Auto-Enrolment Failures

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Category: HR Alerts

The Pensions Regulator (TPR), the U.K.’s pension watchdog, issued its first fines to employers for not meeting their automatic enrolment duties and issued 163 compliance notices, which was significantly higher than the handful issued in the previous quarter. According to its latest update on the use of its statutory powers, which covers the period July 1 to September 30th, three employers have been issued fixed penalties of £400. Peter Stanway, our BackupHR™ legal expert comments:

The fines were the first to be issued since the outset of TPR’s compliance and enforcement activities for auto enrolment, began in July 2012. They were issued as a result of non-compliance with unpaid contributions notices or compliance notices.

Some of the issues identified were:

  • Employers failing to realise that their staging date did not change when they opted for postponement.
  • Not realising that workers had to be assessed at each pay reference period to see if eligibility criteria had been triggered.
  • Employers registering on the government Gateway website and mistakenly believing this fulfilled their compliance duties.

The Regulator also recently published figures showing a fifth of smaller employers were unaware of their staging date and therefore at risk of non-compliance.

The Executive Director for AE at TPR said: As we deal with smaller employers otherwise known as ‘EU holiday’). EU holiday is only 4 weeks which is shorter than the UK entitlement of 5.6 weeks. This means that any employer who pays basic pay only during holiday is at risk of a claim for the value of supplemental payments which should have been paid during holiday.

  • There is limited scope for workers to recover underpayments of holiday pay by way of an unlawful deduction from wages claim. It seems likely that few employees will be able to show that they have had a break of less than 3 months between periods of such “EU holiday” over a long period of time.
  • Leave to appeal has been given on all the issues involved in this case.Given the significance of this decision Business Secretary Vince Cable announced he is setting up a taskforce to assess the impact of the judgment, leave it too late or do not comply at all. This type of non-compliance is not acceptable. We expect to see the number of times we need to use our powers increase.

    This echoes the message of TPR chairman Mark Boyle, who outlined the challenges ahead for those employers staging between 2015 and 2018, highlighting support schemes as part of it’s educate and enable agenda. They aim to help small and micro employers through the auto-enrolment staging process, by engaging with bookkeepers and accountants. More than 1.5m employers are due to auto enrol between now and 2018.

    We are familiar with the picture of many smaller employers struggling with auto-enrolment; it is clear that the Regulator is taking a tough line and will not take a lack of preparation as an excuse. Employers must address their legal obligations to avoid costly penalties.

    Actions

    • Find out your staging date using the Pensions Regulator, and TPR website
    • Read all of the employer guidance provided free on the TPR website
    • Talk to your existing pensions provider if you have one
    • Do a financial assessment of your workforce
    • Consider your remuneration strategy and decide whether you see pensions as a cost or a benefit
    • Compile a project plan and allocate or contract out responsibilities
    • If you are not willing or able to set up a better scheme investigate the three online options of NEST, NOW or the People’s Pension.

    We do not claim to be pension experts, but we do have considerable experience of advising clients on the potential employment issues, that can arise from auto-enrolment.

    The guidance provided in this article is just that – guidance. Before taking any action make sure that you know what you are doing, or call us for specific advice.

According to a 2002 survey, a quarter of all long-term relationships start at work, which is hardly surprising, given the amount of time we spend there. Recent surveys suggest that 80 per cent of workers view the office as an ideal place to meet their next partner. But, following a lead from employment practices in the United States, some UK employers are seeking to restrict relationships that might blur the lines between the public and the professional. The aim is to avoid potential conflicts of interest, and protect the employer from sexual harassment claims. Some US Employers have adopted policies restricting office relationships by introducing a ‘non-fraternization policy’ or asking employees to sign a consensual relationship agreement commonly referred to as a ‘love contract’.

In May, Ipswich Borough Council made headlines when it introduced a new code of conduct making it obligatory to report to line managers, short-term sexual flings, as well as long-term relationships.

