This e-bulletin includes short summaries of the following recent developments

Red tape day: agency workers and national minimum wage

On 1 October 2011 UK regulations implementing the EU Directive on temporary agency workers came into force. Both agencies and employers hiring agency staff will face an increased administrative burden and potential additional cost.

  • The rights apply from 1 October 2011, but employers are only responsible for providing access to information about vacancies and access to collective amenities from that date. The right to certain pay terms and other working conditions as if the individual were directly employed by the hirer only applies once a worker has worked for 12 weeks in a particular role, ignoring time prior to 1 October 2011.
  • It is the agency that is primarily responsible for providing the relevant pay, not the employer hiring the worker. The employer must provide information about the pay terms to the agency and will only be liable if that information is inaccurate or incomplete.
  • The right to equal pay does not cover all of a worker's pay and benefits. Only certain elements of the remuneration package have to be matched, principally those that relate to pay for work done and not elements intended to reflect the different nature of a permanent employment relationship, such as rewards for long service. Most benefits in kind do not have to be matched, although exchangeable monetary vouchers do have to be provided. Some forms of bonus scheme will also need to be matched, but the same eligibility criteria as apply to employees can be used for agency workers (even if this tends to exclude most or all agency workers).
  • Temporary staff may be covered even if not supplied by a traditional agency, but rather a group company eg where there is an intra-group staffing bank.
  • The use by a worker of a personal services company or an umbrella company does not by itself take a worker outside the scope of the Regulations. Only workers who are genuinely in business on their own account are excluded.

All employers should be considering which of their arrangements may be covered and taking steps to prepare now, including:

  • carrying out an impact assessment for their business
  • creating systems for providing the necessary information to workers and agencies
  • reviewing the terms of business with agencies
  • reviewing various policies and training.

The national minimum wage also changes from 1 October. The hourly rate increases to £6.08 for workers aged 21 and over, £4.98 for workers aged 18-20, £3.68 for workers aged 16 and 17 and £2.60 for apprentices aged under 19 or in the first year of their apprenticeship. The accommodation offset is now £4.73 a day.

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Dismissal and re-engagement on new terms: no need to repeat inducement offered to agree new terms

Employers seeking to reduce pay by consent may choose to offer a one-off payment as compensation for the reduction and in return for avoiding the risk of litigation. If this offer is rejected, and the employer decides to dismiss and offer a new contract with the reduced pay terms, its failure to also make the one-off payment to those dismissed will not itself make the dismissals unfair.

Whether the dismissals are fair will depend on balancing the employer's business reasons, the extent to which it consulted with staff and attempted to agree changes, and the degree of impact on the employees. Here, although the impact was significant (an 18% pay cut in some cases), the employer's action was reasonable given that the business's long-term viability was at risk if costs were not reduced, it had taken other steps to reduce costs, and the relevant pay structure was divisive as some employees were on lower rates and some on higher pay were receiving more than the market rate. The level of employee acceptance of the change is also a relevant factor. (Slade v TNT (UK), EAT).

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Working time: interrupted rest breaks

Where employees such as security guards are required to maintain a permanent presence during their shift, compensatory rest breaks which are subject to interruption nevertheless satisfy working time rules, provided the 20 minute minimum period restarts if there is an actual interruption. (Hughes v The Corps of Commissionaires Management, CA)

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Disability: duty to make reasonable adjustments

Recent EAT rulings have established that:

  • it is not a reasonable adjustment to give a disabled employee on sick leave a career sabbatical, nor to provide rehabilitative non-productive work for the employee to do for a period. Reasonable adjustments for a disabled employee on sick leave are primarily concerned with helping them return to work. Steps such as consultations and trial periods are useful in ascertaining what reasonable adjustments can be made, but are not themselves adjustments which employers are obliged to make. (Salford NHS Primary Care Trust v Smith, EAT)
  • if there is an adjustment which has a prospect of removing a disabled employee's disadvantage, it may amount to a reasonable adjustment that an employer should make. The fact that there is not a "good or real" prospect of success does not automatically make the adjustment unreasonable. This ruling slightly lowers the threshold for showing that an adjustment would be reasonable. (Leeds Teaching Hospital v Foster, EAT)
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  • whether an adjustment is reasonable in light of its cost is a matter of judgement for the tribunal (making their rulings difficult to appeal).  A tribunal can take into account a variety of factors such as the size of any budget dedicated to reasonable adjustments (though this cannot be conclusive), what the employer has spent in comparable situations (in this case, an education allowance per employee's child to assist relocation abroad), what other employers are prepared to spend, and any collective agreement or other indication of the level of expenditure regarded as appropriate by representative organisations.  (Cordell v FCO, EAT)

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Government plans: unfair dismissal and tribunal fees

The Chancellor has announced that the qualifying period to claim unfair dismissal is to be increased from 1 to 2 years with effect from April 2012. It is unknown whether the Government has analysed relevant statistics to rule out the possibility of challenging this increase on grounds of indirect discrimination. Employers may fear that it will simply lead to an increase in discrimination or whistleblowing claims from employees dismissed before the 2 year point (as these do not require any minimum period of service).

The Chancellor also announced that fees will be introduced for bringing an employment tribunal claim, refunded if the litigant wins their case.  No other details have been confirmed. There are media reports that fees will be introduced in April 2013 and that a public consultation on the issue will start by the end of November 2011.

In the meantime the Government's Red Tape Challenge is focussing on employment law until 19 October, and employers and employees are being encouraged to comment on which employment laws should be changed. In view of the unfair dismissal proposal, it is to be hoped that the Government will consider restricting whistleblowing claims to disclosures with a public interest element, rather than just grievances about the individual's own employment conditions.

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Equal pay: voluntary initiative launched

The Government Equalities Office has published a reporting framework to encourage employers voluntarily to identify barriers to equality of pay, take action to address the issues and report publicly on progress. This is supported by guidance from Acas. The initiative is aimed at employers of 150 or more staff.

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Executive remuneration: new guidelines and consultation

The ABI has published new executive remuneration guidelines, while BIS has published a discussion paper on the governance of executive remuneration in quoted companies, seeking views on possible measures to more closely link executive pay with long-term company performance. Comments are invited by 25 November 2011. Both are discussed in more detail in the Herbert Smith Corporate ebulletin.

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VAT and salary sacrifice: revised HMRC approach from January 2012

HMRC has stated that, from 1 January 2012, employers must account for output tax on the supply of VATable benefits provided under salary sacrifice arrangements.

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New resources:

  • Acas guidance on social networking, including tips on drawing up a social networking policy  
  • ET and EAT statistics for 2010-2011 show a 15% decrease in the number of single tribunal claims, but significant increases in part-time and age discrimination claims
  • revised Government guidance on the application of the national minimum wage to interns. Graduate careers website Graduate Fog has launched a campaign to name and shame employers who do not pay their interns the national minimum wage.