«Labor and Employment Client Service Group To: Our Clients and Friends May 2014 Employing Staff in the UK This briefing sets out the main employer ...»
Pension New rules have come into force requiring all employers to enrol employees into a suitable pension scheme and pay contributions at a minimum level (up to 3% of an employee’s earnings, currently between £5,772 and £41,865). Employees will also be required to contribute at a specified minimum level (up to 5%). The date an employer needs to comply with the new legislation is called the “staging date” and depends on the size of an employer’s payroll.
Discrimination and whistle-blowing Discrimination Discrimination in employment is prohibited under UK law on the basis of the following protected
This protection applies throughout the employment relationship, from recruitment to termination.
There is no minimum service requirement before these protections apply.
UK law also prohibits discrimination on the basis of an individuals’ association with someone who has one of the above characteristics (such as a parent being discriminated against because of his or her disabled child), as well as discrimination based on someone’s perceived characteristics (such as a man perceived to be gay but who is not in reality).
The legislation also has special provisions dealing with harassment by third parties (for which an employer may be liable).
Potential compensation for discrimination is uncapped, but is essentially calculated by reference to the amount of income lost by an employee who leaves his/her employment as a result of discrimination (for a reasonable period of time.) Whistle-blowing UK legislation prohibits dismissing or treating detrimentally, any worker who has ‘blown the whistle’ on potential corporate wrongdoing (either past wrongdoing, current, or future). There is a detailed definition of what constitutes corporate wrongdoing for this purpose.
Like the UK’s discrimination legislation, the potential compensation for breach of the legislation is uncapped, and by contrast with unfair dismissal (see below) there is no required qualifying period of continuous service.
Bryan Cave LLP America | Europe | Asia www.bryancave.com Data Protection In the UK, legislation governs the collection and processing of personal data (being information relating to a living individual who can be identified from that data, including any expression of opinion about the individual and any indication of the intentions of the employer or any other person in respect of an individual).
Legislation places responsibilities on any organisation (including employers) to only collect and use personal information that it holds in a fair and proper way. The legislation is overseen and enforced by the Office of the Information Commissioner, which has published guidelines for employers to follow. It is now common for employment contracts to contain provisions dealing with data protection issues.
There are particular limitations on the transfer of personal data outside the European Economic Area. “Transfer” includes accessing data contained on a global human resources intranet from a country outside the EEA e.g. the United States. Companies must ensure that they comply with data protection rules before transferring data even in the case of an intra-company transfer.
An employer’s ability to monitor employee’s emails and internet use is also more restricted in the UK than in some other countries, i.e. the United States.
Ending the Relationship A contract of employment can be ended by mutual agreement or by the employer or employee giving the required notice of termination. The UK employment laws do not recongise the US concept of “at will” employment. In the absence of gross misconduct, employers are required to give employees notice of termination.
Notice of termination The appropriate notice period for any employee is usually set out in his or her contract of employment. If it is not, then the courts imply a requirement of “reasonable” notice (though the parties may differ as to what is or is not “reasonable” in any particular case).
An employee’s notice period will always be at least the statutory minimum period of notice, even if the parties have agreed to a lesser notice period in the employment contract (see above).
Employers can elect to release an employee immediately by making a payment-in-lieu-of-notice (often abbreviate to “PILON”). Sometimes the contract of employment expressly provides for this (in which case the PILON is taxable) and sometimes it does not (in which case the PILON is probably not taxable unless it exceeds £30,000).
In the UK it is also common to place executive staff on “garden leave” during their notice period.
“Garden leave” is shorthand for requiring the executive to remain away from the office and to not have any business contact with other staff or clients. A discretion to place an employee on “garden leave” should be included within the employment contract.
Wrongful dismissal claims An employee will have a claim in damages if the employer, in dismissing him/her, breaches the contract of employment. This is usually called a “wrongful” dismissal in the UK.
The most usual situation in which wrongful dismissal is claimed is where the employee is dismissed without the correct notice. In that situation damages are normally limited to the net amount that the employee would have earned during the minimum period of notice which the employer could have lawfully given under the terms of the contract.
