Pay day?

Photo by Jordan Rowland on Unsplash

One of the most important common law duties that an employer has under the contract of employment is to pay wages to the employee.

This duty, of course, is contingent upon the employee carrying out his or her side of the bargain i.e. performing their contractual duties.

The right to be paid fully and on time is a basic right of any employee. Failure by employers to pay wages (wholly or partially) or to delay payment is a serious contractual breach.

Historically, employers could exploit employees by paying them in vouchers or other commodities. Often, these vouchers could be exchanged only in the factory shop. This led Parliament to pass the Truck Acts to prevent such abuses.

Sections 13-27 of the Employment Rights Act 1996 (which replaced the Wages Act 1986) give employees some very important rights as regards the payment of wages.

The National Minimum Wage Act 1998 (and the associated statutory instruments) and the Equality Act 2010 also contain important provisions about wages and other contractual benefits.

There are a number of key issues regarding the payment of wages:

  • All employees are entitled to an individual written pay statement (whether a hard or electronic copy)
  • The written pay statement must contain certain information
  • Pay slips/statements must be given on or before the pay date
  • Fixed pay deductions must be shown with detailed amounts and reasons for the deductions e.g. Tax, pensions and national insurance
  • Part time workers must get same rate as full time workers (on a pro rata basis)
  • Most workers entitled to be paid the National Minimum Wage or the National Minimum Living Wage (if over age 25) (NMW)
  • Some workers under age 19 may be entitled to the apprentice rate

Most workers (please note not just employees) are entitled to receive the NMW i.e. over school leaving age. NMW rates are reviewed each year by the Low Pay Commission and changes are usually announced from 1 April each year.

It is a criminal offence not to pay workers the NMW and they can also take (civil) legal action before an Employment Tribunal (or Industrial Tribunal in Northern Ireland) in order to assert this important statutory right.

There are certain individuals who are not entitled to receive the NMW:

  • Members of the Armed Forces
  • Genuinely self-employed persons
  • Prisoners
  • Volunteers
  • Students doing work placements as part of their studies
  • Workers on certain training schemes
  • Members of religious communities
  • Share fishermen

Pay deductions?

Can be lawful when made by employers …

… but in certain, limited circumstances only.

When exactly are deductions from pay lawful?:

  • Required or authorised by legislation (e.g. income tax or national insurance deductions);
  • It is authorised by the worker’s contract – provided the worker has been given a written copy of the relevant terms or a written explanation of them before it is made;
  • The consent of the worker has been obtained in writing before deduction is made.

Extra protection exists for individuals working in the retail sector making it illegal for employers to deduct more than 10% from the gross amount of any payment of wages (except the final payment on termination of employment).

Employees can take a claim to an Employment Tribunal for unpaid wages or unauthorised deductions from wages. They must do so within 3 months (minus 1 day) from the date that wages should have been paid or, if the deduction is an ongoing one, the time limit runs from the date of the last relevant deduction.

An example of a claim for unpaid wages can be seen below:

Riyad Mahrez and wife ordered to pay former nanny

Equal Pay

Regular readers of the Blog will be aware of the provisions of the Equality Act 2010 in relation to pay and contractual benefits. It will amount to unlawful sex discrimination if an employer pays a female worker less than her male comparator if they are doing:

  • Like work
  • Work of equal value
  • Work rated equivalent

Sick Pay

Some employees may be entitled to receive pay from the employer while absent from work due to ill health e.g. 6 months’ full pay & then 6 months’ half pay. An example of this can be seen below:

Statutory Sick Pay (SSP)

This is relevant in situations where employees are not entitled to receive contractual sick pay. Pre (and probably post Coronavirus crisis) it was payable from the 4th day of sickness absence only. Since the outbreak of the virus, statutory sick pay can paid from the first day of absence for those who either are infected with the virus or are self-isolating.

Contractual sick pay is often much more generous than SSP

2020: £95.85 per week from 6 April (compared to £94.25 SSP in 2019) which is payable for up to 28 weeks.

To be eligible for SSP, the claimant must be an employee earning at least £120 (before tax) per week.

Employees wishing to claim SSP submit a claim in writing (if requested) to their employer who may set a deadline for claims. If the employee doesn’t qualify for SSP, s/he may be eligible for Employment and Support Allowance.

Holiday Pay

As per the Working Time Regulations 1998 (as amended), workers entitled to 5.6 weeks paid holiday entitlement (usually translates into 28 days) per year (Bank and public holidays can be included in this figure).

Some workers do far better in terms of holiday entitlement e.g. teachers and lecturers.

Part-time workers get holiday leave on a pro rata basis: a worker works 3 days a week will have their entitlement calculated by multiplying 3 by 5.6 which comes to 16.8 days of annual paid leave.

Employers usually nominate a date in the year when accrual of holiday pay/entitlement begins e.g. 1 September to 31st August each year. If employees leave during the holiday year, their accrued holiday pay will be part of any final payment they receive.

Holiday entitlement means that workers have the right to:

  • get paid for leave that they build up (‘accrue’) in respect of holiday entitlement during maternity, paternity and adoption leave
  • build up holiday entitlement while off work sick
  • choose to take holiday(s) instead of sick leave.

Guarantee payments

Lay-offs & short-time working

Employers can ask you to stay at home or take unpaid leave (lay-offs/short time working) if there’s not enough work for you as an alternative to making redundancies. There should be a clause in the contract of employment addressing such a contingency.

Employees are entitled to guarantee pay during lay-off or short-time working. The maximum which can be paid is £30 a day for 5 days in any 3-month period – so a maximum of £150 can be paid to the employee in question.

If the employee usually earn less than £30 a day, s/he will get their normal daily rate. Part-time employees will be paid on a pro rata basis.

How long can employees be laid-off/placed on short-time working?

There’s no limit for how long employees can be laid-off or put on short-time. They could apply for redundancy and claim redundancy pay if the lay-off/short-term working period has been:

  • 4 weeks in a row
  • 6 weeks in a 13-week period

Eligibility for statutory lay-off pay

To be eligible, employees must:

  • have been employed continuously for 1 month (includes part-time workers)
  • reasonably make sure you’re available for work
  • not refuse any reasonable alternative work (including work not in the contract)
  • Not have been laid-off because of industrial action
  • Employer may have their own guarantee pay scheme
  • It can’t be less than the statutory arrangements.
  • If you get employer’s payments, you don’t get statutory pay in addition to this
  • Failure to receive guarantee payments can give rise to Employment Tribunal claims.

This is an extremely relevant issue with Coronavirus, but many employers are choosing to take advantage of the UK Government’s Furlough Scheme whereby the State meets 80% of the cost of an employee’s wages because the business is prevented from trading.

Redundancy payments

If an employee is being made redundant, s/he may be entitled to receive a statutory redundancy payment. To be eligible for such a payment, employees must have been employed continuously for more than 2 years.

The current weekly pay used to calculate redundancy payments is £525.

Employees will receive:

  • half a week’s pay for each full year that they were employed under 22 years old
  • one week’s pay for each full year they were employed between 22 and 40 years old
  • one and half week’s pay for each full year they were employed from age 41 or older

Redundancy payments are capped at £525 a week (£508 if you were made redundant before 6 April 2019).

Please find below a link which helps employees facing redundancy to calculate their redundancy payment:

https://www.gov.uk/calculate-your-redundancy-pay

Family friendly payments

Employers also have to be mindful of the following issues:

  • Paternity pay
  • Maternity Pay
  • Shared Parental Pay
  • Maternity Allowance
  • Adoption Pay
  • Bereavement Pay

Employers can easily keep up to date with the statutory rates for family friendly payments by using the link below on the UK Government’s website:

https://www.gov.uk/maternity-paternity-calculator

What happens if the employer becomes insolvent and goes into liquidation?

Ultimately, the State will pay employees their wages, redundancy pay, holiday pay and unpaid commission that they would have been owed. This why the UK Government maintains a social security fund supported by national insurance contributions.