Peter Stanway, our BackupHR™ legal expert comments:

Many employers would see heavy-handed restrictions as patronising and dislike the whole notion of love contracts or “consensual relationship agreements”, because they intrude on private lives and, under UK law, offer little protection against potential sexual harassment claims if an affair breaks down badly. Others would like to impose a blanket ban on relationships on the grounds that they are wholly inappropriate in a work environment.

Sex discrimination is a relatively common claim faced by employers. Statistically it is most likely to be brought by a junior female member of staff, where the employer has decided to move the employee to another department as a solution either to dealing with the existence of a relationship, or following its breakdown.

According to some employers, any move to link love/romance in HR processes should be resisted, not just because it looks like snooping, but because the majority of sexual liaisons between colleagues are brief.

So how do you strike the right balance between respecting privacy and protecting your business interests?

Because romances are part and parcel of corporate life, the best way to manage relationships is for them to be totally out in the open, and require employees to be professional enough to report when they occur. Often the key issue is that people in a ‘relationship’ cannot be in a reporting relationship. Aside from a potential conflict with meritocracy and fairness, there could also be an issue of sensitive information being used as a lever of power. If people feel that individuals are getting preferential treatment because of a relationship with someone more senior, resentment and anger can quickly build. Perceived unfairness often results in resignation.

It needs to be clear if the failure to divulge a relationship with a direct report is cause for demotion, transfer, resignation or other disciplinary action, including dismissal.

There is the ever-present danger of the grapevine. Office gossips remain a very helpful source of information. If it is left up to a third party to inform management of the relationship, this not only looks bad for the couple concerned, but it also makes management think there are more potential problems than perhaps there are.

We believe that this sort of case comes under the heading of conflict of interest, which in other contexts, is quite clearly something employers will not allow. If you are going to have a policy then it should set out how the business will deal with workplace relationships. The existence of policies alone is not sufficient and employers should provide appropriate training to all staff to avoid any confusion.

Actions

  • Ensure you have codes of conduct, equal opportunities and anti-harassment policies, that set out the type of behaviour that is not tolerated at work.
  • Consider adding a “pillow talk” clause to the staff handbook.
  • Put in protocols for when relationships occur where there are commercial issues to consider.

The guidance provided in this article is just that – guidance. Before taking any action make sure that you know what you are doing, or call us for specific advice.

There are regular surveys about employee attitudes to false expense claims. According to a study conducted by YouGov for Concur, one in five people (18%) believed it is acceptable to fiddle (exaggerate) expenses ‘when an employee works long hours but isn’t paid any overtime’. The same percentage believed an employee is entitled to fiddle if they ‘don’t feel they are fully reimbursed’ for all the costs they have incurred on behalf of their employer. Mileage is the biggest area of potential expense fiddling with over one in four (26%) judging it acceptable to exaggerate expense claims when the ‘mileage rate paid by the employer doesn’t cover the actual car and fuel costs’.

Peter Stanway, our BackupHR™ legal expert comments:

It seems that many otherwise honest people think that fiddling expenses is OK. But as we know from the Westminster expenses scandal, unmanaged expenses can lead to considerable loss of money and trust. Inflated or inappropriate claims are a form of theft, so it’s important to manage your expenses policy properly.

Not all incorrect expense claims are dishonest. People do make genuine errors, so if an expense claim seems unduly high, do not make assumptions. Check the facts before reaching a conclusion. What does your policy say? Is it clear? Has the employee been given ‘guidance’ in the past? Are the rules that have been broken new or particularly complex? If so, it may be that they haven’t been understood. This often happens where there is no policy or it’s vague. As a reasonable employer you may be expected to give employees the benefit of the doubt.

Some employers conduct checks with a view to reducing the workforce; handled correctly, it is cheaper than redundancy, but is not a tactic we would support. Courts have cautioned against employers using “gross misconduct” as a way of getting rid of a problem employee.

If people get away with false claims, they often become less careful over time so be watchful, just because it is regular does not make it right.

The timing of expense submissions is often a problem, so set out your requirements clearly. You can stipulate that expenses must be submitted by a specific date. You should also include a statement that they won’t be reimbursed if submitted after that date, unless for a very good reason which is acceptable to the business.

