Considering pay reviews in 2017?

 

 

If you’re recruiting into the business or find you’re losing people to similar jobs outside for higher pay, this is the right time to look at the rates you’re paying.

Maybe you’ve had to recruit in at a higher salary than your existing people doing the same job? – or you can see that you’ll need to, in order to secure the right person? 
 

This is a good opportunity to even things out so all your people are being paid the market rate for the job, a rate that reflects their level of skills and value to the business.  Or just imagine how your most skilled long serving person would feel if they find out you’ve recruited someone with less experience into the same job and paid a few thousand more!  Resentment and resignation are likely to follow.  Pay may not be a motivator, but it can certainly be a demotivator!

Plus, awarding a salary increase before and not after a valuable employee finds another job paying a lot more and hands in their notice has to be so much better in terms of the psychological contract.  You don’t want to try managing the expectations of an employee who’s been given the impression they have the power to negotiate their pay.....

There’s evidence that workers are increasingly prepared to quit their job without first securing a better position, indicating that there’s a high degree of confidence that other work is out there.   

And there is: there are almost 750,000 vacancies available, one of the highest numbers on record, and unemployment is at its lowest for 11 years.  It may mean you face pressure this year as an employer to pay more to gain and keep the staff you need.

More pressure on pay may come from inflation.  At a time of rising prices it’s likely there will be pressure from households demanding more pay to maintain their living standards.  The inflation rate is already picking up from its current 1.6% and could hit 3% or more by the end of the year, caused in large part by the fall in the value of the pound pushing up the price of imported goods.  It means the same take-home pay will buy less.   

Of course affordability for the business is the first consideration with pay increases.

Costs for businesses are on the rise, with the effect of exchange rates and increased business rates – and average employment costs are rising this year too for most UK employers. Employers with payrolls over £3million will be paying 0.5% of their wage bill as apprenticeship levy from April, minimum wage rates increase a little, and pension auto enrolment with its mandatory 1% contribution will be rolled out to the smallest and newest employers. 

So it’s likely that this year, to offset the extra costs for employers, average increases will fall despite the pressures of inflation on take-home pay.   Most pay awards during 2016 were in the 1% to 3% range, and in the 3 months up to January 2017 they were 2.7%.  Average increases are predicted to fall to 2.2% this year.

But it’s likely there will be higher pay increases for staff in specific jobs or industries where there are skill shortages, where employers will have to pay a premium to recruit from outside.  And where existing staff will find it relatively easy to find other jobs paying more.

The Human Resource will be pleased to advise your business on pay policy, bonus schemes, benchmarking and salary review.  Contact us today on 07884 475303 or enquiries@thehr.co.uk for a free informal discussion.

Are your freelancers part of the sham self-employed?

 

Q:      When is a self-employed person not self-employed?

A:      When they’re a really worker…..

Plenty of small businesses use freelancers to give them flexibility in meeting customer demand without the legal obligations and responsibilities of having employees.  The freelancer pays their own tax, and doesn’t have to be offered a set number of hours a week.

But here’s a sorry tale where this has worked out very expensive for a plumbing business.  And it’s now likely that similar arrangements will have to be reviewed carefully.

A plumber, Gary Smith, had signed an agreement with his company Pimlico Plumbers Ltd where he was described as a “self-employed operative”.  The wording of the contract suggested that he was effectively running his own business, providing a service to Pimlico Plumbers.

However there were some indications in his contract that in reality, he wasn’t genuinely self-employed.  For example, he was required to wear Pimlico’s uniform displaying the company’s logo, use a van leased from Pimlico (with a GPS tracker and the company’s logo), and work a minimum number of weekly hours.

On the other hand, he could choose when he worked and which jobs he took, was required to provide his own tools and equipment, and handled his own tax and insurance.

All went smoothly for 6 years until Mr Smith suffered a heart attack and decided he wanted to reduce his working days from five days a week to three.  Pimlico Plumbers refused his request, took away the branded van and terminated its agreement with him!

Mr Smith has now successfully brought a claim for disability discrimination.  He argued that he was entitled to basic workers’ rights – and this includes protection against unlawful discrimination.

Pimlico Plumbers argued unsuccessfully that Mr Smith was an “independent contractor”, rather than a worker or an employee, and therefore had no claim. 