Bryan Cave LLP America | Europe | Asia www.bryancave.com Unfair Dismissal An employee who has been dismissed by his employer (whether with or without notice) may be able to bring a claim for “unfair” dismissal before an Employment Tribunal. This is a statutory claim independent of any claim the employee may be able to bring under the employment contract for “wrongful” dismissal.
To be eligible to bring a claim for unfair dismissal, employees must first satisfy a number of conditions; in particular, they must have been employed for a continuous period of not less than two years (one year, if the employment started before 6th April 2012).
In the UK, a dismissal must be for a fair reason and also follow a fair procedure. There are only five potentially fair reasons: redundancy (i.e. reduction in force); illegality (e.g. no work visa);
misconduct (e.g. persistent lateness), capability (e.g. poor performance) and some other substantial reason (e.g. reorganisation).
Compensation is the most common remedy in the UK (in almost all cases); reinstatement to the position is very rare. Compensation consists of: (i) a basic award, calculated in a similar way as redundancy payments (see below) on the basis of the employee’s age, length of service and weekly pay; and (ii) a compensatory award, which is currently 12 months’ pay or £76,574 (whichever is the lower) but depends on, amongst other “heads of loss”, how long the dismissed employee is expected to be out of work. There is no cap on compensation in discrimination or whistle-blowing cases.
Redundancy Employees who are dismissed by reason of redundancy (similar to the US term “reduction in force”) may be entitled to a statutory redundancy payment in addition to any other payment due under their contract. Employees must have two years continuous service before they are eligible to claim statutory redundancy payment (calculated on the basis of the employee’s age, length of service and weekly pay). Additionally, employees may have an express or implied contractual right to an enhanced contractual redundancy payment.
Employers must comply with certain rules concerning the information and consultation process during a redundancy. Additional rules apply when employers are making 20 or more employees redundant at or about the same time.
Disciplinary and Grievance Procedures Most UK employers have written rules and procedures to deal with employee performance, conduct and grievance issues. Such procedures should comply with the UK’s code of practice on disciplinary and grievance procedures.
A dismissal will not be automatically unfair simply because the employer has failed to follow a particular procedure. However, the dismissal may still be unfair as Employment Tribunals will consider whether employers have acted in a broadly fair manner, and they will take into consideration the statutory Code of Practice on disciplinary and grievance procedures.
A failure by either party to follow the Code of Practice will be taken into account by an Employment Tribunal when assessing a case. Employment Tribunals may, in certain cases,increase an award of compensation by up to 25 per cent if they find that an employer failed unreasonably to follow the guidance set out in the code, or decrease compensation by up to 25 per cent for an employee’s unreasonable failure to do so.
Business and asset sales in the UK Where there is a transfer of a business or an identifiable undertaking (which includes business sales and outsourcings), the UK’s Transfer of Undertakings (Protection of Employment) Regulations 2006 Bryan Cave LLP America | Europe | Asia www.bryancave.com (“TUPE”) may apply. TUPE implements in the UK a European directive widely known as the Acquired Rights Directive.
The aim of TUPE is to protect employees’ rights. The fundamental rights are set out below:
employees assigned to the business which is transferred transfer with it (i.e. they move with the job) and become employed automatically by the buyer;
the employees cannot usually be dismissed as a result of the business transfer, unless due to a legitimate downsizing by the buyer after the transfer occurs (any such dismissal will automatically be an unfair dismissal);
the terms and conditions of employment contracts cannot be varied as a result of the transfer;
and there are certain pre-transfer consultation obligations placed on both the old and new employers regarding the transferring employees.
Similar protections do not generally exist for acquisitions by share transfer (i.e. company sales).
It should be noted that TUPE has broad application — it can apply to outsourcings and to business transfers within subsidiaries of the same holding company.
To discuss any of these issues further, please direct your queries to the authors, your contact at
Bryan Cave or to any member of the Labour and Employment Client Service Group: