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Changes to the Takeover Code, announced in the last month and due to take effect on 20 May 2013, aim to increase the transparency of defined benefit pensions in listed company acquisitions and allow pension scheme trustees a greater degree of involvement in such deals.

The Takeover Code is a binding set of rules that apply to listed companies in the UK. The changes will apply only to pension schemes that provide some or all of their benefits on a defined benefit basis. Defined contribution schemes had been included in the consultation published on 5 July 2012, but have been excluded from the changes being implemented.

Key changes relate to:

1. Details of the bidder’s intention for the pension scheme;
2. Greater access to key documents and information;
3. Opportunity for the trustees to voice their opinion on the effects of the offer on the scheme; and
4. Disclosure of information on future funding agreements.

The bidder must state its intentions for the pension scheme, specifically with regard to: employer contributions (including the scheme funding arrangements); accrual of benefits for existing members; and admitting new members. Unless there has been a material change of circumstances, the bidder will be regarded as being committed to the statement for 12 months from the date when the offer period ends (or longer if the statement provides for a longer period).

The target company’s trustees will enjoy the same rights to bid information and documents as the target’s employee representatives. These include:

1. The announcement starting the offer period;
2. The offer document;
3. The announcement of a firm intention to make an offer; and
4. Target board circulars in response to any revised offer document.

The trustees will also be able to elect to provide the target company with an opinion on the effects of the offer on the pension scheme, which, provided that it is received in good time, must be included as an appendix to the circular on the offer to the shareholders. Alternatively it must be published on a website and the board must announce that this has been done.  Any costs incurred by the trustees in relation to the opinion will be borne by them, not by the target company. Where offers have been made before the effective date of 20 May 2013, the trustees can require their opinion to be appended to the board circular even if the offer document was published before this date.

Pension schemes are not being given any greater protection under the new changes and the trustees have no legal power to stop a deal going through. There is no requirement for the bidder to produce a statement on any likely impact of the deal on the target’s covenant or whether it can continue to meet its funding obligations, something which is likely to be the trustees’ key concern, because it was thought to be disproportionate and would result in meaningless disclosures.

The Takeover Code is however designed only to protect the target’s shareholders and the stated intention of the proposed changes was to ensure that the pension scheme would become a debating point during the course of the offer. The changes will hopefully encourage companies to consider pension schemes more carefully in light of potential acquisitions and the increased transparency for trustees is a welcome change.

For further information please contact Pitmans Pensions Team.

Parminder Latimer
Director
T: 0118 957 0324
E: platimer@pitmans.com

Zoe Dhenin
Solicitor
T: 0207 634 4590
E: zdhenin@pitmans.com

The Government has issued a state pension White Paper confirming the introduction of a single tier pension. As a result, employers will be given temporary powers to change scheme rules without trustee consent. The reforms, planned in order to simplify the current system, are intended to be implemented in April 2017 at the earliest and will:

(a) abolish contracting out;
(b) replace the basic state pension and state second pension; and
(c) introduce a flat-rate pension of around £140 per week.

Under the contracted out regime, which now only applies to defined benefit schemes and which will be abolished, employers can opt out of the state second pension and pay lower NI contributions. The reforms will result in employers bearing cost and administrative implications, including paying an additional 3.4% of relevant earnings for each contracted out employee. Many employers will wish to offset these additional costs by reducing future pension benefits or by increasing employee contribution rates.

There is however a restriction in some private sector schemes which limits the employer’s ability to modify the scheme benefit structure, whether by legislation or by the scheme rules themselves. In many cases, where the employer can modify the benefit structure, it can only be done by the trustees or with their consent. Where the changes may be detrimental to members, as is likely to be the case here, it is possible that the trustees may not consent.

As the trustees cannot be compelled to give their consent, the Government is therefore proposing to give employers powers to change scheme rules for this purpose without trustee consent. The Government believes employers should be able to change their scheme design to reflect the additional cost because it is a direct result of a Government policy change.

The modification powers will exist for a limited period and only allow changes to the extent that they offset the cost of additional employer NI contributions. Although this could result in employees’ workplace pension benefits being reduced, the Government argues that those affected would be brought back into the state pension system. The powers will also only enable changes in respect of future benefits – any benefits already accrued will not be affected.

The Government said it believes that this measure is necessary to ensure the changes do not undermine DB provision, however there is still concern in the industry that the end of contracting out could result in a wave of DB closures as employers struggle with the additional cost burden.

Whilst the reforms are four years away, employers and trustees should start planning changes to their scheme now.

For further information please contact Pitmans Pensions Team.

Symon Rowley
Director
T: 0118 957 0301
E: srowley@pitmans.com

Zoë Dhenin
Solicitor
T: 0207 634 4590
E: zdhenin@pitmans.com

The Department for Work and Pensions has issued a consultation on the proposed amendments to the Pension Protection Regulations to address the discrepancy between auto-enrolment duties and the minimum level of future benefits owed to transferring employees following a TUPE transfer.

Where there is a transfer of a business to which the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) applies, transferee employers are required to provide a minimum level of pension benefits for those employees that transfer to them. Currently, the level is determined by the transferring employee, with employers required to match employee contributions up to 6% of pensionable pay in money purchase and stakeholder schemes.

With auto-enrolment legislation requiring all employers to eventually enrol all eligible workers in to a work place pension scheme, and setting minimum levels of employer contributions, the DWP has revisited the Transfer of Employment (Pension Protection) Regulations 2005 (Pension Protection Regulations) to smooth the interaction between TUPE pension rights and auto-enrolment and to clarify the policy intention that it is the transferring employee’s right to choose their rate of contribution.

The proposed amendment to the Pension Protection Regulations will mean that the transferee employer will satisfy the pension protection requirements for transferring employees if contributions are either:

- Not less than those paid by the transferor employer immediately before the transfer; or

- Match the contribution level chosen and paid by the employee, up to a maximum of 6% of the transferring employee’s pay (as is the current requirement).

The purpose of this amendment is an attempt to address the emergence of a two tier pension provision discrepancy existing in the work place where, under auto enrolment legislation, employers pay minimum 1% contributions for existing employees and up to 6% contributions for those employees transferred to them in accordance with the current TUPE Pension Protection Regulations. This may still arise after the amendment where the transferor employer has historically paid generous contributions that the transferee employer has the option to match. In reality this represents a levelling down of pension benefits as employer contributions are unlikely to be above the 6% level that can be set by the member. Therefore, while matching employee contributions up to 6% is still an either/or option, employers are more likely to opt to match transferor employer contributions which are likely to be lower.

The DWP also propose an amendment to make clear the original policy intention behind the 2005 regulations; that the rate of contributions up to 6% is a rate which is chosen by the employee and must be matched by the employer. The DWP are concerned that the current regulations are ambiguous on this point.

If you are transferring a business and are concerned about the impact of TUPE or an existing pension scheme, please contact Pitmans’ Pensions team.

Symon Rowley
Director
T: 0118 957 0301
E: srowley@pitmans.com

Ben Seth
Solicitor
T: 0118 957 0259
E: bseth@pitmans.com

View Pitmans’ Employment Bulletin April 2013

1. What’s new for April?

April is traditionally the busiest time of the year when it comes to employment law change, and this April is no exception. Changes include:

• Increases to Statutory Sick Pay (£86.70 per week), Statutory Maternity Pay, Statutory Paternity Pay and Statutory Adoption Pay (£136.78)  and changes to the earnings thresholds (£109 per week);
• Increase for company car tax for vehicles with carbon dioxide emissions of between 95g/km and 219g/km;
• Changes to the rules on collective redundancies; employers wishing to make 100 or more employees redundant now only have to consult with them for a period of at least 45 days;
• Increases to the lower level of qualifying earnings (£5,668) and the earnings trigger for pensions automatic enrolment (£9,440);
• Increases to fees for visa applications and changes to the points base system for skilled migrant workers from outside of the EEA;

2. Laws in the pipeline: an update

The Government has published a revised timetable for the implementation of various employment law reforms. Various reforms are now due to come into force in the Summer, rather than April as previously announced. These are:

• The introduction of protected settlement conversations;
• A cap on the compensatory award in unfair dismissal cases. This will be the lower of one year’s gross pay (excluding pension contributions, benefits in kind and bonuses) or £74,200;
• The introduction of new employment tribunal rules;
• The introduction of tribunal fees;
• Changes to whistleblowing laws.

Plans for a new type of employment contract called an ‘employee-owner’ contract are now expected to come into force in the Autumn rather than April, subject to Parliamentary approval.

3. Revised fit note guidance has been published

The Department for Work and Pensions has published revised fit note guidance.

What does this mean?
Fit notes are intended to capture medical advice clearly for patients and employers so that they can consider whether to make any changes to accommodate a return to work. The emphasis is on what staff can do at work, rather than on diagnosis and symptoms. The guidance for employers and line managers explains the different sections of the fit note, what employers should do if they are given a fit note by an employee and how they can use it most effectively to help their organisation. The guidance can be found here.

4. Bring Your Own Device guidance has been published

The Information Commissioner’s Office has published guidance on Bring You Own Device (BDO).

What does this mean?
The guide is aimed at helping employers understand their data protection obligations and promote good practice if they permit staff to use their own personal devices, such as smart phones and lap tops, for work purposes. It contains detailed practical tips and links to further resources. A full copy of the guidance can be found here.

5. Dismissals at the behest of a third party

The Employment Appeal Tribunal has held that it is not reasonable to dismiss an employee at the behest of a third party without considering whether the request is justified.