The Employment Tribunal, looking at how Mr Smith worked in practice, found that he was a worker not self-employed.  Although he had registered as self-employed with HMRC and paid his own taxes, as far as employment rights are concerned the decision is that he should be legally classed as a worker because:  

• he was obliged to provide his services personally
• Pimlico Plumbers was more than just a customer of a business operated by Mr Smith.

Why does this matter?  Because people legally categorised as workers have the same rights not to be discriminated against, to minimum wage, to paid annual leave and to rest breaks as employees, and depending on earnings, need to be included in pension auto enrolment. 

So Mr Smith is now pursuing claims for disability discrimination and 6 years' arrears of holiday pay against Pimlico Plumbers...

But we need to make the distinction that workers aren’t the same as employees.  They don’t have the full range of protections given to employees, for example they aren't entitled to minimum notice periods, they aren't protected against unfair dismissal and they aren't entitled to redundancy pay. 

 General secretary of the TUC Frances O’Grady commented: “This case has exposed once again the growing problem of sham self-employment.  Unscrupulous bosses falsely claim their workers are self-employed to get out of paying the minimum wage and providing basics like paid holidays and rest breaks.”  Oh dear!

If you’re in doubt about whether your people are genuinely self-employed, or workers, or employees, contact The Human Resource today on 07884 475303 for expert advice.   We can give you confidence that the terms and practices applying to your workers and employees are all in order - so your business doesn't become the next Pimlico Plumbers!

Sickies vs Presenteeism

 

We seem to have a pattern in the UK that the first Monday in February is the single day of the year with the highest sickness absence -  and now it’s earmarked as National Sickie Day.

It’s not hard to imagine why. The fresh start to the year in January in over, we’re still paying the bills from Christmas, still getting up and coming home in the dark. Freezing temperatures and widespread ‘flu outbreaks don’t help either.  Maybe it’s easier to phone in sick and snuggle down under the duvet….

So … be ready to tackle the odd bad apple in your workforce who has the urge to skive off work on the first Monday in February – or any Monday.  A proactive approach towards absence will make sure that an absence culture doesn’t take root in your workplace, hitting morale and productivity at a time when most businesses are looking to find ways to boost future growth.  Here’s what to do:

·         Communicate a consistent policy that people phone their direct manager if they need to take time off sick, and if practical don’t accept texts and emails.  

·         If an employee doesn’t even phone in but simply fails to turn up, handle it firmly as a disciplinary matter.

·         If you’re given a reason for absence that doesn’t relate to the person’s own health, let them know clearly that it won’t be counted as sickness absence.  It would be this sort of excuse – all reported in National Sickie Day top 10 bizarre reasons lists for not turning up to work:

o   “I’ve accidentally locked myself in the bathroom and I’m having to wait until someone with a key to the house can come round to let me out.”

o   “I’ve accidentally sent my uniform to the charity shop so need to go and buy it back.”

o   “I thought it was a bank holiday today and I’m 500 miles away.”

o   From a worker in Glasgow “I missed the stop on my train this morning and can’t get off the train now until London.”

The time can either be unpaid, or even deducted from the holiday entitlement (though you should make it clear that holiday normally must be booked in advance). 

·         As an employer you’re perfectly entitled to challenge an employee’s reason for absence.  But handle it at a confidential return-to-work interview and be sensitive to the fact that people may not feel comfortable telling you about their reasons.  Perhaps they’re suffering from an illness or mental health issue that they don’t feel they can talk openly about? Perhaps they’re finding it difficult to work with their team and are switching off? Perhaps they’re working around caring responsibilities at home?

There's more advice on strategies to control absence here.

Presenteeism

On the other side of the coin, coming into work unwell for fear of your colleagues thinking you’re pulling a sickie if you take a day off (presenteeism) seems to be even more widespread than absenteeism. And could be costing businesses even more money.

Recent UK research has found that a quarter of people have gone into work when they're too ill and should be at home.  Working on through illness could account for as much - if not more  - of a loss in productivity than sickness absence, because of errors, infecting others, irritation, lack of concentration etc. Sickness presence can also mean it takes longer for people to recover from illness.

