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HMO Quarterly Employment Bulletin – September 2010
Minimum Wage
The new Government has confirmed that the new national minimum wage rates, which come into force on 1 October 2010, will be:-
• £5.93 per hour for workers aged 21 and over;
• £4.92 per hour for 18 to 20 year olds and;
• £3.64 per hour for 16 to 17 year olds.
There
is a minimum for apprentices of £2.50 per hour. This applies to
apprentices below the age of 19 or those 19 and over but in the first
year of their apprenticeship.
Employed or Self Employed?
HMRC
continue to probe those who declare themselves to be self employed but
whom the Revenue believe are for all intents and purposes employed. The
Tax Commissioners, the recently established First-tier Tribunal and the
Courts continue to refine the matters to be considered when making this
distinction. Every case is considered on its own facts but, the case of
Weight Watchers (UK) Limited and others v. HMRC has led to great
interest on the part of those who wish to be regarded as self employed
but, fear being regarded as employed for the purpose of a payment of
tax. The importance from the employer’s point of view, of course, is
that it needs to know whether it has a duty to operate the PAYE system.
Further, although not definitive, if an employer operates the PAYE
system, he invites the argument that this is a recognition that he is
dealing with an employee rather than a self employed independent
contractor with all the implications of that if it comes to termination.
In
the Weight Watchers case there was a detailed examination of past law.
Briefly, however, for tax purposes at least a contract of employment is
likely to be found to exist if three conditions are fulfilled:-
• Personal service in exchange for pay;
• A sufficient degree of control to make one party the employer and the controlled party the employee;
• The other terms of the contract being consistent with an employer/employee arrangement.
As
an employer you do not want to be faced with a back claim for failure
to have deducted tax. Has the time come to inform that “self employed”
member of your staff that he/she is to go onto the PAYE payroll? On a
number of occasions we have been asked to assist in this delicate
process.
Who is a worker
Most would regard a
worker as being an employee. As a matter of law, however, that is not
necessarily the case. Why does it matter? Because the Working Time
Regulations (and a number of others) refer to workers rather than
employees. As an employer you therefore have to think beyond purely
whom you would regard as an employee and consider whether you have
responsibilities in law towards others who fall into the definition of a
worker. In the case of Parkes v. Yorkshire Window Company Limited, the
Employment Appeal Tribunal laid down detailed criteria to assist in
assessing who was a worker, the last of which was that a worker was one
who “held an intermediate position between an employee and someone who
carried on his own business undertaking”. That is clear then isn’t it!
The
practical point, however, is do not assume that worker is synonymous
with employee, particularly in the field of working time, holidays etc.
Seeking advice could help prevent you facing a claim to the Employment
Tribunal.
Benefits in kind: Pool cars
Where an
employer provides a car for an employee this will generally constitute a
taxable employment benefit. There can be an exemption if the employee
has access to a pool car. We say can because the pool car exemption
applies if the car is not available for private use. The car will be
regarded as available for private use if it is normally kept overnight
at any residential premises where any of the employees in the pool
resides, unless the premises are occupied by the employer.
In the
case of Yum Yum Limited v. HMRC of July of this year the Revenue argued
successfully that the fact that the residential premises were provided
for a Director of the Company by the Company did not amount to
occupation by the company as to enable the pool car exemption to apply.
The Company, the First-tier Tribunal said, had failed to show that it,
rather than its Director (who used the car) had possession or control of
the Director’s house (where the car was parked) or any power to exclude
persons from it. Therefore the pool car exemption did not apply.
Part payment of salary in vouchers: The VAT implications.
In
July of this year the European Court of Justice decided a dispute
between two heavy weights, HMRC and Astra Zeneca UK Limited. Astra
Zeneca paid part of their salary to employees in vouchers. Astra Zeneca
had not treated these vouchers as a supply for consideration for VAT
purposes. The finding, however, was that they should have done.
Therefore, the position now is that when such schemes are operated the
employer will get credit for the input tax incurred when buying the
vouchers, but they will also have to account for VAT on the supply of
those vouchers to their employees. Astra Zeneca, therefore, will no
longer achieve the gain of a net VAT repayment by adopting the voucher
scheme. We suspect that there will be a sudden loss of popularity of
such voucher schemes amongst large employers!
Equal pay: Treatment of unsocial hours payments
There
had been previous cases which had led to some confusion as to how pay
should be compared when considering an equal pay claim. A general rule
had been established that equal pay claims required a term by term
comparison but then a subsequent case decided that a more general view
should be taken by lumping together various elements of pay and looking
at an overall comparison. The most recent case in the Employment Appeal
Tribunal has decided that when looking at unsocial hours payments the
correct approach was to focus just on the terms of weekend and night
work supplements paid to the female claimants, with the more generous
supplements paid to the males with whom they sought to compare terms.
As
the Equality Act comes into force (see later) you might think that this
is an appropriate time to conduct an audit with a view to warding off
potential claims.
Equal pay: The friction with TUPE
If
you have acquired another business and have transferred a group of
employees into your business, you will come across TUPE –the regulations
which seek to protect the transferring workers. A standard scenario
which arises, is that those workers are better paid than your existing
workers. You take advice as to whether you can harmonise pay by
bringing the transferring workers inline with yours and your lawyer
tells you that harmonisation based upon the transfer alone is illegal.
We should add that there may be circumstances which entitle you to
impose harmonisation but, equally (if you will excuse the pun) there may
not.