An example of a UK business forced into liquidation can be seen below:

Patisserie Valerie: Redundant staff ‘not receiving final pay’

Up to 900 workers lost their jobs when administrators closed 70 of the cafe chain’s outlets. Disclaimer:

Conclusion

Payment of wages is one of the most important duties that an employer must fulfil. It is also an area which is highly regulated by law, for example:

  • The common law
  • The Employment Rights Act 1996
  • The Working Time Regulations 1998
  • The National Minimum Wage Act 1998
  • The Equality Act 2010
  • Family friendly legislation e.g. adoption, bereavement, maternity, paternity

Failure by an employer to pay an employee (and workers) their wages and other entitlements can lead to the possibility of claims being submitted to an Employment Tribunal. The basic advice to employers is make sure you stay on top of this important area of employment law because it changes on a regular basis and ignorance of the law is no excuse.

Related Blog Articles:

https://seancrossansscotslaw.com/2020/01/30/2020-same-old-sexism-yes-equal-pay-again/

https://seancrossansscotslaw.com/2020/01/10/new-year-same-old-story/

https://seancrossansscotslaw.com/2019/05/13/inequality-in-the-uk/

https://seancrossansscotslaw.com/2019/03/31/the-gender-pay-gap/

https://seancrossansscotslaw.com/2019/04/05/the-gender-pay-gap-part-2/

https://seancrossansscotslaw.com/2019/06/26/ouch/

https://seancrossansscotslaw.com/2019/06/20/sexism-in-the-uk/

Thttps://seancrossansscotslaw.com/2019/04/30/paternity-leave/

Copyright Seán J Crossan, 5 April 2020

Pregnancy discrimination (or New Year, same old story … Part 2)

Photo by Sincerely Media on Unsplash

We’re barely into 2020 and we seem to be on something of a roll with stories about sex discrimination. Yesterday, I discussed the issue of equal pay.

Only this morning I was flicking through the newspaper and came across another story, this time, concerning pregnancy discrimination.

Helen Larkin was dismissed from her post with the Liz Earle Beauty Company on the grounds of her pregnancy. Her employer was restructuring the company and refused to consider Ms Larkin for two alternative posts within the organisation. This refusal to consider suitable, alternative employment appeared to be motivated by the fact that Ms Larkin would shortly be going off on her period of maternity leave.

This treatment amounted to unlawful direct discrimination in terms of Sections 13 and 18 of the Equality Act 2010. Her dismissal would also be automatically unfair in terms of the Employment Rights Act 1996.

Consequently, Ms Larkin was awarded over £17,000 in compensation. This sum, of course, reflects an element to injury to feelings (the so called Vento Bands or Guidelines). In fact, Ms Larkin was awarded £10,000 in compensation to reflect injury to feelings.

A link to the judgement of the Employment Tribunal can be found below:

https://assets.publishing.service.gov.uk/media/5e2f0300e5274a6c42dcd132/Mrs_H_Larkin_v_Liz_Earle_Beauty_Co._Ltd_-_1403400.2018.pdf

A study carried out jointly by the UK Government Department (Business, Innovation and Skills) and the Equality and Human Rights Commission previously discovered that some 54,000 women per year in this country were forced out of their employment for reasons related to pregnancy and/or maternity.

A link to a summary of the research on the website of the Equality and Human Rights Commission can be found below:

https://www.equalityhumanrights.com/en/managing-pregnancy-and-maternity-workplace/pregnancy-and-maternity-discrimination-research-findings

Again, as I noted in yesterday’s Blog (New Year, same old story …), we have had anti-discrimination laws in the UK for nearly 45 years and yet we still regularly hear stories about pregnancy and maternity discrimination.

Readers might be interested to learn about the work of a pressure group (Pregnant then screwed) which campaigns to end the ‘motherhood penalty’:

https://pregnantthenscrewed.com

A link to Helen Larkin’s story as reported in The Independent can be found below:

https://edition.independent.co.uk/editions/uk.co.independent.issue.110120/data/9278901/index.html

Related Blog articles:

https://seancrossansscotslaw.com/2020/01/10/new-year-same-old-story/

https://seancrossansscotslaw.com/2019/02/14/hurt-feelings/

https://seancrossansscotslaw.com/2019/02/22/sticks-and-stones-may-break-my-bones-but-names-will-never-hurt-me/

https://seancrossansscotslaw.com/2019/07/08/just-blew-it-again/

https://seancrossansscotslaw.com/2019/08/22/the-trouble-with-pregnancy/

https://seancrossansscotslaw.com/2019/09/10/barbaric/

Copyright Seán J Crossan, 11 January 2020

TUPE or Redundancy?

