In WM Morrison Supermarkets plc v Various Claimants, the Court of Appeal has upheld the decision of the High Court that an employer was vicariously liable for the actions of a rogue employee, who disclosed the personal information of around 100,000 colleagues on the Internet. The Data Protection Act 1998 (DPA) did not exclude vicarious liability in such circumstances, and there was a sufficiently close connection between the employee’s employment and his wrongful conduct for it to be just to hold the employer liable. In so holding, the Court has confirmed that motive is irrelevant to the test for vicarious liability, even when, as here, the employee’s motive was to harm the employer rather than to achieve some benefit for himself, or to inflict injury on a third party.

Mr Skelton, a disgruntled senior IT internal auditor at Morrisons, was asked to send data to external auditors. He exploited his legitimate working access to their databases to steal and post online the personal details of employees. The data consisted of names, addresses, gender, date of birth, phone numbers (home or mobile), national insurance numbers, bank sort codes and account numbers, and salary details. He was convicted of fraud and offences under the Computer Misuse Act 1990 and the DPA, in pursuit of a personal grudge against Morrisons. Some 5,000 employees sought to hold them vicariously liable for Mr Skelton’s misuse of their private information and breach of confidence.

Peter Stanway, our BackupHR™ legal expert comments:

Lawyers’ views remain divided on whether such activity was truly in the course of employment, or a ‘frolic of the employee’s own’. From a corporate compliance standpoint, the decision causes a problem, since there is, in effect, very little that can be done to protect an employer (and consequently data subjects) from the actions of a rogue employee. For the Courts to find that the employer can be liable for a malicious breach, notwithstanding that it took appropriate steps to protect the data, will be of concern to many businesses.

The Court of Appeal specifically rejected Morrisons’ public-policy argument that vicarious liability in similar scenarios imposes a disproportionate burden on “innocent” employers. The Court’s strict stance in that regard should be viewed in conjunction with the possible increase in data protection-related group litigation now that the GDPR is in force. The decision is particularly notable in light of the ICO’s conclusion, following its investigation into this case, that Morrisons had not breached the DPA, and as such, should not be fined. On a practical level, the Court suggested that employers should insure against data breaches committed by employees given the large potential liabilities involved.

The case is likely to go to the Supreme Court, but whatever the result there, organisations cannot be complacent about data protection.


Notwithstanding our concern that there is little that can be done to prevent clever, senior, malicious individuals from committing illegal acts; employers should ensure that they have:

  1. Properly vetted staff, particularly where they require access to confidential information.
  2. Clear, easily understood and relevant policies, which are regularly updated and communicated to employees and some contractors.
  3. Train staff on security rules and requirements.
  4. Close monitoring of how sensitive data is handled.
  5. Protocols which prevent indiscriminate access to, and copying of, sensitive information to personal devices.
  6. Strong indemnities in employment contracts as a financial deterrent to potential rogue employees.
  7. Sufficient insurance policies in the event of “Armageddon” – as the Court put it.

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 a free initial chat on 01480 677980.

The Parental Bereavement (Leave and Pay) Act 2018 was granted Royal Assent on 13 September 2018, having started out in July 2017 as a Private Member’s Bill subsequently supported by the Government. The Act introduces a new statutory right to a period of paid leave in the event of the death of a child. It is believed that this affects about 8,000 parents a year.

The Act will offer, as a day one right, two weeks’ bereavement leave (unpaid) to any employed parent who loses a child under the age of 18, or who suffers a stillbirth after 24 weeks of pregnancy. Further, employees will be eligible for statutory bereavement pay if they meet certain criteria, including that they have been employed for at least 26 weeks, ending in the week of the child’s death, and have given the correct notice. It is designed to go some way to help ease the pressure on parents grieving a child.

Bereavement leave will have to be taken within 56 days of the child’s death and parents who have lost more than one child will be entitled to take leave in respect of each child.

There will be a further consultation on the practicalities of taking the leave, to be detailed in separate regulations in due course, setting out how parental bereavement leave and pay will be taken, and the eligibility criteria. This will include details of notice requirements, whether leave can be taken in separate blocks, and, whether employees who are not the biological parent of a child (but who have been significantly involved in caring for the child, such as step-parents) will also qualify for leave and pay. We expect that the criteria will in some way reference the employee’s care of the child before the child’s death.

