Category Archives: Statutory sick pay

Sports Direct: Use of Zero Hours Contracts – A Business Model With Exploitation at its Heart? (Part 2)

11578822 - 3d human charcter holding green zero, 3d render, isolated on whiteSUMMARY: The Sports Direct founder Mike Ashley faced the Business Innovation and Skills (“BIS”) Select Committee on 7 June 2016 for an evidence session into the working practices adopted by Sports Direct. A month later, it was widely reported that Sports Direct’s profits had been hit. Mr Ashley’s fortunes have not improved as, at the beginning of this month, it was announced that shareholders will be asked to vote on whether there should be an independent workplace review; and this week it was reported that Sports Direct is to pay £1million to its workers for breaches of the minimum wage legislation.

But how did it come to this?

To recap, Mr Ashley received intense criticism stemming from the Guardian Newspaper’s investigation at the end of 2015, which uncovered allegations that his Company:

1. Failed to pay its workers the minimum wage;

2. Engaged a significant proportion of staff via zero hours contracts and short term hours agency worker agreements;

3. Created a culture of fear throughout its workforce due to arbitrary and outdated disciplinary practices; and

4. Conducted daily physical security searches of employees.

In the first article of a two part series, we deal with the allegation concerning a breach of national minimum wage legislation; the first article can be accessed here.

In this second article, we explore the allegation that Sports Direct sought to increase its profit margins by engaging workers on zero hours contracts and short term hours agency agreements in order to avoid many of the legal obligations of employing staff. We also review the legal considerations that your business should take into account when using either zero hours contracts or being supplied with temporary workers via an agency.

THE ALLEGATIONS

Reports revealed that nearly 80% of Sports Direct’s workers are not employees but, instead, workers engaged via zero hours contracts or short term hours agency worker agreements. During the Select Committee’s evidence session on 7 June 2016, Steven Turner, the Assistant General Secretary of the Unite Union, remarked that this practice has created a “business model that has exploitation at its heart.”

In May 2015 the Government banned exclusivity clauses in zero hours contracts; clauses that prohibit a worker from taking up work under another contract, or which require the worker to get the company’s consent beforehand can no longer be included.

However, alternative work arrangements, specifically the arrangements adopted by Transline and the Best Connection Group, who supply Sports Direct with agency workers, could be placing workers in a worse position compared to if they had been engaged via a zero hours contract post the May 2015 change.

The reason behind this claim is that the Transline and the Best Connection Group do not have an obligation to offer these agency workers any work over and above a minimum of 336 hours over a 12 month period.

However, the agency workers must accept any suitable assignment offered to them unless there is “just cause,” and if assignments are not accepted, it is likely that the worker will not be offered another.

In addition, the workers are effectively forbidden for looking for additional hours elsewhere; workers who have done so have not been offered any further assignments – this is effectively an exclusivity clause in disguise.

WHAT IS A ZERO HOURS CONTRACT?

Zero hours contracts are contracts between a company and a worker and/or an employee, which specifies that the company is not obliged to provide the worker or employee with any minimum working hours, and that the company only pays for work undertaken. Similarly, the worker or employee is not obliged to accept any of the hours offered to them.

CAN ZERO HOURS CONTRACTS STILL BE USED?

Yes, zero hours contracts can still be used by companies.

The change in the law in May 2015 did not ban companies using zero hours contracts completely, instead it prohibits zero hours contracts containing exclusivity clauses.

WHY WOULD A COMPANY USE A ZERO HOURS CONTRACT & WHEN IS IT APPROPRIATE TO DO SO?

The key benefits of a zero hours contract are that a company using these contracts:

  • does not have to guarantee a minimum amount of work, and
  • only pays for work undertaken.

This is useful if your company is a start-up business and you are unsure of your people requirements. Alternatively, zero hours contracts may be useful if a company wishes to engage staff for seasonal work, or to cover absence and holidays.

The other benefit to companies is that the relationship between the company and the worker does not have to be one of employment. However, the worker will still benefit from the right to receive the National Minimum Wage, paid annual leave, rest breaks and will be protected from discrimination.

WHAT SHOULD THE BUSINESS CONSIDER WHEN ENGAGING AGENCY WORKERS?

If like Sports Direct, your company is supplied with workers via an external agency, you should be very clear as to the employment status of these workers because this will affect their rights.

Usually, the arrangement dictates that workers supplied by an agency are classed as workers of the end user client and not as their employees.

From day 1, agency workers are entitled to access to collective facilities (such as canteen facilities, child care facilities and transport facilities) and access to information about employment vacancies. Agency workers are also entitled to take rest breaks, receive the National Minimum Wage, receive Statutory Sick Pay (if they satisfy the relevant qualifying conditions set out in the legislation), take paid annual leave and benefit from protection against discrimination.

Following 12 weeks with the Company, agency workers are entitled to receive the same pay and other basic working conditions as equivalent permanent staff; this can include the auto enrolment pension obligations.

This is a relationship which often gives rise to uncertainty of employment status and, consequently, there are many reported cases on this very issue. Companies are therefore advised to ensure that, when engaging agency workers, they have in place the appropriate documentation with both the agency supplying the worker and the agency worker.

COMMENT:

Exclusivity clauses in zero hours contracts, which could exploit the most vulnerable of workers, are now unenforceable. However, this protection does not address the real issue for zero hours workers, which is the practice of ceasing to use workers who have turned down an assignment because they have accepted an alternative assignment and are unavailable.