Photo by Ian Tormo on Unsplash

Readers of this blog will know that TUPE and redundancy are two employment law issues which have featured regularly in the last month or so.

So, today, we have a story which combines both.

Jobs lost as courier SGM Distribution goes into liquidation

SGM Distribution, a courier company, based in North-East Scotland (Aberdeen and Letham to be precise) has gone into liquidation. Thankfully, 51 of the DGM employees have had their employment transferred to another employer. These fortunate individuals will, of course, have their core terms and conditions of employment protected by the Transfer of Undertakings (Protection of Employment) Regulations 2006 (as amended).

Sadly, 16 of DGM’s employees will be having their employment terminated by reason of redundancy. Redundancy is a potentially fair reason for dismissal in terms of Section 98(2)(c) of the Employment Rights Act 1996 – assuming that such an exercise has been carried out properly by the employer.

The definition of redundancy is contained in Section 139(1) of the Employment Rights Act 1996:

For the purposes of this Act an employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is wholly or mainly attributable to—

(a) the fact that his employer has ceased or intends to cease—

(i) to carry on the business for the purposes of which the employee was employed by him, or

(ii) to carry on that business in the place where the employee was so employed, or

(b) the fact that the requirements of that business—

(i) for employees to carry out work of a particular kind, or

(ii) for employees to carry out work of a particular kind in the place where the employee was employed by the employer,

have ceased or diminished or are expected to cease or diminish.

Conclusion

Those former DGM employees unlucky enough to be made redundant are having their contracts terminated. On the other hand, the vast majority of the former DGM employees will maintain their continuity of employment (on their existing terms and conditions) with their new employer. They have a right not to experience any detriments to their terms and conditions of employment as a result of this transfer of an undertaking. Entirely positive changes to their contracts e.g increased pay, holiday entitlement, flexible working arrangements and enhanced family friendly working benefits would be most welcome. In terms of the TUPE Regulations, the new employer has limited scope for implementing negative changes to the employment contracts of the transferred employees. Any attempted changes must be for economic, technical or organisational reasons – not an especially profitable area for employers.

Postscript

Just when you find one story about the implications of TUPE or redundancy, another pops up. Please see a link to a relevant story from BBC Northern Ireland involving the Canadian company, Bombardier:

Bombardier to sell NI operations

The Canadian aircraft manufacturer employs about 3,600 people in Northern Ireland.

Copyright Seán J Crossan, 2 May 2019

More hell on the high street (or redundancy again)

Photo by Becca McHaffie on Unsplash

The difficult trading conditions on the UK high street don’t seem to be easing with news that Debenhams, one of the country’s biggest retailers, will close 50 of its stores. This will affect about 1,200 employees of Debenhams, many of whom will be facing up to the threat of redundancy.

Debenhams have just announced the names of the first 22 stores which will close in 2020.

Debenhams names 22 stores to close

The struggling department store chain plans to close the shops next year, affecting 1,200 staff.

Redundancy

Redundancy can be potentially fair reason for dismissal… if handled correctly by employers.

Only employees can be made redundant. 

Remember: Section 230 of the Employment Rights 1996 defines who is an “employee”.

The definition of redundancy can be found in Section 139(1) of the Employment Rights Act 1996:

(1) For the purposes of this Act an employee who is dismissed shall be taken to be dismissed by reason of redundancy if the dismissal is wholly or mainly attributable to-

(a) the fact that his employer has ceased or intends to cease-

(i) to carry on the business for the purposes of which the employee was employed by him, or

(ii) to carry on that business in the place where the employee was so employed, or

(b) the fact that the requirements of that business-

(i) for employees to carry out work of a particular kind, or

(ii) for employees to carry out work of a particular kind in the place where the employee was employed by the employer,

The relevant legal provisions governing redundancy are quite extensive and can be found in:

● Trade Union and Labour Relations (Consolidation) Act 1992 

● Employment Rights Act 1996

● Information and Consultation of Employees Regulations 2004 

● Transfer of Undertakings (Protection of Employment) Regulations 2006

● Collective Redundancies and Transfer of  Undertakings (Protection of Employment) (Amendment) Regulations 2014.

The really critical provisions of UK employment law which govern redundancy handling are to be found in the following:

● Sections 188-198 of the Trade Union and Labour Relations (Consolidation) Act 1992 

(Section 188 is further supplemented by the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 1999).

Handling redundancies

Employees should be selected for redundancy in a fair way.

The employees who are at risk for potential redundancy will be part of a group of individuals known as the redundancy pool.

Employers can manage situation in a number of ways. 

How?

● LIFO

● Volunteers 

● Disciplinary records

● Staff appraisal – skills, experience etc (redundancy matrices or re-applying for your job).

What is LIFO? 

Last in, first out – was the most commonly used method, but it could fall foul be regarded as indirect discrimination e.g. too many young people are made redundant. So there are limitations to this approach.

Redundancy selection criteria must be objective. 

Many employers will have contractual redundancy policies. Must stick with this: see John Anderson v Pringle of Scotland [1998] IRLR 64.

Appeals should be permitted.

Individuals will still be an employee until effective date of redundancy.

Avoiding redundancies

Redundancy could be avoided by:

● Short-time working

● Lay-offs

The employer needs to consult with employees or their representatives.

Both sides may not reach agreement, but consultation has occurred. 

 It has to be a meaningful exercise – not a paper one.  

Additional rights

Employees have additional rights in redundancy situations:

● Consultation with employer

● Notice period

● Suitable, alternative employment 

● Time off to find new employment

Selection for redundancy

Selection for redundancy is automatically unfair in relation to:

● Protected characteristics e.g. age, disability, gender, maternity and pregnancy etc

● Trade Union participation or acting as employee representatives

● Jury service

● Whistle-blowing & health and safety cases

● Asserting statutory rights

● Occupational pension trustees

Statutory redundancy pay

Statutory redundancy pay is most common payment. Only those employees who have 2 years or more continuous service are entitled to claim statutory redundancy pay.

It is worked out according to the following formula:

● half a week’s pay for each full year employees were under 22

● 1 week’s pay for each full year employees were 22 or older, but under 41

● 1 and half week’s pay for each full year employees were 41 or older

Length of service which can be used to calculate the amount of redundancy pay is capped at 20 years and the amount of weekly pay is capped at £525 (the maximum statutory amount claimable is £15,750) from 6 April 2019.

Employers can be more generous with redundancy pay or they can include employees with less than 2 years’ continuous service.

No tax is payable on redundancy pay less than £30,000.

Employees can calculate their entitlement to statutory redundancy pay by clicking on the link below:

https://www.gov.uk/calculate-employee-redundancy-pay

Notice of redundancy

Proper notice of redundancy must be given. Section 86 of the Employment Rights Act 1996 contains the relevant notice periods for termination of the employment contract.

The maximum period of notice for those employees with 12 years or more continuous service is 12 weeks.

Sometimes contractual periods of notice can be longer, but not shorter than the those laid down by the Employment Rights Act 1996.

That said, notice can be shorter if the employment contract permits employer to make a payment in lieu of notice. 

Employees will receive full entitlement to redundancy pay, notice pay, holiday pay & other entitlements.

Collective redundancies?

This situation arise where more than 20 employees are going to be  made redundant in a 90 day period. Fixed term contract employees do not need to be included in collective consultation, except if contract ending early because of redundancy.

The Debenhams’ situation is likely to be classified as a case of collective redundancy.

There must be consultation with with Trade Union or employee representatives.

Consultations must cover:

● ways to avoid redundancies

● the reasons for redundancies

● how to keep the number of dismissals to a minimum

● how to limit the effects for employees involved, e.g. by offering retraining

Length of consultation period?

No time limit for how long this period should be, but the minimum is:

● 20 to 99 redundancies – the consultation must start at least 30 days before any dismissals take effect

● 100 + redundancies – the consultation must start at least 45 days before any dismissals take effect

These minimum periods apply if employers are contemplating making collective redundancies within a 90 day period. 

The UK Coalition Government (2010-15) substantially reduced redundancy consultation periods.

Failure to consult employees?

Dismissals will almost certainly be unfair. 

In a collective redundancy situation, employers should notify the Redundancy Payments Service (RPS) by filling out form HR1. It is a (strict liability) criminal offence not to complete the HR1.

A link to a template HR1 form can be found below:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/782487/NEW_HR1.pdf

Failure to pay redundancy payments or payment of the wrong amount?

Affected employees have 6 months (minus 1 day) to lodge an Employment Tribunal claim.

Insolvent employers?

The State will ultimately pay out from the National Insurance Fund (employee’s should complete and submit an RP1 Form).

Employees can find out if their employer is insolvent by going to the following link:

https://www.gov.uk/get-information-about-a-company

A short film from ACAS about the core employments rights in relation to redundancy can be found below:

Copyright Seán J Crossan, 28 April 2019

Don’t fly with us …

Photo by Joel Barwick on Unsplash

Yet another story in the news today about the possibility of redundancies. UK airline Flybe has cancelled many flights because of the prospect of having to make staff redundant.

This has occurred because Flybe appears to be in serious financial difficulties.

As discussed in previous blogs, redundancy is a potentially fair reason for dismissal of employees if carried out correctly. The definition of redundancy appears in Section 139 of the Employment Rights Act 1996.

Flybe cancels flights amid redundancy talks

Flights from Belfast City Airport and from Birmingham are among the dozens of flights affected.

Copyright Seán J Crossan, 3 April 2019

Hell on the High Street

Photo by kevin laminto on Unsplash

It’s been a tough time for many retailers on the UK high street over the last few years.

This has led to a succession of well known businesses going into liquidation (e.g. Maplins and Toys ‘R’ Us UK ) or being taken over by other companies (e.g. Evans Cycles and House of Fraser).

In February 2019, it was announced that the music chain HMV was being taken over by Sunrise Records, a Canadian company. Sunrise was willing to take over 100 former HMV and Fopp Records stores from the company administrators. As a result of this acquisition, nearly 1500 jobs were saved. Unfortunately, 27 stores had to close with the loss of 445 jobs. Many music and film fans will lament the loss of Fopp’s Byres Road store in Glasgow which was one of the outlets that ceased trading.

The lucky HMV and Fopp employees will have their employment transferred to Sunrise Records in terms of the Transfer of Undertakings (Protection of Employment) Regulations 2006. This protects them from dismissal and guarantees continuation of their core terms and conditions of employment.

As for the unlucky employees, they are being made redundant in terms of Section 139 of the Employment Rights Act 1996. Redundancy is a potentially fair reason for dismissal – so long as the procedure is carried out fairly and objectively.

A link to a BBC article about the takeover of HMV and Fopp by Sunrise Records can be found below:

HMV chain saved but some stores will close

The firm is to buy 100 stores out of administration, but 27 outlets will close, including the Oxford Street store

Copyright Seán J Crossan, 3 April 2019

Mishandling redundancy?

Photo by Casey Botticello on Unsplash

An interesting story appeared in today’s Independent newspaper about allegations of racism directed against the office of Tom Watson MP, the Deputy Leader of the UK Labour Party.

The allegations (and they are allegations I would stress at this point) concern claims by a former employee of Mr Watson’s that she was unfairly selected for redundancy. Sarah Goulbourne, the former employee in question is alleging that she lost her post because of her race and/or ethnicity (she is of Afro-Caribbean descent). A person’s race is, of course, a protected characteristic in terms of the Equality Act 2010 and s/he has a right not to be subjected to unlawful discrimination or less favourable treatment.

A link to the story can be found below:


https://edition.independent.co.uk/editions/uk.co.independent.issue.270319/data/8841231/index.html

In terms of the Employment Rights Act 1996, redundancy can be a potentially fair reason for dismissing an employee – if handled correctly and fairly.

If, however, a person was selected for redundancy because they possessed a protected characteristic such as race, this would be extremely problematic for the employer. If racial discrimination could be proved by the ex-employee, the dismissal or termination of the contract on grounds of redundancy would almost certainly be automatically unfair.

Employers can access very useful advice about redundancy handling (and presumably how to get it right) from the ACAS website:

http://www.acas.org.uk/media/pdf/1/1/Redundancy-handling-accessible-version.pdf

It will be interesting to see if the case proceeds any further.

Copyright Seán J Crossan, 27 March 2019