Peter Stanway, our BackupHR™ legal expert comments:

The rights provided by the Act are expected to come into force in 2020, on a date yet to be determined but probably early April.

Under current legislation, employees only have the right to take a reasonable amount of unpaid time off work to make arrangements following the death of a dependant. However, the cases on this limit the amount of time off to one or two days at most, save in exceptional circumstances. The change in law is therefore the first time in the UK that specific bereavement leave has been made both a legal right for up to two weeks and paid, albeit this is very unlikely to mean full pay.


  • If you already have a policy we recommend that you follow your usual absence policies.
  • You may wish to review it in the light of the Acas guide to managing bereavement in the workplace
  • After the Regulations have been published, employers should review any existing policy or put one in place.
  • Ensure that managers are trained on the new law.

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 a free initial chat on 01480 677980.

The Supreme Court has recently given its judgement in the case of Pimlico Plumbers Ltd v Smith. This is an important judgement in determining whether or not persons described as “independent contractors” are in fact in law “workers”, thus enabling them to bring claims for holiday pay, unlawful deduction of wages and discrimination claims. Mr Smith was engaged by Pimlico Plumbers for over five years. His contract stated that he was an independent contractor, that he was in business on his own account, that he was under no obligation to accept work and that the company was under no obligation to offer him work. The contract stated that he would not be paid if a customer failed to pay for the job and he was responsible for ensuring that liability insurance was in place. He was registered for VAT, submitted invoices to Pimlico Plumbers and filed his own tax returns as a self-employed person.

The Court decided that the plumber in question was so much an integral part of Pimlico’s operations and was subordinate to it, that he fell within the definition of a “worker”. Even though the Claimant was allowed to accept work outside Pimlico, there were also features of the contract which strongly militated against recognition of Pimlico as a client or customer of the Claimant. Although he could provide a substitute for his work, the substitute could only come from their list of plumbers.

Other important factors were that he:

  • Wore a Pimlico uniform and had to be clean and smart at all times.
  • Drove a Pimlico van.
  • Carried a Pimlico identification card.
  • Agreed to a suite of covenants restricting his working activities after termination.

The subordinate position of Mr Smith to Pimlico was a key indicator that they were not a client of a business run by Mr Smith, but that he was really their worker.

Peter Stanway, our BackupHR™ legal expert comments:

The case sends out a clear warning to all businesses that although an individual may be described as an “independent contractor” they are in fact in law a “worker” and therefore have entitlement to a range of ‘employment’ rights. The ruling is in line with what was expected and with other recent high-profile employment tribunal gig economy cases, such as the Uber decision.

In every case like this, courts will have to grapple with the facts of the particular case; considering whether personal service is required, if there is a genuine right to provide a substitute and looking at questions of control, risk and subordination. This analysis will go beyond the terms of the written documentation. What has emerged from the recent line of cases is that where a business seeks to exercise a significant amount of control over how and by whom the work is done, integrates the individual into its own business, and dictates terms which put them in a subordinate position, they are likely to be found to be a worker (if not an employee).

It remains to be seen whether the Government will take action to help provide more clarity to businesses and their workforces. Whilst they may try to legislate in this area in an attempt to make it clearer how to decide whether an individual is an employee, worker or self-employed, there will always be an element of interpretation and the outcome will turn on the specific facts of the working relationship. This means that this area is likely to continue to cause confusion and uncertainty.

The publicity surrounding the decision is likely to lead to future challenges by ostensibly self employed individuals looking to unpick those arrangements in the event of a dispute.


  • Be aware of the possibility that so-called contractors may be found to be employees or workers in a tax or employment tribunal.
  • There are consequent risks of employment law claims or demands for PAYE and NICs arrears.
  • It is not good enough just to have a cleverly worded contract, the reality must match the wording.

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 a free initial chat on 01480 677980.


We are often asked what are the benefits of using external trainers rather than using internal trainers, or asking a member of staff to run some training.

While the obvious benefit of using internal staff for training is the cost, this has to be carefully weighed against what type of training is needed and what you are looking to achieve for both the attendees and the organisation from any training.

As a general rule, we would say that using an internal trainer for things like your own product training can work, as clearly the Product or Sales Manager will know their products or systems better than an external trainer. However, you have to factor in the time it takes for your internal trainer to prepare the training and deliver it. Also what do you do if some important meeting comes up, or crisis within the organisation which means the trainer is unable to deliver the planned course? All the time spent getting staff together on a specific date is lost.
When you get into the area of behavioural or specialised training, we feel the balance certainly tips in favour external trainers. This is because external trainers are specialists and have to keep up to date with:

  • new methods
  • new industry standards
  • new methods and processes of delivery
  • what is happening across many sectors
  • what is new in their specific area of expertise

The delegates see external trainers as experts, which is less likely to be the case when using your own staff. Delegates can often be more open in sharing problems with an external trainer, either in open forum or informally. If the ‘boss’ or Manager of staff is giving the training, that may well inhibit open communication.

The saying ‘No man is a prophet in his own land’ comes to mind, which means (taken out of its biblical context) that your own people see you they way they always saw you, regardless of what you have to say. A less kind explanation is that ‘familiarity breeds contempt’. Whilst internal trainers may ‘know their stuff’, it sometimes comes better from an expert external source. We often find that people require someone from outside to reinforce what their HR professional has been telling them for years, that they have either never quite understood or believed.

The external trainer can get delegates to think ‘outside the box’ and challenge ‘we’ve always done it that way’ responses. A trainer from within the organisation may well be limited by their own knowledge of the organisation and end up colluding with delegates views, rather than trying to push boundaries.

Finally, we are hearing more and more about a growing skills shortage and organisations will need to focus on developing and retaining staff. Employing an external expert trainer to deliver training and development to your staff shows you are prepared to invest in their future with you, in a way that using internal staff may not.

So while there are some cost savings to be made using internal trainers, it may be a false economy when you consider the many benefits employing an external trainer brings.

  • Specialist training expertise
  • Experts in their area of training
  • Wide and varied industry experience bought to training
  • Increased credibility with delegates
  • More open communication
  • More likely to encourage thinking ‘outside the box’
  • Shows your staff you are taking them seriously by investing in their future with your organisation.

The symptoms of it can be – in certain circumstances – according to a recent Glasgow employment tribunal.

Ms Davies, a court officer for the Scottish Courts and Tribunal Service (SCTS), had been suffering from extensive medical problems related to the menopause. She was prescribed medication which required to be dissolved in water. On one occasion, after returning to the court, she noticed that a water jug on her table had been emptied. She could not remember if this contained her medication, and became concerned that two male colleagues were drinking her water so she informed the men of this; one of whom “launched into a rant” as a result.

A health and safety investigation was launched and it was later determined that the water didn’t contain the medication. Nevertheless, Ms Davies was dismissed for gross misconduct as a result of this incident, the SCTS stating that she knowingly misled the two men and had failed to follow their “values and behaviours”!

The tribunal found that she had been unfairly dismissed, and her dismissal was because of something arising in consequence of her disability. She was awarded £19,000, £5,000 of which was for injury to feelings for disability discrimination, and was also given her job back (which is very unusual but appropriate in this case).

Peter Stanway, our BackupHR™ legal expert comments:

It is important to note that this case does not confirm that menopause will automatically be classed as a disability; it depends on how it affects the individual woman at that stage in her life. Therefore, this type of condition will be judged by the effect of the individual’s symptoms. We were predicting three years ago that the menopause may well be classified as a disability, and this decision confirms our thoughts. We are aware that it is only a tribunal decision and has no legal weight, but would expect other tribunals to come to the same conclusions depending on the symptoms and facts. The menopause does not of itself amount to a disability, but the physiological or physical consequences of going through it can do for those women who suffer significant health problem as a consequence. To meet the definition in the Equality Act, the symptoms must have a ‘substantial and long-term adverse effect on the ability to carry out normal day-to-day activities’.

What does this mean for employers?

Before making a decision with regards to an individual’s employment, it is important to take all aspects of the individual’s current state into account. It is clear that Ms Davies was suffering from severe symptoms of menopause and this should have been taken into account by SCTS, before dismissing her for gross misconduct.

Outside of a disciplinary scenario; employers should take reasonable steps to support affected employees in coping with their condition.