Actions:

  • It is essential to set the tone from the top by creating an honest culture.
  • Your expenses policy should be clear about what, who, why and when.
  • The principle should be to reimburse legitimate out-of-pocket expenses, without permitting extravagance at the employer’s expense.
  • Be clear about what receipts must be provided.
  • Regularly monitor and review claims, warning employees of anything inappropriate and nipping excessive accrual of expenses in the bud.
  • Investigate if something seems doubtful or suspicious.
  • Confirm that breach of the policy is potentially gross misconduct.

The guidance provided in this article is just that – guidance. Before taking any action make sure that you know what you are doing, or call us for specific advice.

Employment tribunal receipts continue to record a dramatic year-on-year decline, according to the latest round of quarterly statistics from the Ministry of Justice. Peter Stanway, our BackupHR™ legal expert comments:

The number of single tribunal claims received in April to June 2014 was 3,792 – 70% fewer year-on-year and one-third down on the previous quarter. The number of multiple claims also fell, down 85% year-on-year. i.e. those involving numerous complaints against the same employer – was down to 453 in April-June, compared to around 1,500 in the same period in 2013. The Ministry of Justice correctly point out that multiple claims are particularly volatile, since some of the litigation involves claims that need to be resubmitted every quarter, and a few large claims can skew the figures. Sex discrimination claims have fallen by the largest margin with only 591 claims in April to June 2014, a fall of 91%.

The decline will continue to be correlated with the introduction in July 2013 of tribunal fees, but it may be significant that single claims are down one-third on the last quarter (Jan-Mar 2014), which is probably due to the introduction of compulsory Acas Early Conciliation on 6th May 2014 (it was voluntary from 6th April). It is too early to tell to what extent this affected the number of claims.

The decline has led to accusations that justice is now available only to those who can afford it.

TUC general secretary Frances O’Grady said: “Early conciliation through Acas is a welcome step that is helping in some cases when things go wrong at work, but it can’t explain such a large fall …. The fees system is a victory for bad bosses who are getting away with harassment and abuse of workers.

Rob Wall locking out low-paid workers and preventing them from defending their rights at work.” John Allan, chairman of the Federation of Small Businesses, welcomed the fall in claims but said “Nobody wants to see excessively high fees prevent a worker from obtaining redress for a genuine grievance.”

Fees were introduced to reduce frivolous claims. With individuals having to pay up to £1,250 to take their employer to tribunal, there has been such a marked decrease in cases it is very unlikely that only frivolous cases have been discouraged.

When the previous quarter’s figures were released, Michael Reed, the principle legal officer at the Free Representation Unit, pointed out that there was no significant change in the ratio of employers winning cases versus employees winning cases when comparing pre- and post-fee periods. If the fees were truly discouraging weak cases then employers should be winning fewer cases. Such a view is probably misleading as it appears that the number of cases proceeding to a hearing is unchanged and small changes are inevitable given normal statistical fluctuations.

Many solicitors report that they are seeing people who would have a good chance of success at tribunal not progressing with claims because of [them] being unwilling to pay £1,250, or being unable to get through the bureaucratic nightmare which is the Fees Remission Scheme.

The reductions should not give employers any cause for complacency, so you should:

  • Keep your policies and procedures up to date.
  • Follow procedures properly and apply sound judgment.
  • Respond positively to any calls from ACAS about Early Conciliation.
  • Deal pragmatically with potential claims as Tribunals can be expensive.
  • Get professional advice to avoid claims and deal with them properly.

The guidance provided in this article is just that – guidance. Before taking any action make sure that you know what you are doing, or call us for specific advice.

The Reserve Forces (Payments to Employers and Partners) Regulations 2014 have been published and come into force on 1st October 2014. At present, military reservists called up for active service are paid directly by the Ministry of Defence. Employers can claim expenses in respect of additional costs incurred whilst replacing the reservist (to a maximum of £110 per day).