What does this mean?
If a client, or other third party, asks an employer to remove or dismiss an employee, the employer should consider whether such a request is justified before doing so. It may in some instances be appropriate for the employer to seek to persuade the third party to change its mind.

What should employers do?
Employers should always follow their disciplinary procedures before dismissing staff or taking steps short of dismissal, including investigating the reasons why a third party wishes for the employee to be removed. They should be able to show they have weighed up and made the decision themselves.

Bancroft v Interserve (Facilities Management) Limited

6. Whistleblowers are protected even after their employment ends

The Employment Appeal Tribunal has held that whistleblowing laws protect former employees as well as current ones.

What does this mean?
Ex-employees who have blown the whistle on their former employer may be still be protected if they are badly treated as a result.

What should employers do?
Employers should always be careful how they treat staff, including, former staff, who have made what may be “protected disclosures”.

Onyango v Berkeley Solicitors

7. Disagreement over employment terms did not amount to a fair reason for dismissal

The Employment Appeal Tribunal has held that a disagreement over an employee’s entitlement to a profit share and over other terms of employment did not provide the employer with ‘some other substantial reason’ for dismissal.

What does this mean?
A ‘power struggle’ over employment terms cannot in itself amount to a breach of the duty to maintain trust and confidence and will not provide evidence that the working relationship has broken down.

What should employers do?
Employers should take care in situations where an employee is arguing about his/her contract and be aware that the mere continuation of a negotiation may well not give grounds for fair dismissal.

Handshake Limited v Summers

8. Covert recordings may be used as evidence in tribunal claims

The Employment Appeal Tribunal has confirmed that covert recordings may be admissible as evidence in tribunal claims.

What does this mean?
The practice of covert recordings may, as the EAT said, be ‘very distasteful’, but the person making the recording might still be able to use them at tribunal.

What should employers do?
Employers should be mindful of their legal obligations to their staff and ensure that management’s notes of disciplinary and similar hearings accurately reflect what was said.

Vaughan v London Borough of Lewisham and Others

For further information, please contact Pitmans Employment Team.

In approaching the challenges of auto enrolment Pitmans LLP is working closely with a number of pension specialists so that it can provide comprehensive advice and practical solutions for its clients.  The legislation has thrown up a number of pension and employment issues that some consider straight forward on first glance though in practice they can be complex. Areas that we have advised upon are as follows:

- assessing whether existing pension schemes need to be amended to meet the qualifying criteria for auto enrolment;

- determining whether consultants or self employed contractors are “workers”;

- confirming that employee contracts and an employer’s day to day  HR practices comply with the auto-enrolment legislation;

- determining whether a default investment fund is suitable for your employees;

- finalising the details of service agreements with third party service providers; and

- rationalising existing pension schemes.

This is not an exhaustive list and the legal complexities of auto enrolment should not be underestimated.

Briefing notes on the many aspects of auto enrolment can be found via the following links:

(1) Qualifying Schemes

(2) Categorising the Workforce

(3) Opting in and opting out and contractual enrolment

(4) Salary Sacrifice and Flexible Benefits

(5) Postponement and transitional periods
 
(6) Safeguarding Employees
 
(7) The Role of the Regulator and Record Keeping

We recommend that any employer with 61 to 249 workers should now start planning for auto-enrolment staging dates that start from 1 April 2014, if they have not done so already, and that any employers with over 1,250 workers should take immediate action if they are to comfortably meet their auto-enrolment obligations by their staging date.

Please contact Pitmans’ Auto Enrolment Team for further advice.

David Loosemore
Solicitor
T: 0118 957 0240
E: dloosemore@pitmans.com

Parminder Latimer
Director
T: 0118 957 0324
E: platimer@pitmans.com

Introduced by the government in the Pensions Act 2008, the legislation implementing the main provisions relating to automatic pension enrolment (auto-enrolment) was brought into force on 30 June 2012 by the Pensions Act 2008 (Commencement No 13) Order 2012 (SI2012/1682).

From the 1 October 2012 all employers with over 1200 employees in their PAYE scheme as at 1 April 2012, have been obliged to automatically enrol eligible jobholders into an auto-enrolment scheme unless they are already active members of a qualifying pension scheme. This process will continue to be phased in according to employer PAYE scheme size and will not be completed for all existing employers until April 2017.

New record keeping requirements in relation to Auto Enrolment

There are now new legal requirements for employers as well as trustees, managers and providers of a pension scheme, to keep records about their workers and the pension scheme being used to fulfil their duties under auto-enrolment legislation. The records kept will enable them to demonstrate their compliance with their new duties and, on a practical level, these new rules will provide employers with detailed internal records which will help avoid or resolve potential disputes with employees and allow them to consolidate the existing information they currently hold regarding their workforce.

Sound record keeping is not a new concept and has been advocated by the Regulator in the past and considered to be a vital component in the effective and efficient running of a pension scheme.