Building awareness of the condition, considering practices and creating healthy environments for workers can only be a plus point. The menopause should be on employers’ agendas in order to make the workplace a safe and understanding space for the women going through this phase of life. Whilst many women will have only minor discomfort in some cases reasonable adjustments are necessary which need not be costly or complicated. Employers can help by communicating to their workforce that health-related problems such as the menopause are ‘normal’.

Possible actions:

There are no universal easy solutions but some simple cheap actions may help:

  • increased flexibility of working hours and working arrangements
  • relocation of desks closer to opening windows and or control over heating
  • plentiful supplies of cold water; and more frequent toilet breaks
  • rethinking of uniforms specifically avoiding nylon
  • good and honest communication between the manager and the employee

Improvements in workplace arrangements should therefore become accepted and normal.

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 a free initial chat on 01480 677980.


Most of us enjoy the hot weather but many of us also find it oppressive and difficult to work in. It is worth reading the Health and Safety Executive (HSE) on workers whose job keeps them outside for most of the day. Their leaflet INDG337: Sun Protection: Advice for Employers of Outdoor Workers gives advice on reducing the health risks for such employees.

The leaflet advises outdoor workers to follow the sun protection six-point code:

  1. Keep tops on to act as a barrier from the rays of the sun.
  2. Wear a hat with a brim or flap that protects the ears and back of the neck.
  3. Stay in the shade wherever possible, especially at break times.
  4. Use a high factor sunscreen on any exposed skin.
  5. Drink plenty of water to avoid dehydration.
  6. Check skin regularly for any unusual moles or spots and see the doctor promptly.

Employers or managers responsible for outdoor workers should make their workers aware of the above points and especially:

  • Include sun protection advice in routine health and safety training, as well as informing workers that a tan is not healthy but a sign of skin damage.
  • Make sure that they drink plenty of water to avoid dehydration.
  • Encourage workers to keep covered up when the sun is at its hottest.
  • Encourage workers to use sunscreen with a protection factor of at least 15.

The HSE says, “UV radiation should be considered an occupational hazard for people who work outdoors” so this needs to be considered as part of any generic workplace risk assessment undertaken.

Other workers that need to be considered are those that work in hot conditions all year round but when there is additional summer heat, their environments can get even hotter. These can range from professional kitchens, bakeries and laundries through to heavy industrial processing activities such as smelting or welding. These workers are at risk of heat stress, which is when the body’s means of controlling its internal temperature starts to fail. Air temperature, work rate, humidity and work clothing are all factors that can cause heat stress; the problem being is that it is not an obvious risk to people that are only passing through rather than actually working there. Factors to reduce risks include:

  • Control the temperature e.g. fans or air conditioning.
  • Provide mechanical aids to reduce strenuous work.
  • Regulate the length of exposure e.g. job rotation.
  • Encouraging people to drink small amounts frequently during and after working.
  • Provide training about heat risks, symptoms of heat stress, safe working practices and emergency procedures. Make sure first aiders know about what to look out for and what treatment to provide as well.
  • Allow workers to acclimatise to their environment and asses if they are fit to work.
  • Identify those who may be more susceptible to heat related illness, due to health problems or medication e.g. pregnant women or those with heart conditions.
  • Monitor the health of workers at risk and seek OH advice if necessary.

There is a useful example of a heat stress checklist and risk assessment at:
Heat Stress Checklist.

Finally, for those that are simply suffering the heat in an office environment, there is no upper temperature limit that employers must adhere to. The Workplace, Health, Safety & Welfare Regulations however, do require that working areas should be adequately ventilated with clean fresh air drawn from a source outside of the workplace with suitable circulation. That can mean either opening windows to switching on the air conditioning. High quality drinking water must be readily available. Workers who spend many hours in a vehicle driving can suffer with heat exhaustion increasing the risk of accidents, so make sure that they carry plenty of fresh drinking water in their vehicles, switch on the air conditioning, and take appropriate rests especially when driving at the hottest time of the day.


  • Check that your risk assessments cover hot weather
  • Make sure that your control measures are adequate for all of your workers, indoors and out, and anyone in between!

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 a free initial chat on 01480 677980.

