasons in which case a beard snood must be worn.

Does facial hair put employers off as part of the recruitment process? Well in the US in 2009 Gillette commissioned a survey of 500 HR professionals to find out. Apparently those men who are well groomed and clean shaven creates more of a good first impression than a firm handshake. A principle my son grasped on my advice when he went for an interview last year and secured the job. Unfortunately the moustache and beard quickly reappeared. The latest designer look of facial stubble does men no favours and can promote an unkempt, untidy look which may or may not be reflected in their performance. Many companies will not take the chance at interview.

Research done in the US in 2003 indicated that a having a beard did not harm a man’s job prospects. Whilst Margaret Thatcher did not allow any men with beards when she was prime minister these days there are many celebrity business figures in the UK who sport full facial hair such as Richard Branson and Alan Sugar. High profile Jeremy Paxman recently took a lot of stick from the media when he returned from holiday having grown a beard. However the US research showed that having a moustache alone did harm career prospects for men.

Whether facial hair is welcomed in the workplace or not, employers can do a lot to join in the fun of Movember and promote men’s health and wellbeing.

Helping The Sick Back to Work With Medical Interviews

This November the government is introducing a two year pilot scheme designed to get people who are receiving sickness benefits back to work with regular medical interviews. Healthcare professionals will help people on sickness benefits to address the barriers to work or face losing their benefits.

The pilot will be run across the Black Country, Derbyshire, Leicestershire, Northamptonshire, Lincolnshire, Nottinghamshire, Rutland, Staffordshire and Shropshire. 3,000 people will take part all of whom have been identified as being fit to work in the next 18-24 months. These sick people will have regular medical interviews as a condition of receiving their benefit hopefully helping them move closer to getting a job. The interviews will be separate to GP appointments and will attempt individuals to engage with their GP if that relationship appears to be broken.

The results of the pilot will be compared to those of a different scheme where employment-focused support is being offered through the Jobcentre or work programme providers. The aim is to see which scheme is the most successful in getting people back to work.

The schemes are being introduced in an effort to stem the increasing benefits bill that currently comes in at almost £220 billion pounds.

Living Wage in the News

This week is Living Wage week (4-10 November) – and the living wage is being promoted in the news. The economy is on the up so we are told. There are more people in jobs and the economy is growing, but at what cost? The media reports the number of people in the UK who are paid less than a living wage are increasing whilst the economy is recovering. The living wage is based on the amount of money an individual needs to have a basic standard of living and cover basic living costs. .

It is not a legally enforceable level of pay, however, unlike the national minimum wage that rises annually every October set by the Chancellor of the Exchequer and enforceable by HMRC. The living wage is currently calculated by the Centre for Research in Social Policy at Loughborough University, while the London living wage has been calculated by the Greater London Authority since 2005. For London it is set as £8.80 per hour and in the rest of the UK £7.65 per hour as of 4 November 2013. The living wage is higher in London because it is the most expensive place to live in the UK. The Living Wage Foundation promotes the rate which compared to the national minimum wage which currently is £6.31 for adults and £5.03 for those aged 18-21.

Ed Milliband is keen on implementing the living wage and has just announced that if Labour get into power he will introduce a tax break to employers who implement it.

Very few employers use it as a benchmark, but so far this year 432 employers have signed up to the living wage. Whilst many employers pay more than the living wage many pay much less. KPMG have revealed that 21% of the working population do not earn enough to make ends meet. Those workers who suffer are part timers, women and young people under 21. 27% of women for example are paid less than the living wage compared to 16% of men. Workers in the private sector are more likely to be affected.

Data compiled by the Office of National Statistics for 2012 shows that median weekly earnings before tax were £506 in the year to April 2012. Men earned £546 a week, while women earned £449. Median annual earnings were £26,500. However, there was substantial variation across the UK with the highest median weekly earnings in London, at £653 and the lowest were in Wales, at £453.

Progress to get pay above the national minimum wage has been slow but now there is more campaigning about the living wage because low pay has been an issue for years.

For more details on the living wage: http://www.livingwage.org.uk/

Penalties for Employers Who Lose At Employment Tribunal

The government has recently announced that from April 2014 there will be penalties for employers who lose at employment tribunal. This change is part of the reform of the employment tribunal system in accordance with the The Enterprise and Regulatory Reform Act 2013. The penalty will be paid to the Secretary of State with a minimum of £100 and a maximum of £5000. A penalty can be awarded against an employer even if the employee has not been successful in their claim and is separate to financial compensation to an employee who is successful.