From 1st October, small and medium employers will also be able to receive up to £500 per month for each full month a reservist is absent from work (reduced pro rata for parts of a month, or part-time workers).

Peter Stanway, our BackupHR™ legal expert comments:

The Regulations are a response to the White Paper, “Reserves in the future force 2020” which stated that the amendments will ensure that “the financial limits and the types of costs open for claim, including for training of replacement staff, are appropriate and that the administrative arrangements are streamlined.”

It is all a part of the plan to ’rebalance’ and increase the ratio of reservists in the military, given the cuts in numbers of regular members of the armed forces. The Government has recognised that enhancing the reserve forces must be “underpinned by legislative changes which permit greater ease of mobilisation, better employee protection and greater recognition of employers.” There is also an intention to broaden legislation to enable the use of reservists in a greater range of circumstances. It will mean a significant change to the relationship between reservists, employers and the government. Traditionally the numbers have been small, and have tended to be employed by large employers, who could afford to ‘lose’ such people for a period. The Government’s intention is increase the number of reservists from 20,000 to 30,000 by 2018.

The reservist or the employer may apply for deferral, revocation or exemption and, in the employer’s case; the grounds upon which they may apply, is that the reservist’s absence would cause serious harm to their business.

Employers should be aware that they are not statutorily obliged to pay reservists while mobilised, as the reservists receive military income. Further, they are not required to pay employees absent on reservist training, and may choose to require individuals to take annual leave during such training.

Currently reservists have a degree of protection in employment. If, however, they are to be more widely utilised, there will be a clamour for “better” protection. Exactly what this might involve is not yet clear, but it has been suggested that reservist ‘anti-discrimination’ legislation may be introduced, as in some other countries.

If an employer has reservists in their work force, SaBRE, the Ministry of Defence marketing and communications campaign, provides advice and support via their website and helpline. There are useful information packs to download for the employer and the reservist which cover all aspects of employing reservists.

SaBRE recommendations, with which we broadly concur include:

  • Speaking to reservist employees to find out their basic training commitments and dates of annual camp
  • Developing a policy to accommodate and support participation in the Reserve Forces
  • Having a regular dialogue with reservist employees.

The guidance provided in this article is just that – guidance. Before taking any action make sure that you know what you are doing, or call us for specific advice.

It was reported recently that a man was dismissed for taking the ice bucket challenge at work. For those few of you who have managed to miss it; it is the craze that has seen millions of people across the globe, including many celebrities; pour ice-filled buckets of water over themselves to raise awareness and funds for motor neurone disease and subsequently, other charities. A man who filmed and actively participated in his colleague’s ice bucket challenge has allegedly been sacked from his supervisory job after his bosses discovered the video. If the facts are as reported, it would appear that they must have been looking for an excuse to take this course of action.

According to The Express, the employee was dismissed from his job in Greater Manchester, after bosses allegedly told him that his actions were gross misconduct.

Peter Stanway, our BackupHR™ legal expert comments:

The video, filmed during a break at the warehouse where the employee worked, shows him pouring a plastic bin of ice water over a co-worker’s head. He claims he had apologised to bosses, but was sacked the day before he was due to attend a disciplinary meeting.

I wanted to take part because one of the lads was raising money for Macmillan Cancer Support. But on Monday I received a letter alleging gross misconduct. I was supposed to attend a meeting the next day had gone unpunished.

The Mirror reported his employers as saying in their dismissal letter, he “misused company resources” for the challenge – a black bin and chair – and breached health and safety rules. They also claimed his ‘unsatisfactory performance’, amounted to gross misconduct, which would not stand up if legally challenged.

On the surface, the ice bucket story looks like an excuse to get rid of an employee, who probably had less than 2 years service. The fact he was sacked the day before a disciplinary meeting, does seem to indicate there were other issues going on and again such an instant dismissal is quite questionable in practice. That said, it is hard to establish how the employer can argue that the ice bucket challenge equates to gross misconduct, or brought the employer into disrepute, and only applied this logic to one of the employees who participated in the challenge.