Mr Afzal was a trainee manager for a fast food company and had the right to work in the UK but had failed to produce evidence before the end of his limited leave to remain (which gave him the right to work) in August 2016. On the day that his leave would have expired, Mr Afzal sent an email to his employer with evidence of his application to the Home Office. That application automatically extended his right to work. The attachments with the evidence could not be opened and the Respondent dismissed to avoid civil and criminal penalties under the Immigration, Asylum and Nationality Act 2006. In the dismissal letter, East London Pizza failed to offer the right to an appeal. They also argued in the tribunal that there was “nothing to appeal against”; new evidence would not have undermined the reasonableness of the Respondent’s belief at the time of dismissal.

The Employment Appeal Tribunal rejected that argument which had succeeded at Tribunal. The Judge said that while the employer was justified in urgently dismissing the employee when it did, since it had a genuine belief that his employment was by then illegal, if evidence had been produced upon appeal, that the employee was entitled to work at all material times, the employer could immediately have rescinded the dismissal without fear of prosecution or penalty. He decided that production of the evidence of right to work could have happened during an appeal process and the contract could have been revived “without fear of prosecution or penalty”. Affording an appeal allows matters of this kind to be considered again ‘rather more calmly than can be done as the time limit expires’ holding that the whole of the process, including an appeal, was relevant to the question of fairness.

Peter Stanway, our BackupHR™ legal expert comments:

Allowing a right of appeal in right to work cases is always good employment relations practice, even where immigration compliance is at stake. If an appeal had been offered, there were various ways in which he could have established his right to work. He could have provided documents demonstrating the in-time application. They might have obtained the relevant number from him and then made its own enquiry of the Employment Checking Service. Had his right to work been established, there was no reason why he should not have been reinstated. As the judge said “The appeal process affords an opportunity for this kind of case, which can result in real feelings of injustice, to be looked at again.”

  • Employees should always be notified of the right of appeal when they are informed of a disciplinary or dismissal decision, no matter how long or short their length of service is.
  • The appeal should be heard irrespective of the seriousness of the offence or the circumstances.
  • The Employee has the right to be accompanied at any appeal with either a (current or former) work colleague, or, accredited trade union representative.
  • Appeals should be dealt with as speedily as is practicable and wherever possible, heard by a manager who is more senior than the person who took the disciplinary/dismissal action.
  • The employee, or their representative, should have an opportunity to comment on any new evidence arising during the appeal before any decision is taken. They can also comment on whether the original disciplinary/dismissal process and decision, including any investigation, was fair and proportionate.

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 a free initial chat on 01480 677980.


Striking a balance between the privacy rights of staff suspected of wrong-doing and your right as an employer to protect your business interests and property is a difficult task.

The recent European case of Ribalda v Spain helps to put this in context. A family owned supermarket was experiencing major stock losses. As it was unclear whether this was as a result of internal or external activities the employer decided to install video surveillance equipment to determine the root cause of the problem. They deployed a two prong approach by installing visible and hidden cameras. The purpose of the hidden cameras was to catch any internal thefts by the cashiers. The covert cameras were ‘successful’ and the employer dismissed five employees. They all admitted to the thefts in the presence of their union representative.

All five brought claims in the Spanish Employment Tribunal arguing that their dismissals had been unfair as they had not been told of the hidden cameras, and that their employer’s failure to do so breached Spanish data protection laws, which require data subjects to be “previously and explicitly, precisely and unambiguously informed” about the processing of their personal data. The Spanish courts were of the view that the covert CCTV surveillance had been justified, since there was a reasonable suspicion of theft, appropriate to the employer’s legitimate aim of protecting company property, and was necessary and proportionate.

Nevertheless, the claims found their way to the European Court of Human Rights. The claimants argued that the use of covert CCTV was an infringement of their Article 8 rights. The court found that a worker should have an expectation of privacy which must be rebutted before any covert monitoring becomes appropriate. The court took account of the following:

  • the fact that several people had seen the footage prior to the claimants, including their union representative and the employer’s lawyer;
  • the workers had not been told of, or consented to the covert surveillance;
  • the footage had been taken over a number of weeks, at all hours and had caught images of other workers who were not guilty of theft.

The court concluded that the employer’s measures were not proportionate and they were awarded 4,000 euros.

