Apprenticeship Levy

The apprenticeship levy is due to come into force in April 2017 and will require the employers with a payroll bill of more than £3m pay 0.5% of this to HMRC on a monthly basis. There are no exceptions to this for employers who currently pay a levy to CITB or ECITB.

In England and Wales, details of how this will work in practice are already at an advanced stage. This will allow employers who employ apprentices to use the apprenticeship levy funds they pay plus a 10% Government incentive payment for the training of apprentices within defined parameters, via digital accounts.

In Scotland there is not as yet, any detail as to how employers will be able to claim back and use the money paid by way of the apprenticeship levy. The Scottish Government commenced a consultation with employers on 13 July 2016. The outcome of the consultation is not expected until the autumn, around the time of the Scottish Government’s spending review decisions.

Scottish Engineering will update members as more information becomes available.

Reasonable Adjustments

Following the judgment of the Employment Appeal Tribunal in the case of G4S Cash Solutions (UK) Ltd -v- Powell it may be necessary for employers to consider pay protection where an employee is offered alternative employment as a reasonable adjustment. The Employment Appeal Tribunal found that the objectives of the legislation concerning reasonable adjustments may clearly necessitate an element of cost to the employer and pay protection was but one form of cost to an employer. However, the question will always be whether the adjustment is reasonable or not. If the adjustment is reasonable the employer is required to make it.

However, there were particular circumstances in this case including that the employee had continued to receive the enhanced rate of pay for almost a year and had expected it would be a long term arrangement, and the employer’s main reason for wanting to discontinue paying at the higher rate was because of discontent it would create amongst other employees employed in the same role, as opposed to any particular financial reason.

The Employment Appeal Tribunal also stated they did not expect it would be an everyday event that an employer would be required to make up an employee’s pay long term to any significant extent.

However, if an employer is now offering a lower paid role to a disabled employee as a reasonable adjustment, it would appear that the company will now need to demonstrate that pay protection is something it has taken into consideration, and if it is not in a position to pay the higher salary, then there will need to be fairly robust reasons for this.

BREXIT – What does the future hold for European Nationals working in the UK?

The EU Referendum result in the UK has created a plethora of uncertainty but not least for European (EEA) Nationals living and working in the UK.  Alarmingly, this uncertainty has been coupled with a sharp increase in the number of race hate incidents being reported throughout the country.

Until the UK formally leaves the EU, EEA Nationals will continue to have the right to reside and work in the UK.  Therefore, it will be unlawful for employers to refuse to recruit or continue to employ EEA Nationals.  It is also likely that EEA Nationals who already had a right of permanent residence in the UK before Brexit will be allowed to remain.  However, it is less clear what provisions will be made for EEA Nationals who have not acquired a right of permanent residence by the time the UK leaves the EU or what restrictions will be placed on ‘new’ EEA Nationals coming to the UK before the UK’s departure is finalised.

Like all other workers in the UK, EEA Nationals have the right to:

  • work in an environment which is free from bullying and harassment;
  • complain about unfair treatment at work without being victimised;
  • not be discriminated against;
  • work in an environment which complies with health and safety law.

The Equalities and Human Rights Commission’s (EHRC) Chair, David Issac, has published an open letter to employers this month encouraging them to take a leading role in challenging intolerance towards EEA Nationals in the UK workplaces.  The EHRC has published materials which can be displayed and distributed to EEA staff within the workplace about sources of help, advice and support in respect of these matters.

Please see the link below to these materials:

https://www.equalityhumanrights.com/sites/default/files/what-to-do-if-youre-worried-about-racism-eu-referendum-factsheet.pdf

 

Holiday Pay Update

In White & Others -v- Dudley Metropolitan Borough Council 2016 1300537/2015, an Employment Judge held that certain types of work undertaken on a voluntary basis, including voluntary overtime, voluntary standby and voluntary call out payments should be considered as part of normal earnings if undertaken sufficiently regularly and should be taken into account when calculating a worker’s holiday pay (to the extent of the 20 days guaranteed under the European Working Time Directive).  What is meant by “regular” is yet to be established.

This decision is not binding on other Tribunals, as it is only a first instance judgement, but it would become binding if it is appealed and upheld on appeal.

Pension Freedoms – one year on

It was in March 2014 when the Chancellor announced in his Budget speech what was to become possibly the biggest shake up of pensions since pensions taxation was introduced in 1921. From April 2015 it was no longer more or less obligatory for most pension savers to buy an annuity on their retirement.  Instead, they could take their pension pot as cash or draw down, in the Chancellor’s words “as much or as little of their pension pot as they want, any time they want”.  The people were to be “trusted with their own finances” or at least those who had reached age 55.

This was heralded at the time as giving retirees the opportunity to treat their pension savings like ISAs, but simultaneously there were fears that many could run out of cash too soon or splash out such as on a holiday of a lifetime. This was put into shorthand as the Lamborghini effect.  The pensions industry itself saw it as the death knell of the annuity.  But what is the reality?