So tackling presenteeism can reduce costs and improve productivity. Tackling the causes is a start: the report found that personal money troubles, work-related stress, worrying about redundancy and perceived pressure from managers all contribute to people coming into work despite being ill.

 Finding a balance

To keep the business running successfully and productivity up, we need to strike the right balance here.  The balance between taking action against any employees taking advantage of your sick pay scheme and on the other hand, ensuring the right support is in place for those who are genuinely ill.

Happy and supported employees are less likely to be absent, and ultimately they will be more productive, committed and engaged with the business.  Skilled managers create a workplace people want, an environment where people don’t think about calling in sick unless they’re genuinely ill. How? Interesting and fulfilling work, opportunities for developing our skills and feeling included and valued are all important.

If you have a motivated and engaged workforce with a strong team spirit, every individual who can come into work will do.

We help businesses to manage sickness absence, advising on policy and individual cases.  Do you want to discuss your challenges with a professional, and walk away with a manageable action plan so you know exactly what you need to do? Give us a call today on 07884 475303 or email enquiries@thehr.co.uk. 

 

10 ridiculous (but completely real) excuses for not paying Minimum Wage

Yes, these are real excuses that business owners have given HMRC to explain why the law about minimum wage rates simply doesn’t apply to them:  

• Her job’s too menial: “She doesn’t deserve the national minimum wage because she only makes the teas and sweeps the floors.” 
• Do you know who I am?  “The national minimum wage doesn’t apply to my business.” 
• I’ll pay them properly when they can do the job: “My employee is still learning so they aren’t entitled to the national minimum wage.” 
• I have a foreign accountant: “My accountant and I speak a different language – he doesn’t understand me and that’s why he doesn’t pay my workers the correct wages.” 
• It’s not the international minimum wage: “I thought it was okay to pay foreign workers below the national minimum wage as they aren’t British and therefore don’t have the right to be paid it.”
• Because I’m worth it – they’re not: “It’s part of UK culture not to pay young workers for the first three months as they have to prove their ‘worth’ first.” 
• Performance-related pay: “The employee wasn’t a good worker so I didn’t think they deserved to be paid the national minimum wage.” 
• Yeah, but they signed on the dotted line: “I’ve got an agreement with my workers that I won’t pay them the national minimum wage; they understand and they even signed a contract to this effect.” 
• It’s not who you are, it’s who you think you are: “My workers like to think of themselves as being self-employed and the national minimum wage doesn’t apply to people who work for themselves.”
• Standby me: “My workers are often just on standby when there are no customers in the shop; I only pay them for when they’re actually serving someone.” 

We could provide commentary on WHY all of these bizarre excuses are completely and utterly wrong … But some things just speak for themselves.

 

It doesn’t matter who the business owner is, what their accounting arrangements are, whether their workers are performing at the desired level, are pieceworkers, home workers, agency workers, commission workers, part-time workers or casual workers. The fact remains that if they aren’t paying minimum wage, they’re breaking the law.

 

This lame excuses list has been released as part of a nationwide campaign to raise awareness among the low paid about their minimum legal wage and flag up cases of non-compliance to HMRC.  Anyone who thinks they may be paid less is being encouraged to contact ACAS as soon as possible, and every call is followed up. HMRC’s enforcement budget, used to fund the number of compliance officers investigating minimum wage complaints, is £20 million a year and will increase by another £4.3 million this April.

 

The consequences for your business of underpaying staff what they’re legally entitled to receive could be dire: here's more about the level of fines being imposed by HMRC.

 

As a refresher, the current National Living Wage for all employees aged 25 years and over is £7.20 an hour.  The National Minimum Wage rates are currently:

• for employees aged 25 years and over £7.20 an hour
• for 21- to 24-year-olds £6.95 an hour
• for 18-20 year olds £5.55 an hour
• for 16-17 year olds £4 an hour
• for those in the first year of an apprenticeship, £3.40 an hour

The rates rise again a little in April 2017: watch this blog for an update.

Enforcement of minimum pay really has some teeth and pay rates need managing carefully to ensure the right one is applied.  Employment law can be complex, and we understand that dealing with it can be a hassle.  That’s why we’re here to help.  If you’re unsure about where you stand and what you need to do to keep your business on the straight and narrow, give us a call today at The Human Resource on 07884 475303.