It’s not often that a development in employment law is the leading national news story but that scenario certainly arose this week. The Employment Appeal Tribunal in England ruled in the cases of Bear Scotland v Fulton, Amec  v Law and Hertel v Wood  that employees who work overtime should have their holiday pay calculated based upon their average weekly earnings – to include overtime.

The Claimants won their cases before the Employment Tribunal and the decision of the Employment Appeal Tribunal has been pending for some time. The decision is not surprising. It follows another recent decision that provided that employees’ whose remuneration includes payment of commission (for instance on sales) should have their commission payments taken into account when calculating holidays.

Traditionally, employers have paid employees’ their holiday pay at their basic rate of pay, without taking into account overtime worked or commission earned. In light of these rulings, employers are going to have to consider changes to their approach. Unfortunately, the position is not yet settled because there are indications that the employers in the cases referred to above may lodge an appeal with the Court of Appeal. However, unless the decision is overturned on a further appeal, it seems that the law now requires employers to take into account an employee’s total average earnings, rather than simply pay basic pay during a period of annual leave.

Clearly having to pay employees at a higher rate of pay during periods of annual leave will impose an increased burden on employers. However, the decision appears logical when analysed. The purpose of allowing employees to receive paid annual leave is to allow for a much-needed rest from work and time of refreshment. Employees benefit from time away from work and, as a result, are less likely to become fatigued, burnt out, stressed and absent from work on sick leave.

Because of the obvious health and lifestyle benefits of time off work, the law does not allow employers to incentivise employees to refrain from taking their full annual leave entitlement. This is why an employer can only make a payment in lieu of holidays accrued but not taken at the end of the employee’s employment and not during the employment. Employees, especially low paid employees, who rely on overtime and commission to “top-up” their wages to a level at which they can afford to live, are disadvantaged if they are only paid their basic rate of pay during time off work. These recent decisions seek to put employees in no worse a financial position for having taken annual leave than if they had not taken annual leave. As a matter of public policy, it seems a sensible decision, even if it isn’t good for the bottom-line of the business.

Employers would be wise to review overtime worked in their organisation. The potential for increased costs as a result of overtime being included in holiday pay means that a review of working practices to see if overtime is being kept to a minimum would be in order. Further, if there are particularly busy times of the year when overtime is a more regular feature, employers may wish to consider curtailing employees’ ability to take annual leave during that busy period, if this is practical.

One of the quirks of the decision is that it gives effect to a European Directive that only requires employees to receive 4 weeks’ annual leave per year. In the UK, the entitlement is to 5.6 weeks so it would seem, on the face of it, that the requirement to include overtime in holiday pay may be limited to the first 4 weeks’ annual leave in a year. Administratively, this may be difficult to keep on top of and it may be that the law moves to require the additional 1.6 weeks’ annual leave to be calculated in the same way as the first 4.

Finally, there has been a lot written in the media about the potential for these decisions to cost UK  businesses billions of pounds in back-dated claims from employees who will seek to take advantage of these decisions. The government has set up a task-force to analyse the impact of the decisions of the appeal tribunal and intends to try to limit the impact of the decisions. The Tribunal points out that claims could only be back-dated if there were no more than three months between what are now viewed as underpayments of holiday pay. While it appears that employers will have to include overtime in holiday pay going forward, the chances of claims going back several years appear slim.

This case is a significant development in employment law. This article is intended only as a brief guide and not as legal advice. For specific advice on your situation, please do not hesitate to get in touch.

Employees have a right to paid annual leave. The statutory minimum holiday entitlement for an employee is 5.6 weeks. For a full time employee working a Monday to Friday job, this equates to 28 days’ paid holiday in the year. Employees working less than a five day week are entitled to a pro rata number of days’ annual leave.

Statutory annual leave entitlement is inclusive of any bank, public holidays or other fixed closures determined by the employer. If a company gives only the statutory minimum amount of annual leave and that company closes on 8 bank / public holidays in a year, this means that a full-time employee working for that employer will have 20 days’ annual leave to be taken at times during the year that are mutually convenient for the employer and employee. As an aside, it is worth noting that, unless the contract of employment provides to the contrary, there is no automatic right to any particular bank holiday off work for employees employed in the private sector.