Firstly, the reforms only apply to defined contribution (aka Money Purchase) schemes and do not directly affect final salary pension savings. Normally, only 25% of an amount drawn down is tax free.  In the 2015/16 tax year a drawn down of £100,000 would have incurred a tax liability of about £29,400, assuming no other income.  Nowadays, would-be raiders of their pension pots have to get their heads around the terminology as well as the meaning.  We have, for example, “flexi-access drawdown” and “uncrystallised funds lump sums” or UFPLS for short.  There are important differences that are particularly relevant to those still in work or have other sources of income.  A hot towel may be needed and an independent financial adviser highly recommended.

It is often overlooked that there is no duty on a pension scheme trustee to offer the flexibilities lauded in the Chancellor’s statement. In that situation it will generally be open to a scheme member to transfer funds to another arrangement, which does facilitate flexibilities.  Even then, 70% of final salary schemes reportedly do not allow partial transfers.  The Government was quick to recognise though that transfers out of final salary schemes to defined contribution schemes in order to access pension funds is fraught with risk.  It is, therefore, a requirement that those seeking to access funds valued at £30,000 or more must get advice from a specially qualified adviser, and the adviser must disclose certain information to the Trustee before it can go ahead.

When all is said and done, the objective is to ensure that sufficient pension savings are accrued to enable each retiree to afford and enjoy the lifestyle in retirement that they expect. This was the rationale behind Auto-Enrolment.  However, the low minimum statutory contributions mean that someone on average earnings who are auto-enrolled from age 22 and along with their employer paying in only the minimums, would have to work until age 77 in order to achieve a retirement income of two-thirds of their pre-retirement earnings.  Add to that the state pension age will rise to age 66 in 2020, with further rises in the pipeline.

Then there is inheritance tax. Like most tax rules it is complicated, but if the deceased was age 75 or over and had their pension in a draw down or uncrystallised (untouched) arrangement, the inheritor is likely to incur a tax charge potentially up to 45%.  At least this is an improvement on the previous 55% burden on inherited pensions.

Finally, when large sums of money are involved, there are certain to be unscrupulous individuals lurking, and even at this early stage there have been reports of scams involving pension pots.

The watchword is beware, and be advised.

Shared Parental Leave – one year on

 

5 April 2016 marks the first anniversary of the launch of Shared Parental Leave (SPL), the revolutionary policy that allows couples to share leave surrounding the arrival of a new addition to the family.  The hope is to help women back into the workplace quicker and give men the opportunity to care full-time for their new baby or adopted child in the important first year.

My Family Care and the Women’s Business Council conducted research on the story so far and found that just 1% of men (all men that is, not just eligible men based on their feedback) have so far taken up the opportunity to share their partner’s parental leave, while 55% of women say they wouldn’t want to share their maternity leave.

The combined survey of over 1,000 parents and 200 businesses found that taking up SPL was very much dependent on a person’s individual circumstances, particularly on their financial situation and the level of paternity pay available from their employer.  The main reasons for lack of take up by men are affordability, lack of awareness and unwillingness of women to share the leave entitlement.  While take up is still low, the research found that men are interested in taking SPL in the future.  Of those surveyed, 63% of men who already had children and were considering having more said it was likely they would choose to take SPL.

Of the 200 employers asked, the majority said that they enhanced both maternity (77%) and paternity (65%) pay.  The core reasons were to be consistent with their culture of fairness and equality and to increase employee retention and gender diversity.

Outwith the survey’s findings there is perceived a reluctance to engage on the part of fathers in case this is interpreted as lack of career commitment.

Employment Tribunals Scotland – Devolution

 scales of justice

The Scotland Bill is currently working its way through Westminster. One of the provisions allows for the Employment Tribunal in Scotland to become a devolved matter. In anticipation of this, the Scottish Government is currently consulting regarding the transfer of certain functions of the Employment Tribunal to the First-tier Tribunal for Scotland, which currently deals with a variety of matters, including immigration housing and welfare.

 Scottish Engineering has submitted a response to the consultation (which is due to close on 24th March 2016) expressing a number of reservations about the current proposals, including parity of service with other parts of the UK, the position of the current Employment Tribunal Judges, and the possibility of UK wide legislation being interpreted differently north and south of the border.

 We will report on the outcome of the consultation once that is published by the Scottish Government.

 

Holiday Pay Update

The Employment Appeal Tribunal issued its decision in the Lock v British Gas case at the end of February 2016.

The EAT, rejected British Gas’ appeal and confirmed that Mr Lock is entitled to holiday pay which includes an element for the amount of commission he would normally receive when working his regular hours. The Lock decision follows on from the EAT’s judgement in the  Bear Scotland case, which confirmed that all regular overtime, which employees are obliged to perform if requested by the employer, should be included for holiday pay purposes. However it is important to remember that this top up only needs to be paid for 20 days’ worth of annual leave per year.

 

Unfortunately, the Lock decision does not provide any further clarity on the reference period over which average earnings must be assessed in calculating holiday pay. Accordingly uncertainty remains over how to calculate claim for previous underpaid holiday and how it should be calculated going forward. British Gas has stated that it intends to appeal the EAT’s decision, so watch this space for future developments……