Assuming 2 years’ service, the Company would almost certainly lose an Employment Tribunal claim for unfair dismissal for three reasons;

  • Dismissal is not a proportionate response i.e. not within the band of reasonable responses to his conduct
  • The apparent lack of procedure in not investigating or holding a meeting
  • A lack of consistency in how people are treated is never helpful.

Finally, the employee took part in the ice bucket challenge, when it was very high profile on social media channels. His sacking has also been widely reported in social media, creating adverse publicity for his employers, and could potentially lead to cancelled orders. Whatever the truth of the matter, it also shows that perhaps there are times when social media should be taken into account before making what appear to be ‘knee-jerk’ decisions about employment matters.

The guidance provided in this article is just that – guidance. Before taking any action make sure that you know what you are doing, or call us for specific advice.

A recent judgment from the Employment Appeal Tribunal (EAT) casts light on the always tricky issues of when and how far an employer can move (relocate) employees due to the changing business needs of the employer. In Cetinsoy v London United Busways Limited, the claimants were bus drivers, whose employment transferred to the respondent. They were required to change the location of the depot from which they worked. They did not like this change and eventually they resigned. They claimed the benefit of the provisions of the TUPE Regulations saying that, in the circumstances, they were entitled to resign and should be regarded as having been dismissed for all purposes by the respondent.

The Tribunal threw out their unfair dismissal and TUPE claims, because although the place of work was a contractual term, and the requirement to work at a new depot was a breach of contract, it was not considered to be a fundamental breach of contract. The addition of between 30 minutes and 60 minutes travelling per day was not, in the opinion of the employment tribunal, substantial, or to the material detriment of the employees.

Peter Stanway, our BackupHR™ legal expert comments:

Despite reservations about the Employment Judges’ reasoning, it was not perverse. The EAT agreed that the claim needed a fundamental breach of contract, or a substantial change in working conditions, that caused the employees’ material detriment. The EAT considered that the Judge was entitled to come to the view he did, assisted by the practical experience of the tribunal lay members.

      So what can we learn from this case?

 

  • Ensure that you do have some appropriate flexibility in your employment contracts about place of work.
  • Consult fully about TUPE transfers, especially if there is likely to be some anticipated and legitimate business changes ahead.
  • Act reasonably, and always consider practical ways to persuade employees to change their place of work, if the reality is the new location is within reasonable travelling distance from their original one.
  • Be clear in maintaining that a change does not necessarily mean that employees will be ‘substantially worse off’, and therefore you can be expected to change some conditions.
  • If people make a change, it will be difficult for them to re-think and claim later.
  • Every case will be dependent on its facts, but a relatively small change in main place of work location does not always justify a redundancy dismissal.

The guidance provided in this article is just that – guidance. Before taking any action make sure that you know what you are doing, or call us for specific advice.

About a year ago, the issue of zero-hours contracts became highly contentious. Research showed that there could be more than a million workers on such contracts, where work is not guaranteed. This triggered headlines about the exploitation of workers. The principal case against zero-hours contracts was that they were being abused by employers of low-paid people as a way of reducing costs to the minimum and possibly avoiding holiday and sick pay obligations. A consensus developed in political circles that “something must be done”, so the Government consulted widely.

Peter Stanway, our BackupHR™ legal expert comments:

It is thought that there are approximately a million workers on zero-hours contracts, of whom 9% (125,000 people) have ‘exclusivity clauses’. CIPD research, found that, workers on zero-hours arrangements were equally satisfied with their job, happier with their work/life balance and less likely to think they were treated unfairly by their organisation, when compared to the average UK employee.

The Government has responded to its consultation on the use of zero-hours contracts and confirms that it will:

  • Ban the use of ‘exclusivity clauses’ which prevent employees on zero-hours contracts working under another contract or “under any other arrangement”, or which prohibits the worker from doing so without the employer’s consent.
  • Publish more guidance for employees and employers on using zero-hours contracts.
  • Work with trade unions and business to develop a code of conduct for employers using zero-hours contracts.