Sometimes employees will not avail of their full annual leave entitlement and will request payment in lieu of holidays that had been accrued by the end of the year but not taken. Often this will seem like an attractive proposition for both the employer and the employee. From the employee’s perspective, this will lead to additional income and, from the employer’s perspective, there is no need to arrange for cover for the individual as they will not be taking holiday. This can be particularly attractive to an employer in very busy periods.

Employers should however note that the purpose of the law granting employees a statutory minimum number of weeks’ paid holiday in the year is to enable the employee to benefit from paid time away from the workplace environment. There are sound health and safety reasons for providing employees with this entitlement and there can be dangers to health and wellbeing if people do not take sufficient time off work during the year. For this reason, the law does not allow the employer and employee to contract out of the statutory minimum holiday entitlement. The exception to this is where the employment relationship is terminating. In these circumstances, if the employee has taken less leave than has been accrued in the portion of the year in which they have worked, the employer should make a payment in lieu of accrued holiday upon termination of the employment.

Employers can adopt a “use them or lose them” policy and are not obliged to police employees to make sure that they avail of their full entitlement but they cannot encourage an employee to take less than the statutory minimum holiday entitlement by paying in lieu of accrued holidays.

If an employee has a contractual entitlement to more holidays than the statutory minimum, the employer and employee can make their own arrangements for the scenario whereby an employee has accrued annual leave by the end of the year that they have not taken. So, for instance if an employee has a contractual entitlement to 35 days’ holiday in the year and takes 30 days, the employer can agree to pay the employee in lieu of the extra week’s holiday that has been accrued but not taken. There is no obligation to do this but there is nothing wrong with it either. If an employee working a 5 day week has an entitlement to 35 days’ holiday in the year and only takes 25 days, then the employer may only pay in lieu of 7 days’ accrued holiday a paying in lieu of holidays up to 28 days in the year would not be permitted.

Annual leave is a complex area and tends to raise all sorts of enquiries and cause a lot of confusion and readers are encouraged to take specific advice on their situation if there is a query relating to a particular individual and their annual leave entitlement.

Collective Questions is intended as a guide and for general information only and is not a substitute for taking specific advice relating to your situation. For specific advice regarding this or any other issue relating to employing people, please do not hesitate to contact us.

“How should disputes at work be handled?”

A wise employer will take steps to mitigate against the risk of disputes arising in the workplace.  Examples of this include recruiting the corret person in the first place to try to ensure that the right type of person is recruited to fit in with the others in the organisations. It is also important to have a culture of openness where hopes, disappointments, frustrations, development needs and other matters can be discussed honestly on a one to one and/or team level.

However, no matter how hard we try, we cannot completely eliminate conflict in the workplace. Every employer will at some stage have to deal with a performance or misconduct issue, a dispute between employees or a grievance. So, when these issues arise, how should they be tackled?

There are statutory procedures for dealing with disputes in the workplace and these are backed up in some detail by the Labour Relations Agency Code of Practice on disciplinary and grievance procedures. Where an employer wishes to address an issue it has with the performance or conduct of an employee, the disciplinary procedure applies. Where the employee wishes to complain about a matter relating to their work, the grievance procedure applies.

The Labour Relations Agency’s Code of Practice encourages employers and employees to resolve matters informally in the first instance where possible. This might involve a manager having a quiet word with an employee about a minor misconduct matter (such as poor timekeeping or making too many personal phone calls during working hours) or an employee speaking to their manager to try to resolve an issue that has caused the employee difficulty. If the informal discussion resolves the issue, then there is no need to move on to the formal process. If the informal discussion does not lead to resolution or if informal resolution is not appropriate because of the nature of the matter (e.g. a harassment complaint or an allegation of theft), then the legislation and Code of Practice set out a process that should be followed. This process applies whether the employer is instigating a disciplinary procedure or the employee is raising a grievance. The statutory procedure is as follows:-

-          The complaint / issue is set out in writing

-          A meeting is convened (at which the employee has the right to be accompanied by a work colleague or trade union representative)

-          The employee receives the outcome in writing from the employer

-          If the employee is dissatisfied with the outcome (s)he may submit an appeal in writing

-          An appeal meeting is convened (if possible, the appeal is heard by a more senior manager)

-          The chair of the appeal meeting submits a written appeal outcome and the process is at an end

The procedure outlined above allows both parties to consider the issue properly in advance of a meeting to discuss the matter. In addition, the entitlement to a written outcome allows the employee a chance to reflect on the outcome and the reasons for it before deciding whether or not to appeal.