Registering with the Regulator

Employers are required to register online with the Regulator within four months of its given staging date. During the registration process certain information will have to be given to the Regulator.

Information which must be provided includes such details as:

- Employer’s address and postcode
- Registered Company Number
- Contact details of the person supplying the information, and their relationship with/capacity within the employer
- The number of jobholders who are auto-enrolled
- The number of jobholders for whom auto-enrolment has been postponed
- The employer scheme reference

The information provided must be accurate and true as the employers are required to certify to the Regulator that this is the case.

Employer Obligations

The legislation requires that employers and schemes are obliged to keep records of auto-enrolments, opt-in and opt-out processes and contributions. These will need to be kept for a period of six years, except for records relating to opt-outs which need only be retained for a period of four years.

Employers are required to keep the following records:

- Details of the auto-enrolment scheme used to comply with the new legislation
- The name, NI number, DOB and auto-enrolment date of all jobholders who have been auto-enrolled
- Copies of all opt-out, opt-in and joining notices received by an employer
- Evidence of workers’ earnings and contributions
- The dates on which employer contributions were paid to the pension scheme

An employer that uses a postponement period must also retain records of workers to whom notice of postponement has been given. The following details must be recorded:

- Worker’s full name and NI number
- Date a postponement notice was given by the employer

Trustees or pension providers also have to fulfil record keeping requirements by keeping the following:

- Employer pension scheme reference assigned by the Regulator
- Dates on which each jobholder was auto-enrolled or became an active member of the scheme
- Names of the jobholders who opt-out and the date on which a valid opt-out notice was received
- Name, NI number, DOB, gender and residential address of each member of a qualifying scheme.

These new record keeping requirements are fairly onerous and employers and trustees alike must ensure that they have appropriate systems in place either themselves, or with any service provider they use, to ensure that these requirements are being adhered to and that the records are capable of being produced to the Regulator upon their request.

These stringent requirements add yet another layer of administration and monitoring to the already complex demands of the auto-enrolment legislation. They must be taken seriously and complied with as it is the employer who remains responsible for ensuring their duties are being fulfilled. Where an external service provider is carrying out the work on an employers behalf, the contractual agreements must give the employer sufficient access to methods of recourse against that provider, should the need arise following a breach of the record keeping duties.

For more information please contact Pitmans’ Auto Enrolment Team.

Download Auto Enrolment Briefing (7) Role of the Regulator and Record Keeping

For further information on Auto Enrolment, please contact Pitmans’ Auto Enrolment team or please see:

Auto Enrolment Briefing (1) – Qualifying Schemes

Auto Enrolment Briefing (2) – Categorising the Workforce

Auto Enrolment Briefing (3) – Opting In and Out

Auto Enrolment Briefing (4) – Salary Sacrifice and Flexible Benefits

Auto Enrolment Briefing (5) – Postponement and Transitional Periods

Auto Enrolment Briefing (6) – Safeguarding Employees

Auto Enrolment Briefing (7) – Role of the Regulator and Record Keeping

Symon Rowley
Director
E: srowley@pitmans.com

Parminder Latimer
Director
E: platimer@pitmans.com

David Loosemore
Solicitor
E: dloosemore@pitmans.com

Richard Jakubowski
Solicitor
E: rjakubowski@pitmans.com

Mark Symons
Partner
E: msymons@pitmans.com

Richard Devall
Partner
E: rdevall@pitmans.com

Angela Shields
Director
E: ashields@pitmans.com

[1] Employee – includes someone who has a contract to perform work or services personally that is not undertaking the work as part of their own business.

Introduced by the government in the Pensions Act 2008, the legislation implementing the main provisions relating to automatic pension enrolment (auto-enrolment) was brought into force on 30 June 2012 by the Pensions Act 2008 (Commencement No 13) Order 2012 (SI2012/1682).From the 1 October 2012 all employers with over 1200 employees in their PAYE scheme as at 1 April 2012 have been obliged to automatically enrol eligible jobholders into an auto-enrolment scheme unless they are already active members of a qualifying pension scheme. This process will continue to be phased in according to employer PAYE scheme size and will not be completed for all existing employers until April 2017.

New Employee Safeguards from 1 July 2012

Whilst most provisions relating to auto-enrolment do not come into effect until October 2012, employers do need to be aware that a number of safeguards introduced to protect employee [1] rights are now in force and that they could inadvertently fall foul of this legislation.

Prohibited Recruitment Conduct

An employer is now prohibited from selecting employees on the grounds that they may or may not choose to opt out of a pension scheme provided by the employer to meet the requirements of auto-enrolment. This means that in any recruitment process an employer or its representatives must not ask any question, or make any statement that either states or implies that a job applicant’s success could depend on whether or not they opt out of an auto-enrolment pension scheme. Such a question or statement could arise in any one of the following processes:

- the wording of an advert or invitation to apply for a position,
- the request for information on an application form,
- during an interview,
- proposing terms and conditions.

