Employment Law Update - September 2016

Employment Law Update - September 2016

It is almost six months since the introduction of the national living wage in the UK. This update takes a brief look at the recent employment practices and issues and evaluates the potential link to this change.

Whilst it has been announced that there will be no changes to the national minimum wage for over 25’s this Autumn, recent reports suggest that the government may still go ahead with planned increases in April 2017, despite continued pressure from some employers to keep the UK national minimum wage rates at existing levels.

The retail, care and hospitality sectors have arguably been hit the hardest, due to the proportion of low paid workers employed by these companies and the fierce competition across these sectors.

The benefits

Employers overwhelmingly supported the introduction of the living wage for many reasons.

In November 2015, BIS reported that:

93% of all bosses agreed the National Living Wage was a good idea, 88% said it would make staff more productive and 86% suggested it would boost staff morale

What has happened since?

The Ripple effect

Despite the positives associated with introducing a national living wage, it is suggested that a number of employers are taking steps to change HR practices to combat the costs associated with a living wage.

Following a Channel 4 investigation into this issue in July 2016, the CIPD reported that a number of employers are adopting poor HR practices to avoid paying the national minimum wage. Examples include, reducing benefit packages to mitigate the cost, cutting overtime hours and enhancements, and taking away additional payments for weekend and bank holiday working.

Employers have suggested that the reason for the changes are linked to reduced profits and increased overheads rather than the introduction of the living wage.

Other related trends?

The Office of National Statistics reported that it is estimated that there has been an increase in flexible employment contracts.  They are reporting that ‘2.9% (903,000) of the employed UK workforce said they were on a zero hour’s contract in April to June 2016, up from 2.4% (747,000) for the same period in 2015’.  Nearly two-fifths (37%) of those surveyed by the ONS on zero hours contracts said they were working fewer than their usual hours at the time they responded; one-fifth (22%) said they were working more. Interestingly, the Resolution Foundation suggests this that zero hours contracts have moved well beyond the student job market, with half of the latest increase being among workers aged 25 and over.

On the subject of flexible contracts, you may have heard that there has been a question mark over the employment status of couriers at Hermes in recent weeks.  HM Revenues and Customs are investigating the status of the company’s self-employed couriers, following a number of complaints. It is suggested that they may be issuing self-employed contracts to avoid paying the national minimum wage and other employment rights.

The outcome of a potential test case in this area, involving London taxi firm, Uber, is likely to be concluded in the courts soon. It was argued that their self-employed taxi drivers should be recognised as workers rather than self-employed, which if upheld would result in additional employment rights for a large number of people employed in similar roles, including the right to be paid the national minimum wage. This case will be one to look out for in the very near future.

Employers need to weigh up the true nature of an employer and employee relationship as an employment tribunal would consider the ‘mutuality of obligation’ that exists between them.


Is it reasonable to suggest that the introduction of the ‘living wage’ in the UK is impacting on other employment practices?

The next rise in April 2017 is expected to be even greater therefore it will be interesting to take a look at the changes in practices going forward and whether such trends continue.

Employers who are considering changes to HR practices to mitigate the rising costs of employing staff,  may find it be beneficial to ask staff how savings might be made in the first instance. They are often your greatest source of ideas.

Also, be mindful of the benefits of having a living wage and the longer term positive impact it may bring.

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At cHRysos HR we have experienced HR consultants who have worked in a wide range of business sectors and types of organisation. They have extensive knowledge and experience in employment law and best practice in managing people.

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