Employers should note that if an employee is dismissed without the employer having followed the procedure outlined above, the dismissal will be found to have been automatically unfair. In addition, Industrial Tribunals have the power to increase compensation by up to 50% as a penalty against the employer for a failure to follow the statutory dismissal procedure.

Following the procedure outlined in this article will ensure that employers comply with legal requirements in relation to dispute resolution and should also help to ensure that disputes, when they arise, are dealt with in a fair and reasonable manner.

Collective Questions is intended as a guide and for general information only and is not a substitute for taking specific advice relating to your situation. For specific advice regarding this or any other issue relating to employing people, please do not hesitate to contact us.

Employees will be eligible for statutory paternity leave and pay if they are the father of the child or husband or partner of the mother if they meet certain eligibility criteria. The employee must expect to have responsibility for the upbringing of the child to be eligible for paternity leave. Further, to be eligible, an employee must have been employed by the employer for 26 weeks by the end of the 15^th week before the expected week of childbirth.

Employees choose to take either one complete week or two consecutive weeks’ ordinary paternity leave. The leave can start from the date of the child’s birth or adoption or on a chosen day after the date of the child’s birth or adoption. In the case of a birth, the leave must be completed by the time the baby is 56 days old. In the case of an adoption, the leave must be completed within 56 days of the child being placed. Only one period of leave will be available even if more than one child is born as the result of the same pregnancy, or more than one child is being adopted.

During paternity leave, employees should be paid statutory paternity pay (currently £138.18) or 90% of average weekly earnings, whichever is the lower.

If an employee is eligible for ordinary paternity leave, he will also be eligible for additional paternity leave. This additional leave can be taken only once the mother / adopter has returned to work from a period of statutory maternity or statutory adoption leave. Additional paternity leave must be for a minimum of two weeks, and a maximum of 26 weeks. It can start no earlier than 20 weeks after the birth or placement of the child and must end not later than 12 months after the birth/placement. If the mother / adopter has not taken his/her full entitlement to statutory maternity or statutory adoption pay this may transfer to the employee taking additional paternity leave.

This article sets out the provisions relating to paternity leave currently in force at the time of writing. Readers may be aware that the government is rolling out a new system of shared parental leave to give parents more flexibility over how to share periods of leave during the first year after the birth of a child. This may include both parents taking a period of leave together and leave being taken in more than one block. In Great Britain, the new arrangements will take effect for children born or placed for adoption after 5^th April 2015. While the date for implementation in Northern Ireland has not yet been confirmed, it is likely to be at a similar time.

Collective Questions is intended as a guide and for general information only and is not a substitute for taking specific advice relating to your situation. For specific advice regarding this or any other issue relating to employing people, please do not hesitate to contact us.

The summer holiday season is upon us. The issue of calculating holiday pay entitlement is often not straightforward. Employees have an entitlement to 5.6 weeks’ paid holiday in a year. A week’s pay is either:-

1.  The employee’s normal rate of pay where the pay does not vary from week to week,; or
2. The average pay over the previous 12 weeks if the hours of work and rate of pay varies from week to week

Traditionally overtime has not generally been included in calculating holiday pay for employees with normal working hours who work overtime from time to time. It had been considered that only where overtime was contractually guaranteed should it be taken into account in calculating holiday pay.

However, a decision of the European Court of Justice indicated that supplementary payments should be maintained during annual leave where they are “intrinsically linked” to the performance of the employee’s contractual obligations.  In practice, this may include bonuses, commission and overtime pay.