Employers that contravene the prohibited recruitment conduct will be subject to fixed penalties ranging from £1,000 for employers with one to four employees, to £5,000 with 250 or more workers.

Prohibited Inducements

To ensure that the concept of employee and employer contributions becomes an accepted practice, it is important that any decision to opt out, or leave an auto-enrolment scheme should be taken freely and without being influenced by the employer.

An act by an employer that is considered an inducement to the employee to opt out of a qualifying pension scheme when the employee is initially entered in to it or to cease active membership of a pension scheme without becoming an active member of another scheme is now prohibited.

Employers should note that it does not matter whether the inducement successfully persuades the person to opt out or cease membership of another scheme and that it is the action taken by the employer, with the intention to induce, that could be a breach of the law. Employers should also be aware that these prohibitions apply to existing pension schemes that may be non qualifying pension schemes for the purpose of auto- enrolment.

The key test that an employer needs to address when it is considering any particular action and has concerns that it could be regarded as inducement is as follows:

Is the ‘sole or main purpose’ of the particular action intended to persuade or cause an individual to opt out of or leave their pension scheme, without becoming an active member of another scheme?

An employee who encounters an unlawful inducement must complain to the Pensions Regulator within six months of the contravention if they wish to take an action against their employer, although the Regulator may look back at the employer’s action in the preceding four years. The Regulator may impose a fine of up to £50,000 on an employer who contravenes the prohibition against inducing opt outs.

Detrimental Treatment and Unfair Dismissal

An employer must not treat an employee unfairly or dismiss an employee, on grounds related to the auto-enrolment legislation, if an employee has taken action to enforce their auto-enrolment rights, or if the employer has been prosecuted for wilfully failing to comply with its duties.  For example, an employer cannot deny an employee promotion or other training opportunities because the employee has decided not to opt out of an auto-enrolment scheme. Any such are likely to be automatically unfair and an employee will be able to bring proceedings in an employment tribunal.

Employer Compliance

If an employer does not comply with its duties or co-operate with the Regulator, it may face enforcement action by the Regulator.

For minor breaches the Regulator may issue warning letters highlighting any breaches of duty that an employer has knowingly or unknowingly made, setting out a time frame for compliance.

If a breach is not remedied, the Regulator can order two levels of penalties:

- A Fixed Penalty notice of £400 which will be issued if an employer has failed to comply with any enforcement or improvement notices issued to it, or

- Escalating penalty notices can be issued for more serious or persistent breaches. The Regulator will operate a system of escalating penalties that vary according to employer size, ranging from £50 a day for employers with one to four employees to £10,000 a day for those with 500 or more employees.

Certain acts or omissions by an employer can also amount to criminal offences. An offence is committed by an employer who wilfully fails to comply with auto-enrolment, automatic re-enrolment and the jobholder’s right to opt in. A person found guilty of one of these offenses will be liable on conviction to imprisonment or a fine or both.

For more information please contact Pitmans’ Auto Enrolment Team.

Download Auto Enrolment Briefing (6) Safeguarding Employees

For further information on Auto Enrolment, please contact Pitmans’ Auto Enrolment team or please see:

Auto Enrolment Briefing (1) – Qualifying Schemes

Auto Enrolment Briefing (2) – Categorising the Workforce

Auto Enrolment Briefing (3) – Opting In and Out

Auto Enrolment Briefing (4) – Salary Sacrifice and Flexible Benefits

Auto Enrolment Briefing (5) – Postponement and Transitional Periods

Auto Enrolment Briefing (7) – Role of the Regulator and Record Keeping

Symon Rowley
Director
E: srowley@pitmans.com

Parminder Latimer
Director
E: platimer@pitmans.com

David Loosemore
Solicitor
E: dloosemore@pitmans.com

Richard Jakubowski
Solicitor
E: rjakubowski@pitmans.com

Mark Symons
Partner
E: msymons@pitmans.com

Richard Devall
Partner
E: rdevall@pitmans.com

Angela Shields
Director
E: ashields@pitmans.com

[1] Employee – includes someone who has a contract to perform work or services personally that is not undertaking the work as part of their own business.

View Pitmans’ Employment Newsletter March 2013

1. Older workers are entitled to a cushion: higher redundancy payments

The Employment Appeals Tribunal has held that enhanced redundancy payments for older workers could be justified.

What does this mean?
Employers may be able to justify a policy of higher payments for older leavers if the reason for the policy is to provide older leavers, who experience extra problems after losing their jobs, with a proportionate financial cushion.

What should employers do?
Employers should consider taking specific legal advice about any redundancy scheme they operate which differs from the statutory regime, particularly if it differentiates between employees on the grounds of one of the protected characteristics, such as age.