Despite calls to ban zero-hours contracts altogether, the Government recognises they have a legitimate role to play in employment. However, there will be further consultation on how to prevent ‘rogue’ employers trying to get around the ban on exclusivity clauses. As drafted, the Bill gives the Secretary of State wide powers to make further regulations to ensure that zero-hours workers are not prevented from working for somebody else. These include extending the protection to other types of contracts (such as contracts guaranteeing a very limited number of hours).

The proposed ban on exclusivity is likely to be welcomed, by low-paid workers and reputable employers, on the basis it should help prevent cowboy employers from undercutting quality businesses. The challenge for the Government will be to construct a legislative approach which works. With no tried and tested statutory definition of a zero hour contract, the potential danger is that any new wording could inadvertently impact on other forms of employment where exclusivity is currently lawful, necessary and common practice. How this will be enforced is yet to be decided.

No action needs to be taken, as the Bill is in its early stages. However, employers with such contracts may want to consider how to change their use of zero hour contracts.

  • Remove exclusivity contracts
  • Amend them to focus on discussion over conflicting interests
  • Improve the drafting of confidentiality clauses
  • Offer more ‘proper’ contracts to good workers
  • Clarify their employee status and rights to holiday pay
  • Improve the way they are communicated and understood by managers and workers.

Employers who do not have such contract may wish to consider:

  • Recruiting some such people to cope with peaks in demand
  • Putting them on well drafted contracts
  • Using fixed term contracts (temps)
  • Offering flexible part time or variable hours contracts.

As we have said before, the downsides they can have are:

  • A damaging effect on the employer’s ability to attract and retain staff
  • A consequent reduction in continuity and quality of services provided
  • A workforce with zero commitment to the employer.

The guidance provided in this article is just that – guidance. Before taking any action make sure that you know what you are doing, or call us for specific advice.

The European Court of Justice has recently ruled in Lock v British Gas Trading Limited that holiday pay paid to workers should include commission, if it is regular enough to be a part of their normal income. This is about ensuring that workers are not discouraged from taking their holiday by losing out financially as a result. Peter Stanway, our BackupHR™ legal expert comments:

Apart from increasing employer costs, the European Court did not actually say how holiday pay should be calculated but bounced that back to the national courts. It will be interesting to see whether the tribunal feels able to interpret the UK’s Working Time Regulations in a way that is compatible with the ECJ’s ruling.

Notwithstanding lots of complicated legal arguments about what will happen next, businesses should reconsider the basis on which holiday pay is calculated and include commission which is intrinsically linked to an employee’s work. We have advocated this in the past with our clients as it seems both fair and in line with our interpretation of the Working Time Regulations. In the absence of any guidance it is probably best to average it out using a sensible reference period.

We have a number of concerns:

  • Holiday pay should be straightforward to calculate, but it is not clear how this should be done.
  • It is possible that employees may be able to gain a significant financial advantage by taking holiday after a particular financially lucrative period.
  • There is great potential to claim lost payments in previous years i.e. back pay.

We suggest it is premature for employers to change their holiday pay arrangements unless they are not including commission at all, or indeed entering into negotiations about backdated compensation for employees, nevertheless it is an option.

Wise employers will now, if they have not already done so, take some or all of the following steps:

  • review their current commission structures and related documentation
  • investigate whether their existing payroll systems are capable of calculating average historical commission payments or entitlements
  • prepare a strategy for minimising their exposure to claims, including back pay and put a value on that exposure.

It is worth mentioning that if you have employees that can achieve “bonuses” at each pay interval then the same principle applies. The good news is that if you pay bonuses on a less frequent basis e.g. quarterly or annually they will not count as part of the average holiday pay calculation.

Much the same applies to the separate but related issue of whether overtime payments should be included in the calculation of holiday pay. The position in relation to overtime is due to be explored in two cases listed for hearing by the Employment Appeal Tribunal in July. This is much more worrying because it would be a major change for very many businesses and would be a clear change in the law. We would not advise making any changes until this is fully resolved.

The guidance provided in this article is just that – guidance. Before taking any action make sure that you know what you are doing, or call us for specific advice.