Peter Stanway, our BackupHR™ legal expert comments:

Guidance from the Information Commissioner’s Office (ICO) confirms that the use of covert CCTV should not be undertaken unless:

  • it has been authorised at the highest level within an employer’s business
  • there are sufficient grounds for suspecting criminal activity or equivalent;
  • telling the workforce would hinder the prevention or detection of crime
  • it is used as part of a specific investigation only and not continuing.

Under GDPR, data protection impact assessments will be mandatory prior to an organisation undertaking any process which presents a potentially high risk to an individual’s privacy rights, addressing the following questions:

  • can a limited, or a time-restricted, operation be used?
  • does the workforce already know of the possibility that covert CCTV surveillance may be used in exceptional cases?

There is no set method of presentation for a data protection impact assessment, under GDPR but the minimum features of such an assessment should include:

  1. A description of the envisaged processing operations and its purpose.
  2. An assessment of the necessity and proportionality of the monitoring.
  3. Evaluating the risks to the privacy rights of the individual(s) affected.
  4. The measures envisaged to address the risks and demonstrate the safeguards, and/or security measures that need to be put into place.

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 a free initial chat on 01480 677980.


Statutory Rates

The current weekly rate of Statutory Maternity Pay is £140.98 (or 90% of the employee’s average weekly earnings if this figure is less than the statutory rate). The rate of Statutory Maternity Pay is rising to £145.18 on the first Sunday in April, which in 2018 is 1st April.

Also on 1st April 2018, the rates of Statutory Paternity Pay and Statutory Shared Parental Pay will also increase from £140.98 to £145.18 (or 90% of the employee’s average weekly earnings if this figure is less than the statutory rate).

The rate of Statutory Adoption Pay also increases to £145.18. This means that, from 1st April 2018, Statutory Adoption Pay is payable at 90% of the employee’s average weekly earnings for the first six weeks, with the rest of the adoption pay period at the rate of £145.18, or 90% of average weekly earnings if this is less than £145.18.

Minimum Wages

The Government will increase the National Living wage (NLW), which applies to workers aged 25 and over, by 4.4% from £7.50 to £7.83 per hour.

At the same time, the National Minimum Wage (NMW) rates will be increased as follows:

  • from £7.05 to £7.38 per hour for 21 to 24 year olds;
  • from £5.60 to £5.90 per hour for 18 to 20 year olds;
  • from £4.05 to £4.20 per hour for 16 and 17 year olds; and
  • from £3.50 to £3.70 per hour for apprentices;

What you must do:

If you employ people on these rates, review what you can do to limit the impact.

If you employ people on just above the living wage, then consider whether your reward strategy will remain competitive, and what you are going to do about it.

Do not try to avoid payment; the financial and PR consequences are substantial.

If applicable, communicate with your staff the impact on their pay, and consult over ways to improve productivity.

Termination and Settlement Payments

From 6th April 2018, termination payments made ‘in lieu of notice’ will be taxed at the employee’s highest rate of income tax. The statutory element of a redundancy package – i.e.: the part that an employer is required to make by law – will remain tax-free. However, another common element of many termination payments, the payment in lieu of notice, will be hit with both income tax and National Insurance.

This is part of a HM Revenue and Customs (HMRC) drive to align tax and NI, so that whenever an income tax payment is made, NI will also be payable. For many employees, it is the payment in lieu of notice that makes up a big proportion of their termination package, and so this is an important change. The current position is that no NI contributions are paid on termination payments where £30k has been paid free of tax. This can amount to a significant cost saving, particularly for employers.

The legislation requires the employer to identify the amount of basic pay that the employee would have received if they had worked their notice period, even if the employee leaves the employment part way through their notice period, or do not work any of it. This amount will, in future, be treated as earnings and will no longer be subject to the £30,000 exemption. All other parts of the termination payment, e.g. compensation for loss of office, will be included within the scope of the £30,000 termination payments exemption. Employers will also be required to pay NICs on any part of a termination payment that exceeds the £30,000 threshold.

It is anticipated that this will be collected in ‘real-time’, as part of the employer’s standard weekly or monthly payroll returns and remittances to (HMRC). HMRC will add the redundancy payment to a worker’s annual earnings in order to calculate how much tax is payable. The worker will then pay tax at their highest rate. This means that redundancy payments will tip many lower paid workers into a higher tax bracket, meaning that they may be paying 40% or even 45% tax plus NICs at 13.8% on a payment that has historically been paid tax free.