Lockwood v Department of Work and Pensions and Cabinet Office

2. Religious equality management – disregard at your peril?

The Equality and Human Rights Commission has published new guidance to help employers deal with issues arising out of religion and belief rights in the workplace.

The new guidance includes a number of examples of the sort of requests that employees may make and contains practical guidance as to how employers might deal with such requests. It also explains how employers should approach the question whether an employee’s religion or belief is genuine.

A full copy of the guidance can be found here.

3. “18… weeks, not years” – the parental leave entitlement increases

From 8 March 2013 the maximum parental leave entitlement increased from 13 weeks to 18 weeks per child.

In addition, from 8 March 2013 agency workers now have the right to request flexible working when they return to work following a period of parental leave.

The Parental Leave (EU Directive) Regulations 2013 (SI 2013/283)

4. “Are you the real deal?” Tougher immigration rules for foreign entrepreneurs

The UK Border Agency has made changes to the Tier 1 (entrepreneur) route by introducing a ‘genuine entrepreneur’ test and by increasing the financial commitment requirement.

What does this mean?
The ‘genuine entrepreneur’ test will give UK Border Agency caseworkers greater discretion when considering applications. They will, for example, be able to consider whether an applicant’s business plan is ‘viable and credible’ and may take into account an applicant’s previous educational and business experience, immigration history, previous activity in the UK and any other ‘relevant’ information.

Entrepreneurs, including those who have already been granted indefinite leave to remain in the UK, will have to hold, or invest in a business, certain minimum amounts, on an ongoing basis rather than solely at the time of the application.

5. Does taking more sick leave result in a greater chance of redundancy?

The Employment Appeals Tribunal has held that there was no unlawful disability discrimination where an employer making redundancy selection took account of sick absence for a medical reason, which did not amount to a disability. This was so even when the employee had also been absent for something that was a disability.

What does this mean?
When scoring employees for redundancy, employers may take into account periods of sickness absence for reasons other than disability even if the employee was absent at the same time because of a disability.

What should employers do?
Where sickness absence is used to score employees for redundancy selection, employers should disregard periods of absence  solely due to disability (or pregnancy) but can take into account any periods where the employee was absent for other sickness reasons even if  those periods overlap with a disability related absence.

Espie v Balfour Beatty Engineering Services Limited

6. Harassment and religion

The Employment Appeal Tribunal has held that a Roman Catholic employee was not harassed when a colleague shouted out an expletive relating to the Pope across a newspaper’s busy newsroom.

What does this mean?
For a harassment claim to succeed it is necessary to show not only ‘unwanted conduct’, but that the conduct had the purpose or effect of violating the employee’s dignity or creating an adverse environment for him. Where the claim relates to an employee’s religion it is also necessary to show that the conduct was ‘on the grounds’ of the employee’s religion. The context in which offensive words are spoken is important in determining whether a harassment claim will succeed.

What should employers do?
Employers should have in place and apply a policy on harassment so that less serious incidents can be effectively addressed internally.

Heafield v Times Newspaper Limited

7. Can I really find out if I’m employing a criminal?

The Court of Appeal has ruled that the blanket disclosure of all criminal convictions and cautions may breach job applicants’ human rights. In giving judgment, it said that, whilst the criminal records checks system and the disclosure obligations interfered with individuals’ rights to privacy,  the interference  might be justified where the aim was a legitimate one, namely in order to protect employers and vulnerable people.  However, the Court said that unfiltered disclosure of all convictions and cautions irrespective of their relevance was disproportionate to those aims and so breached the right to respect for private life. The Court did, however, say that the requirement to disclose serious offences was proportionate.

What does this mean?
The Government may ultimately introduce a filtering system, which would take into account the relevance of information about an individual’s criminal record to the job for which they are applying. However, the Government has applied for permission to appeal the judgment. On that basis the Court has decided that its decision will not take effect in the meantime and so criminal record checks will proceed as before for the moment.

T (R and others) v Chief Constable of Greater Manchester and others

8. Considerations for older workers

The Department of Work and Pensions has published a guide on employing older workers. The guide contains sections on recruitment, training, retirement, succession management, under performance, redundancy and pensions.  A full copy of the guide can be found here.

For further information, please contact Pitmans Employment Team.

Introduced under the Pensions Act 2008, the secondary legislation implementing the main provisions relating to automatic pension enrolment (auto-enrolment) was brought into force on 30 June 2012 by the Pensions Act 2008 (Commencement No 13) Order 2012 (SI2012/1682).

From 1 October 2012, all employers with over 1200 employees in their PAYE scheme as at 1 April 2012 have been obliged to automatically enrol eligible jobholders into an auto-enrolment scheme unless they are already active members of a qualifying pension scheme. This process will continue to be staged according to employer PAYE scheme size and will not be completed for all existing employers until April 2017.