The tribunal will have the power to make an order where the employer’s breach has ‘one or more aggravating features’ (a term which is not further defined in the legislation) or where the employer’s breach involves unreasonable behaviour (for example where there has been negligence or malice involved).

The Tribunal can take into account the employer’s size and resource, the duration of the breach of the employment right and the behaviour of both the employer and employee. If a financial award is awarded at Tribunal, then the financial penalty must be 50% of the amount of the award. If the employer pays the penalty within 21 days they will get a 50% discount.

Multiple claims in respect of the same act and the same workers are treated as a single claim.

A tribunal cannot review an order to pay a penalty if they subsequently award compensation for failure to comply with a Tribunal recommendation or reinstatement or re-engagement order.

Performance Related Pay – Carrot or Stick?

Teachers across the UK have begun to strike causing chaos in the many schools that have had to close placing extra burdens on working parents. The teachers are striking about government plans to change pensions. They are also concerned about increasing workloads and the introduction of performance related pay from September this year.

The government wants to introduce controversial performance related pay in an effort to raise standards in schools. The long standing practice of linking pay to increasing length of service will end. The teachers are not convinced – a poll done by YouGov on 1,000 teachers resulted in 16% who would like pay linked to results, 44% who didn’t and 44% who said it would not make a difference. Many teachers fear the admniistrative burden of the introduction of performance related pay.

Performance related pay links pay progression to the assessment of individual performance according to set objectives. It has been extensively used since the 1980s as employers sought to improve profits through employee reward. It works best where the employee’s contribution or input is measured alongside their output therefore being a more holistic approach. It does help to retain key talent.

An advantage of performance related pay (PRP) is that it can be motivational. However it only works for those individuals who are motivated by financial reward, but many employees are not. More often job satisfaction and doing a job well is more rewarding than an increase in the pay packet. PRP can nevertheless help to motivate unproductive employees.

PRP can embed a high performance culture but only if it is managed consistently and fairly. PRP promotes fairness and equity with the idea that employees who work harder than others should be rewarded for that effort. However it can cause a rift between those employees who are rewarded and those who are not.

The process works much better in the private sector than the public sector. In fact it is the norm in many private sector organisations particularly financial services. Many public sectors workers are used to receiving their annual increase based on continued service. It does not encourage motivation to improve job standards when workers know they will get an increase regardless. Perhaps this is why so many teachers are up in arms.

Measuring performance is key to the effective operation of PRP as well as the consistent operation and objectivity of line managers.

The recession put employee reward on the back burner so that even pay increases were scrubbed. Perhaps now the country’s economy shows signs of improving performance related pay along with other forms of employee reward will be put back firmly on the agenda.

As for the striking teachers only time will tell whether they will accept the government’s initiative or not and how quickly their differences can be settled.

http://www.bbc.co.uk/news/education-24347235

Beware the Use of Fixed Term Contracts

Many employers offer fixed term contracts which can provide certainty of employment for a specific length of time, however, it is important to remember that they come with certain strings attached. With increasing length of service comes increasing employment rights. After two years service there is the right to claim unfair dismissal and redundancy pay. After four years service under successive fixed term contracts, according to the Fixed Term Employees Less Favourable Treatment Regulations 2002, a worker is deemed to be a permanent employee unless that can be objectively justified.

Many organisations rely on external funding and issue successive fixed term contracts accordingly hoping that the precarious nature of the funding process can be classed as objective justification. However the case of Ball v Aberdeen provided definitive ruling that this is not correct. It has implications for many educational, public sector organisations and charities that tend to issue fixed term contracts.

Fixed term employees have the right to be treated the same as a permanent employee doing the same or similar work. The regulations protect them from any detriment linked to their fixed term status. The exception is where that treatment can be objectively justified. Fixed term workers are entitled to the same level of benefits as their permanent comparator. If this is not possible the employer may have to increase the salary of the fixed term worker in order to compensate them for their loss.

The non renewal of a fixed term contract is a dismissal in law and requires a fair procedure to be followed ie letter, meeting, appeal. If a fair procedure is not followed there is a risk that the worker can claim unfair dismissal if they have two years service.

In a redundancy situation an employer is more likely to terminate fixed term employees. Potentially they risk a claim of unfair dismissal that the workers have been dismissed because they are temporary. Employers should therefore mix fixed term workers with permanent employees in the redundancy pool.

Employers should beware of giving notice early before the end of a fixed term contract ends. The fixed term worker could claim for breach of contract if there is no clause in the contract that will allow early termination. The worker could be awarded the full amount of the wages they would have earned had the contract remained in force by an employment tribunal.