According to the HMRC; this measure is intended to bring fairness and clarity to the taxation of termination payments by making it clear that all Pay in Lieu of Notice (PILON), rather than just contractual PILONs, are taxable earnings. All employees will pay tax and Class 1 NICs on the amount of basic pay that they would have received if they had worked their notice in full, even if they are not paid a contractual PILON. This means the tax and NICs consequences are the same for everyone and it is no longer dependent on how the employment contract is drafted, or whether payments are structured in some other form, such as damages.

The distinction between the different types of payments in lieu of notice will be removed. In broad terms, the basic pay that the employee would have received had they worked out their notice is subject to tax and NI in full, irrespective of whether there is a clause in the employment contract giving the employer the right to terminate the employee’s employment by making a payment in lieu of notice (PILON). Any payment that the HMRC deems to be in respect of notice must be taxed, so the old distinctions between contracts with and those without a PILON clause will go. Unless it is very clear that someone has been paid (and taxed etc.) during a period of notice then it is likely that the HMRC will expect payments, which reflect notice period, to be taxed. Hiding it within broad wording about payments being ex gratia, or all inclusive, are very unlikely to be effective. Basic pay for these purposes is the employee’s pay in the period immediately prior to the date on which notice is given or, if no notice is given, the date the employment terminates. Basic pay excludes overtime, bonus, commission, allowances, share and share option gains and benefits in kind.

Employers, but not employees, will have to start making NI contributions. The existing NIC exemption for employees will be retained, even if the payment exceeds £30,000. The Government has said that employees will continue to benefit from an unlimited employee NICs exemption to ensure that those who lose their job will be supported through the tax system.

The ‘disability exemption’ will expressly not apply to compensation for injured feelings, unless the injured feelings amount to a psychiatric injury. This provides a 100% tax exemption for termination payments made only on account of the employee’s disability or injury where it prevents them from carrying out their job. Given that we have never sought to apply this exemption, it is unlikely to be much of a loss to anyone.

Those employers whose employment contracts do not contain PILON clauses should now consider revising them, and inserting contractual PILONs. Paying notice monies in damages (compensation for loss of office or injury to feelings) will cease to be tax efficient and means that the employee stops being bound by on-going contractual obligations such as post-termination restrictive covenants. Dismissing with a contractual PILON clause means that there is no breach of contract so the employee cannot claim that the employer’s breach of contract releases them from any remaining obligations such as restraints on working for rivals, confidentiality, intellectual property protection or that the dismissal was wrongful as it has been lawfully terminated. Further, a contractual PILON payment can be limited to basic salary only, whereas a damages payment should include loss of benefits (including pension contributions, bonus payments, and the cost to the employee of replacing insurances, such as private medical insurance). Doing a payment with a contractual PILON clause will therefore save the employer money.

Employers will need to factor in these additional tax and NI costs in their settlement negotiations. Making all PILONs taxable (whether or not they are contractual) simplifies matters, but it will disadvantage employers who are negotiating termination packages. Employers who plan to make substantial termination payments in the first half of 2018 need to think carefully when those payments are made in order to beat the April date.

Unfortunately the Government has not announced what the new statutory redundancy payments will be post April 2018, but we thought it as well to communicate the above information as soon as we could.

Holiday Pay

We have written in the past about holiday pay, mainly from the perspective of how commission and regular holiday pay ought to reflect normal earnings, so that employees are not dissuaded from taking holidays. There is no April change on this issue, but something significant has changed which will worry some employers. In November 2017, the ECJ handed down their Judgment in the case of Mr C. King –v- The Sash Window Workshop Ltd.

The ECJ held that a worker must be able to carry over and accumulate unexercised rights to paid annual leave when an employer does not put that worker in a position in which he/she is able to exercise his/her right to paid annual leave. Whilst this case was predominantly about unpaid holiday, it has two potentially major impacts because of the way that it opens up the timescale for back payments.

  • Workers who employers might classify as self employed, or as contractors can now claim unpaid backdated holiday pay for an almost unlimited time, i.e. back to 1998. We have highlighted before the risks of not paying holiday pay to such people, but on the previous understanding that there would be a limited cap on how far back such people can go in recovering unpaid holiday pay.
  • The other ‘at risk’ group are employers who have chosen not to address the issue of payment for regular overtime or commission payments, despite the case law which has gone, and in some cases, is still going through the courts.