This decision has been followed by an English Employment Tribunal who found that an employee was entitled to have overtime payments taken into account when calculating holiday pay. The matter is complicated further by the fact that the Tribunal found that the entitlement to have overtime taken into account only applied to the first 4 weeks of annual leave (which is the minimum required to comply with the EU Directive) and not the next 1.6 weeks (which are granted by UK law).

Decisions of Employment Tribunals are not binding on later cases and there have been subsequent cases where Employment Judges have found that overtime should be taken into account and others where the Judge has decided that it should not. The position will become clearer when the Employment Appeal Tribunal decides on the issue when some of the cases are appealed to it.

So, in light of the uncertainty, what should an employer do? On the one hand, beginning to take overtime into account may reduce the risk of unlawful deductions from wages claims. However, on the other hand, it may create an unnecessary contractual entitlement to overtime being taken into account in the future if the Appeals Tribunal decides that this is unnecessary.

If an employer awaits clarification from the higher courts and Tribunals, it should be kept in mind that if it becomes clear that employees are entitled to have overtime taken into account in calculating holiday pay, the risk of claims for unlawful deductions from wages may increase.

Unfortunately, as is often the case with employment law, there is no easy answer to this question and legal advice should be sought in relation to each specific case.

Collective Questions is intended as a guide and for general information only and is not a substitute for taking specific advice relating to your situation. For specific advice regarding this or any other issue relating to employing people, please do not hesitate to contact us.

It is important that employers take steps to ensure that employees settle into their new roles. In general there is a higher rate of turnover of staff among new employees.  A good induction programme makes good business sense, whatever the size of the organization, and whatever the job.

It is important that the employee feels welcome on their first day in a new job. Make sure that basic arrangements such as the employee’s desk and chair are in place and, if appropriate, an email address is set up so that the employee feels that they have a place in the organisation from the outset. On the first day, ensure that the employee is introduced to the colleagues he or she will be working with and make sure he or she is familiar with the premises.

Induction does not need to be a very formal process but it should be well thought through and appropriate to the job and the organisation as a whole. Induction may be carried out informally by the line manager or supervisor on a day-to-day basis. It can also be useful to ask another employee to be on hand as a “buddy” to ensure that day to day questions can be answered such as where certain items are kept or how to use the computer system.

While induction does not have to be a formal process, having a one page checklist is useful for both the line manager and the new employee to ensure that nothing important is missed. This checklist could include matters such as:-

• Ensuring existing employees are made aware of the new employee’s start date and job role
• Providing an organisation chart – showing a “who’s who” of the organisation
• Job description and explanation of how their role fits into the overall aims and objectives of the organisation
• History of the organisation
• Provision of key contact details
• Tour of the premises
• Issue statement of main terms of employment
• Explanation of HR policy handbook (matters such as how to apply for annual leave, how to report sickness absence and outlining the organisation’s Equal Opportunities policy)
• Explanation of health and safety rules and issue of any equipment
• Guidance on the use of the IT system
• Timetable training
• Timetable review meetings

The induction programme may take place over several days or weeks and may include some job specific training. It is important to keep in mind that people can only take in so much information at a time so employers should ensure that sufficient time and space is given for a meaningful induction process to facilitate the smooth integration of the employee into the job.

By investing some time in ensuring that a good procedure is in place for inducting new employees, employers can help the employment relationship get off to a good start.

Collective Questions is intended as a guide and for general information only and is not a substitute for taking specific advice relating to your situation. For specific advice regarding this or any other issue relating to employing people, please do not hesitate to contact us.

There has been a lot of case law in recent years on an employee’s rights to annual leave in circumstances where the employee is off on long term sick and it is an area of law that employers often ask about.

In a slight departure from the normal layout of these articles, this article sets out some of the most commonly asked questions and gives brief answers to each question. For more details on any of the questions or to ask another question regarding this matter, please get in touch:-

Is an employee entitled to accrue annual leave during periods of sickness absence?