Postponement

An employer can choose to postpone their duty to enrol workers into an auto-enrolment scheme by up to three months. The date on which the postponement period ends is a date of the employers choosing and is known as the ‘deferral date’.

An employer can only use postponement once for any particular worker and only at a particular point in the employer’s auto-enrolment process:

- the employer’s staging date (in relation to a worker already employed by the employer on the staging date).

- the first day of a worker’s employment (in relation to a worker starting employment after the employer’s staging date).

- the first day on which a worker already in employment becomes eligible for auto-enrolment (for example, because the worker reaches the age of 22 or earns more than the earnings trigger).

Even where an employer uses a postponement period, the employer should still take steps to categorise the workforce, however an assessment of whether a worker is eligible for auto-enrolment will not have to be made until the end of the postponement period.

There are several practical reasons why many employers are likely to use postponement. These include smoothing the staging process from the outset, aligning existing payroll processes with the new process required by auto-enrolment and avoiding the need to auto-enrol short-term workers, i.e. those who will be employed for less than three months.

Giving notice at the start of Postponement

To take advantage of postponement, an employer must give a worker notice of the ‘deferral date’ – the date postponement is to end. An employer that chooses to use postponement must provide the prescribed information to a worker within a one month period beginning on the day after the point at which the employer uses postponement i.e. one of the three options above.

A jobholder who is in a waiting period can still voluntarily opt in to his employer’s automatic enrolment scheme during the waiting period.

At the end of Postponement

At the end of the period of postponement, an employer will have to assess whether a worker is eligible for auto-enrolment with effect from his deferral date. It follows that the employer will be required to take one or more of the following steps:

- Auto-enrol the worker in an automatic enrolment scheme if he is an eligible jobholder.

- Provide information about the employer’s qualifying scheme if the worker is not eligible for auto-enrolment because he is already an active member of an auto-enrolment scheme.

- Provide information about a non-eligible jobholder’s right to opt in to an automatic enrolment scheme.

- Provide information about an entitled worker’s right to opt in to a pension scheme.

Transitional Period

Employers who operate an existing defined benefit (DB) or hybrid pension scheme (providing defined contribution (DC) and DB benefits) can defer their auto-enrolment duties for a transitional period. The transitional period is a prescribed time period which lasts five years and three months beginning on 1 July 2012. If an employer uses the transitional period they cannot choose to auto enrol a worker at an earlier date than 1 October 2017 – the day after the transitional period ends.

The Transitional period only applies to particular eligible jobholders where the following prescribed conditions apply:

- The eligible jobholder has been employed for a continuous period prior to the employer’s first auto-enrolment date.

- At a point prior to the first auto-enrolment date the eligible jobholder was entitled to membership of the DB/hybrid scheme.

- Since that point the eligible jobholder remains entitled to become an active member of the DB/hybrid scheme.

- The DB/hybrid scheme is a qualifying scheme for auto-enrolment purposes.

As such, even where an employer makes use of the transitional period they will still have had to identify their first auto-enrolment date and categorise their workforce to understand who is an eligible jobholder. Continual assessment will also be necessary because a worker who is subject to the transitional period may cease to be an eligible jobholder during the transitional period, or one of the above four prescribed conditions may cease to apply, and at that point the transitional period will end.

Giving notice at the start of the Transitional Period

As with postponement, an employer wishing to make use of the transitional period must provide the relevant eligible jobholders with a notice. The notice must include prescribed information relating to the length of the transitional period and the options for the relevant eligible jobholder regarding opting in. The notice must be issued before the end of the period of one month from the employer’s first enrolment date. If the employer wishes to use postponement and the transitional period together this will affect the employer’s first auto-enrolment date.

At the end of the Transitional Period

The transitional period will end either on 30 September 2017 or on the date that the prescribed conditions cease to be met.

Where the transitional period ends on 30 September 2017:

- The worker is to be treated as a new starter and their staging date will be 1 October 2017.

- The employer will have to assess the worker as at this date.

- If the worker is not already a member of the employer’s qualifying scheme they must be auto-enrolled; or

- If the worker is an active member in the employer’s qualifying scheme the employer must then comply with the requirements to provide the relevant prescribed information on their membership and auto-enrolment duties.

Where the transitional period ends when the prescribed conditions cease to be met, the employer must enrol the eligible jobholder in either a DB or hybrid auto-enrolment scheme or a DC auto enrolment scheme, and the type of scheme the employer chooses will impact on the duties and process that the employer must comply with. For example, where the employer seeks to use a DB/hybrid scheme the eligible jobholder must become an active member from the date the prescribed conditions ceased to apply, whereas if a DC scheme is used the eligible jobholder must become a member with effect from their original auto-enrolment date.

Comment

Both postponement and transitional protection offer employers a method to defer their auto-enrolment duties, however there is an extra burden to ensure compliance with strict time periods and reporting requirements. Using either postponement and/or transitional protection will not assist employers in deferring their duty to categorise their workforce and employers should begin preparing for auto-enrolment now.