So why is this much bigger concern now? The ECJ have decided that preventing a worker from taking paid holiday is a breach of EU rights, and these rights should not be curtailed by a national law. An employer who seeks to prevent a worker from taking annual leave must bear the consequences of that, and should not benefit from a provision which limits carry over of holiday. Workers bringing such a claim can carry over and accumulate paid annual leave rights, without being subject to any cap. The previous understandings from case law said 15 -18 months in cases of long term sickness.

In the UK, we still have two protections:

  1. The Regulations which prevent workers looking back more than 2 years where holiday pay has been underpaid (rather than not paid at all); and
  2. The case law which indicates that a claim in respect of underpaid holiday pay will be time barred where there is a longer than 3 month gap between underpayments;

This judgment clearly opens the door to a legal challenge to both of these protections as being incompatible with EU law. Such a challenge is likely to succeed.

Organisations that use self-employed contractors should re-examine their arrangements to ensure that employment status risks are minimised, including considering reclassification to worker or employee status, and adopting alternative models of engaging consultants, e.g. outsourcing and use of agency workers. Employers should also be re-considering their approach to holiday pay, as the penalties for being wrong at some stage could be huge. The Government (with the tacit support of the TUC) sought to limit the potential for huge claims which might force people out of business, but this can no longer be relied upon.

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 a free initial chat on 01480 677980.

On the 8th of March the Government released its latest list of businesses who failed to pay the National Minimum Wage. A number of high profile businesses were listed. Some of these businesses probably intended to pay the national minimum wage, but were caught out by complexities in the legislation, as the examples below illustrate.

St Helens Rugby League Club explained their underpayment as mostly relating to a misunderstanding regarding training casual staff. The club had not realised that match day stewards needed to be paid for a two hour training session at the start of each season. The requirement to pay for training is however clearly set out in the Act and, even for casual staff; these hours need to be paid. This is even the case if training is provided to a large group of potential stewards at the start of the year, some of whom do not go on to work at matches or events.

Stoke City Football Club explained that their issue related to deductions from employees pay for items purchased from the club. Had the staff simply paid cash for these tickets and merchandise there would have been no issue but, as a deduction had been made directly from the employees’ pay for these items, the deduction was counted for the purposes of national minimum wage calculation. Although allowing such deductions may appear convenient, it can give rise to the issue Stoke City experienced and the club has confirmed that it has now stopped this practice.

Restaurant chains Wagamama and TGI Fridays were examples of employers who blamed uniform issues. Wagamama has repaid an average of £50 to 2,630 employees. TGI Friday’s had to repay £25 each to 2,300 staff. They both fell foul because their staff had to buy specific items of clothing (e.g. casual black trousers) to wear to work with a branded top which they supplied. As they were not reimbursed for these items, this effectively meant a deduction to pay, meaning some employees had not received the national minimum wage. Even if the items can be used by the employees outside of work, the fact that they have to be purchased for work is sufficient for national minimum wage purposes.

Peter Stanway, our BackupHR™ legal expert comments:

As rates increased on 1 April 2018, the above examples present cautionary tales and demonstrate that minimum wage compliance cannot be taken for granted by simply paying an hourly rate that is at least the required amount. The Government’s powers of enforcement allow compliance officers to commence an investigation and remove information from an employer’s premises with little, if any, warning and conduct a very thorough analysis of records. There is also a potential negative PR effect of non-compliance (in addition to the fines and potentially criminal liability).

The complexity of the national minimum wage and the way HMRC determines working time, means that some employers can make ‘genuine mistakes’.


  • Pay for training sessions which are required as part of the job
  • Be very careful about staff purchasing schemes
  • Ensure all working time is recorded and paid
  • Do not make deductions that take wages below the NMW threshold
  • Review your uniform policy and consider paying a uniform supplement
  • Conduct reviews of systems and working practices, to identify exposure

Employers need to look at remuneration as a whole, not just the hourly rate they pay their staff, if they are to avoid the ‘list of shame’.

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 a free initial chat on 01480 677980.