Yes. Annual leave entitlement continues to accrue during periods of sickness absence. Further, it is important to note that where an employee has not had the opportunity to take annual leave during a leave year because they have been ill, the entitlement to annual leave can be carried over to the next or subsequent years. The entitlement to carry over annual leave is automatic so there is no need for the employee to apply to carry over the leave. It can be tempting to not address the issue of long term absence, especially when entitlement to Statutory Sick Pay (SSP) expires as the perception is that the employee off on long term sick leave is not costing the employer anything. However, as annual leave continues to accrue, allowing the long term absence to continue is only adding to the potential liability for holiday pay that is accruing during the employee’s sickness absence.

Can an employee take annual leave while absent on sick leave?

Yes. Often this will be an attractive option for employees. If employees are off on long term sick leave and getting paid SSP or their entitlement to SSP has expired, employees may wish to take annual leave in order to receive full pay for a period of time. This arrangement can also be attractive to an employer as the annual leave entitlement is used up during the period of sickness absence and does not roll over for the employee to take upon their return from sick leave. It is important to note however that the decision on whether to take annual leave during sickness is one for the employee and the employer cannot require the employee to take annual leave while they are off ill.

Can an employee re-schedule annual leave if they become sick while on annual leave?

Yes. Annual leave is meant to provide employees with relaxation and enjoyment away from the workplace. If annual leave cannot be enjoyed because the employee takes ill while on holiday, they can re-schedule the annual leave for another time. It may be worth considering asking employees to provide a medical certificate for illnesses during sick leave, rather than simply relying upon a self-certificate, which would be normal practice for illnesses up to one week.

There is something else to flag up in relation to sickness absence that does not relate to annual leave but is of relevance this month. Up until the end of the tax year 2013/14, employers were able to avail of a scheme whereby they could recover some or all of the SSP paid to employees on sick leave. Unfortunately, from 6^th April 2014, this scheme will no longer be available to employers, although employers will still have some time to reclaim SSP paid for sickness absences that occurred before 5^th April 2014. In better news for employers, the government’s initiative to waive the first £2,000 of employer’s national insurance contributions in a year will come into effect from 6^th April 2014, which for most small employers should outweigh any loss incurred as a result of the abolition of the SSP recovery scheme.

Collective Questions is intended as a guide and for general information only and is not a substitute for taking specific advice relating to your situation. For specific advice regarding this or any other issue relating to employing people, please do not hesitate to contact us.

Everyone falls ill from time to time and employers should understand that there will be occasions when employees are off work due to sickness. However, a good attendance record from employees is essential to the smooth running of any organisation. When employees are absent on sick leave, this is not only a difficulty for the absent employee but also for their colleagues who often find that they have more work to do to cover for the absent employee. For the smooth running of the organisation, it is essential that absence management is handled in a pro-active manner.

Reporting absence

Employees should be made aware of what reporting mechanism is in place for them if they are absent from work. This should be set out in an absence policy and it is important to ensure that a copy of this is easily accessible to employees so that they know who to contact if they cannot attend work due to sick leave. It is usually best to require employees to telephone their line manager personally where possible so that as much information as possible can be gathered about the sickness absence and the expected duration of the absence.

Keeping in touch during a period of absence

Employers are often nervous about keeping in touch with employees, in case they are accused of harassing a sick employee. However, lack of contact or involvement could lead to an employee feeling that the employer does not care.  Appropriate contact is essential. If the contact is supportive and caring, and focused on supporting the employee it is difficult to see how it could be construed as harassment.

If the absence is for a lengthy period of time, it is important to keep in touch with the employee to remind them that you care about their welfare and to keep employees updated about changes in the workplace. Ongoing contact is also important to ensure that the employer always has the most up to date information and is working from an informed stance when considering timescales for a return to work and whether any adjustments can be made to facilitate a return to work.

Employees should be made aware of their responsibility to keep in contact during their sickness absence, although an employee who is seriously ill is unlikely to be able to comply with normal reporting requirements.

Sometimes employees request that the employer does not make contact during sickness absence. It is important to establish the reason for this request as it may identify that there is an issue in work that is contributing to the employee’s ill-health and, if the employer is aware of this, steps can be taken to address the issue and work towards a resolution and the employee’s return to work.