For more information please contact Pitmans’ Auto Enrolment Team.

Download Auto Enrolment Briefing (5) Postponement and transitional periods

For further information on Auto Enrolment, please contact Pitmans’ Auto Enrolment team or please see:

Auto Enrolment Briefing (1) – Qualifying Schemes

Auto Enrolment Briefing (2) – Categorising the Workforce

Auto Enrolment Briefing (3) – Opting In and Out

Auto Enrolment Briefing (4) – Salary Sacrifice and Flexible Benefits

Auto Enrolment Briefing (6) – Safeguarding Employees

Auto Enrolment Briefing (7) – Role of the Regulator and Record Keeping

Symon Rowley
Director
E: srowley@pitmans.com

Parminder Latimer
Director
E: platimer@pitmans.com

David Loosemore
Solicitor
E: dloosemore@pitmans.com

Richard Jakubowski
Solicitor
E: rjakubowski@pitmans.com

Mark Symons
Partner
E: msymons@pitmans.com

Richard Devall
Partner
E: rdevall@pitmans.com

Angela Shields
Director
E: ashields@pitmans.com

[1] An eligible jobholder is a worker who must be automatically enrolled under the legislation and a non-eligible jobholder is a worker who is not auto-enrolled, but must be enrolled on request (please see Checklist 2 – Categorising the Workforce for more information)

The Department for Work and Pensions (DWP) has launched a public consultation on the new disclosure of information regulations which are intended to “harmonise, simplify and consolidate” the existing disclosure regime.

The Existing Disclosure Regulations

The existing disclosure requirements are found in the Occupational Pension Schemes (Disclosure of Information) Regulations 1996 (SI 1996/1655) introduced under the Pensions Act 1995. These regulations set out the requirements on trustees and employers to disclose certain information to pension scheme members, prospective pension scheme members, beneficiaries, spouses and civil partners, and in some cases, recognised trade unions.

The existing Regulations introduced a requirement for trustees to provide members with basic information about their schemes as standard, together with a requirement to disclose further information upon request. There have been a number of updates to the existing Regulations to allow the provision of electronic information rather than by post, however the current disclosure regime is generally regarded as a heavy burden on trustees and employers. A breach of the existing Regulations can result in fines of up to £5,000 for an individual and £50,000 in any other case.

The Consultation

Many of the changes proposed by the Consultation are a simplification of the old requirements, for instance, AVCs and whether the scheme is tax approved will not be “basic information” and schemes need only confirm whether they are tax registered. For defined benefit schemes, it is proposed that benefit statements can be based on the most appropriate retirement age rather than a scheme specific pension age to help deal with flexible retirement.

Other proposed changes introduce new types of basic information, such as informing members about lifestyling. Many stakeholder pension schemes and defined contribution schemes will already use lifestyling to adapt investment strategies as a member nears retirement. However the DWP proposes that schemes must now notify members of the lifestyling strategy prior to its implementation.

The consultation also seeks to future proof the regulations by extending and consolidating the use of electronic communications available to schemes so that disclosure can take place by email or by using a website. In particular, the DWP have identified disclosure requirements which refer to communications being ‘in writing’ and as a result prevent disclosure by using a website. The proposed regulations do not prescribe how the information must be sent, and there is no requirement for schemes to use electronic information. The member will retain the ability to opt out of electronic communications.

Auto-Enrolment

The advent of auto-enrolment has increased the potential responsibilities on employers and trustees to provide information in a timely manner to workers in pension schemes. The consolidation of the disclosure regime and to harmonise it with the new duties imposed by auto-enrolment is critical to prevent trustees and employers being subsumed in the technical information which must be provided to members.

The consultation therefore proposes some simplification to the annual benefit statements provided by defined contribution schemes. Particularly in relation to Statutory Money Purchase Illustrations (SMPIs), the draft regulations seek to simplify the information provided to members, and remove the specific annuity requirements so that Schemes can choose assumptions which give “more meaningful annual projections” according to their understanding of member circumstances.

What Next?

The Consultation will run until 14 April 2013 and the draft regulations are expected to come in to force in October 2013.

The proposals will be welcomed by trustees and employers as a further simplification of their duties to disclose information to members at a time when the regulatory requirements imposed on trustees and employers are generally increasing. The update which will allow further use of websites to effect disclosure reflects a growing trend for schemes to meaningfully engage with their members rather than simply send a mass of technical information to a postal address.

If you would like to speak to us about the current disclosure regime and how your scheme can comply with the requirements of the current legislation, or if you would like further information on the implications of this consultation, please contact Pitmans Pensions Team.

Ben Seth
Solicitor
T: 0118 957 0259
E: bseth@pitmans.com

Symon Rowley
Director
T: 0118 957 0301
E: srowley@pitmans.com