You therefore grit your teeth and continue to honour the
terms of the incoming employees hoping that the result is not a claim by
your existing employees under the equal pay legislation. If you do
face such a claim, your adviser tells you that there is a “genuine
material factor defence” and that with a fair wind the prohibition on
harmonisation under TUPE would amount to a genuine material factor.
That would be good advice – to a point. The additional advice should
have been that the prohibition on harmonisation would only last for so
long. The longest period that had been sanctioned by the Courts so far
was 2 years.
In a recent case, an employer tried to use the
genuine material factor defence 6 years after the transfer. The
Employment Tribunal found that the pay disparity could not be justified
by relying upon the TUPE regulations. The reason for the disparity in
pay was no longer the TUPE transfer. Too long had passed for that to be
the case.
‘You have been on sick leave and you want extra money for holiday accrued?’
An
Employment Tribunal recently refused a claim by an employee for a
payment in lieu of holiday accrued during sick leave on two bases. The
first was on a technicality, namely that he was too late to claim an
unlawful deduction of wages (which is how he put his case). The second,
however, was that whilst on long term sick leave he had not requested
holiday, had therefore not been denied it, and therefore had not accrued
holiday. This is an interesting decision which unfortunately does not
create a precedent. It is of guidance but not necessarily definitive.
Treat this with caution.
Redundancy during maternity leave
If
you are in the unhappy situation that you have to consider redundancies
amongst your workforce, always bear in mind that any of your staff who
are on maternity leave have generally enhanced rights to be considered
for any suitable alternative vacancies. An employee on maternity leave
complained to the Tribunal (and took her case to the Employment Appeal
Tribunal) that her employer was obliged to offer to relocate her from
London (where the redundancies were to take effect) to Cheltenham. The
EAT disagreed. Referring to the Maternity and Parental Leave etc.
Regulations 1999, it found that whilst looked at in isolation the work
available at Cheltenham was suitable and appropriate, the location was
much less favourable to her. The employer had been entitled to take the
view that this did not amount to a suitable alternative vacancy under
the legislation. Always, however, take advice when an employee in the
selection pool is on maternity leave.
Unfavourable references: The risk for employers
Most
employers are now wary of giving anything other than a factual
reference for fear of being sued by a disillusioned employer who relies
upon a glowing reference, only to find that the employee does not live
up to that reference. In a recent case, however, the position was
somewhat different. Here an employee at a Care Home was dismissed and
subsequently sought new employment. The prospective employer asked for a
reference from the former employer. The former employer gave a damming
reference centring around allegations that she was rough with the
residents.
The employer made a claim to the Employment Tribunal
for Unfair Dismissal. She was found to have been automatically unfairly
dismissed upon the basis of procedural unfairness. She went on to say
that in assessing her compensation she should receive compensation for
being stigmatised in the care industry.
She got compensation for
the unfair dismissal, with an uplift for a failure to follow the
statutory procedures (now defunct, of course). The Employment Appeal
Tribunal decided, however, that to have any hope of obtaining
compensation for stigma, the stigma would need to have arisen from the
dismissal. The stigma did not arise from the dismissal but from the
reference. The Tribunal found that whether the employer dismissed
fairly or unfairly, it would have given a damming reference in any
event. The stigma therefore arose from the reference and no stigma
damages would be awarded.
The Equality Act 2010
This
Act comes into force on 1 October 2010 and replaces all existing
discrimination laws including the Disability Discrimination Act 1995.
Under the Act employers are not allowed to discriminate on grounds of
individuals’ physical or mental disabilities. The Act also requires
employers to make reasonable adjustments to help those suffering from
disabilities (which reflects the current position). One quirk (which we
are obliged to Daniel Barnett, Employment Barrister, for bringing to
our attention) is that the Government has felt it necessary to bring
before Parliament regulations which will specifically state that the
tendency to steal, or set fires, exhibitionism and voyeurism are
excluded from the definition of “disability”! Daniel Barnett comments
“This law makes it clear that employers are not required to make special
adjustments to welcome voyeurs or exhibitionists into the workplace.
Nor are employers required to make allowances for any mental disability
if an employer wants to dismiss someone who turns out to be a voyeur or a
flasher. Similarly, individuals with heavy tattoos and body piercings
are excluded from the protection of the Equalities Act 2010”.
He goes on to comment that a “disability” is a physical or mental impairment which:-
• lasts for more than 12 months: and
•
has a substantial impact on an individual’s abilities to carry out
normal day to day activities. However for this purpose “substantial”
simply means “more than trivial”.
Employment claims increase
The
Employment Tribunals have published statistics for 2009/2010. These
show an increase of 50% by comparison with the previous year. Claims are
at their highest levels yet.
Hand Morgan & Owen can
provide you with an Employment Protection Scheme which assists you in
preventing claims and deals with claims made including covering the
costs of awards made by the Tribunal against your business. Click on
the following link for details of this Scheme.
If you would like
to read other articles, fact sheets and bulletins on Employment Law go
to http://www.hmo.co.uk/content/view/87/93/
For advice and
assistance in respect of Employment matters contact Nigel Pepper,
Consultant or Patrick Nelson, Associate on 01785 211411.
09 September 2010
Disclaimer
The
contents of this article are for the purposes of general awareness
only. They do not purport to constitute legal or professional advice.
The law may have changed since this article was published. Readers
should not act on the basis of the information included and should take
appropriate professional advice upon their own particular circumstances.
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