Seeking medical opinion

It can be helpful to take advice from a sick employee’s doctor regarding the employee’s condition, expected timeframe for recovery and whether you can do anything to assist the employee in returning to work. It may also be appropriate to consider arranging an assessment with an occupational health doctor. Your employee does not have to give permission for you to write to their doctor or consent to you obtaining a report from an independent doctor but if consent is refused, you can tell the employee that you may have to reluctantly make decisions regarding their employment without the benefit of medical opinion.

Returning to work

The absence management process does not end when the employee returns to work. The employee’s line manager should conduct a return-to-work interview with the employee after their absence, so that the employee is aware that their absence has been noted and so that any support the employee might need upon returning to work can be identified. The return-to-work interview also gives the line manager the opportunity to raise any concerns about the absence, particularly if the employee has a poor attendance record. A written record should be kept of the return-to-work interview.

Disciplinary action

Persistent absence can be addressed by using the disciplinary process. An employee should be made aware that there are concerns about his or her attendance before the disciplinary process is invoked. The employee should be aware that a lack of improvement in attendance might result in disciplinary action being taken.

If there has been a serious breach of the absence policy, an employer might consider whether this amounts to gross misconduct and should result in summary dismissal. A typical example of this may be where the employee informs the employer that they are ill and then is spotted working elsewhere while off work on sick leave.

Conclusion

Absence management is difficult. While procedures are important, it is also vital to exercise common sense and discretion and deal with matters on a case by case basis. It is not possible to provide a comprehensive checklist of actions to take in relation to every absence. If an employer is concerned about an employee’s attendance record, either through a long term absence or persistent short term absences, specific advice should be sought on the particular situation.

Collective Questions is intended as a guide and for general information only and is not a substitute for taking specific advice relating to your situation. For specific advice regarding this or any other issue relating to employing people, please do not hesitate to contact us.

“How do I go about changing my employees’ terms and conditions?”

Circumstances in any organisation can change over time and it may be that at some stage an employer finds that the terms and conditions of some or all of the employees no longer best serve the requirements of the organisation.

Perhaps the most obvious example of varying terms and conditions relates to employees’ remuneration. In recent times many organisations have had to go through the difficult process of implementing pay cuts or withdrawing certain employee benefits. Another common scenario is where the employer wishes to vary the business opening hours to respond to customer demand and this requires a change to employees’ working hours.

As the employment relationship is a legally binding contract entered into by two parties, it is not usually open to one party to vary the terms of the contract without the consent of the other. So how does an employer go about varying employees’ terms and conditions when the business needs require such a change?

If the employer simply tries to amend the terms of the contract without the employee’s consent, the employer is at risk of the employee suing for breach of contract or even resigning and claiming that the employer’s conduct in varying the contract amounted to the employee being constructively dismissed.

The process of varying terms of employment should start with consulting with the affected employees with a view to obtaining consent to the proposed change. It is important that the employer explains the reason why the change is proposed. Employees are much more likely to consent to a change in their terms and conditions if they understand why the change has to be made. For instance, if an employer is proposing a pay cut because of economic difficulties the organisation is facing, employees may well consent to the reduction in pay if they understand that the reduction in pay is necessary to safeguard the viability of the business and is being proposed in an effort to avoid redundancies.

If consent to the proposed change can be secured, then the employer should record the agreed variation in writing, have it signed by the employee and attach the statement of variation and the employee’s consent as an appendix to the employee’s statement of main terms of employment.

If, after consultation, agreement cannot be reached with employees regarding a variation in the terms and conditions of employment, the employer may consider serving notice to terminate the existing contract of employment and offering to re-engage the employee on new terms and conditions. Employers should note that the statutory dismissal procedure should be followed throughout the process of terminating the existing contract of employment, including offering the right of appeal against the decision. If an employee refuses to accept the new terms and conditions offered, the employee will leave the organisation as they will have been dismissed by the employer. The dismissal will be fair only if the employer can show that it had a substantial business reason for terminating the contract. This procedure of dismissal and offering to re-engage should be considered only as a last resort where it has not been possible to secure consent to the proposed change. An employer should certainly seek legal advice before embarking upon this process.

Collective Questions is intended as a guide and for general information only and is not a substitute for taking specific advice relating to your situation. For specific advice regarding this or any other issue relating to employing people, please do not hesitate to contact us.