In addition, as is evident from the Sports Direct review, Companies are now taking advantage of other working models such as the arrangements adopted by Transline and the Best Connection Group; although these arrangements are not prohibited by law, they raise questions of morality.

Only time will tell if the ongoing review by the BIS Select Committee will result in recommendations for change. In the meantime, we would recommend carrying out a review of the arrangement that your Company adopts for the supply of its staff to ensure that any legal obligations are being met.

CONTACT DETAILS:

If you would like more information on this topic or would like to discuss a specific concern in relation to your business, please contact us:

Call: +44 (0) 808 172 93 22     Email: fgmedia@fgsolicitors.co.uk

This update is for general guidance only and does not constitute definitive legal advice.

Launch of Fit for Work

Fit for work?What does the recently launched Fit for Work Service mean for employers?

Fit for Work is part of the Government’s long term economic plan to help employees and employers manage sickness absence.  It is hoped that the new service will significantly cut sick pay costs to businesses and also increase economic output.

The Service will provide an occupational health assessment service and general health and work advice to employees, employers and GPs. The aim is to help an individual to stay in or return to work and prevent sickness absence recurring.

How will it work?

GPs will refer employees for an occupational health assessment to provide specialist independent and objective advice.  Early intervention is seen as key to the success of the Service so it is proposed that the first assessment will take place within two working days of receipt of the referral.

Health Management Limited has been appointed by the Government to provide the service.

When will the assessment be triggered?

With nearly a million employees each year reaching the four week sickness absence point, the Government has chosen the four week mark as the appropriate referral point for an assessment.  If it is clear at the outset that the employee will be off work for more than four weeks the GP can make an early referral.

Employers will be able to refer an employee if the GP has not done so by the four week period.

What will the Service provide?

The occupational health assessment will result in a return to work plan being prepared. This will be shared with the employer and GP.   The employee will also be allocated a case manager to ensure that their level of need is correctly identified along with appropriate steps to get them back to work.

There will be more general health and work advice for GPs, employees and employers via the telephone and a website.

Who will pay for the Service?

The Service is expected to be funded through the abolition of the percentage threshold scheme, which enabled employers to reclaim Statutory Sick Pay in certain circumstances.

A tax exemption of up to £500 a year for each employee on payments for medical treatment recommended by the Service, or an employer arranged occupational health service will also be available to employers.

When will the Service be in place?

The Service will be introduced on a phased basis later this year and is expected to be fully up and running by May 2015.

Does this mean that as an employer we do not have to follow any absence management procedures?

The Service is intended to complement rather than replace existing occupational health provision.

If you are considering dismissing an employee who has been off sick long term it is important that a proper process is still followed including obtaining appropriate medical advice, discussing this advice with the employee and considering alternative employment. Care also needs to be taken to ensure that if the employee has a disability, the obligations under the Equality Act 2010 are satisfied, which may include the need to make reasonable adjustments to the individual’s work environment or duties to support a return to work.

Whilst employers will still need to follow fair procedures and act reasonably and in a non-discriminatory way, it is hoped that early independent intervention under the Service will lead to more employees returning to work sooner.  The Service will be particularly useful for those employers who do not have ready access to occupational health advice.

Contact Details

For more details about the Government’s new Fit for Work Service please contact:

fgmedia@fgsolicitors.co.uk

+44 (0) 1604 871143

This update is for general guidance only and does not constitute definitive advice. 

Changes on April 6 2014

Megaphone - Hot Off the Press (123rf ref 8981071)

SUMMARY: A number of statutory changes come into force on April 6 2014 which employers should be aware of.  A summary of the key changes is set out below.

Mandatory Pre-Claim ACAS Conciliation

A duty on the parties and ACAS to attempt pre-claim conciliation will be introduced, involving a four-stage procedure for early conciliation, which must be attempted before a claim can be pursued.  This will be operational from 6 April 2014 and mandatory from 6 May 2014.

Discrimination Questionnaires

Statutory discrimination questionnaires will be abolished.  Acas has published good practice guidance on how employers should deal with questions regarding discrimination in the workplace after statutory discrimination questionnaires are abolished: http://www.acas.org.uk/media/pdf/m/p/Asking-and-responding-to-questions-of-discrimination-in-the-workplace.pdf

Statutory Sick Pay

The Statutory Sick Pay record-keeping will be abolished in favour of giving employers the discretion to use a system which suits them.

The Percentage Threshold Scheme currently enables employers to reclaim Statutory Sick Pay (SSP) from HMRC, where the total SSP paid in a month exceeds 13% of their Class 1 National Insurance contributions for that month.  This scheme is to be abolished.

Financial Penalties

Financial penalties for losing employers may be imposed by a tribunal.  A tribunal will have the power to order an employer who has lost at tribunal to pay a financial penalty of up to £5,000 to the Secretary of State, where the case has “aggravating features”.

Increased Penalty for employing illegal workers

The maximum civil penalty for illegally employing an immigrant will increase from £10,000 to £20,000.  This provides an additional incentive for employers to check that they have the relevant right to work documents recorded on file.

Unfair dismissal compensatory award

The maximum compensatory award for unfair dismissals where the Effective Date of Termination falls before 6 April 2014 is £74,200. This will be increased to £76,574 (or 52 weeks’ gross pay, if lower) where the Effective Date of Termination falls on or after 6 April 2014.

Week’s pay

The maximum amount of a week’s pay, used to calculate statutory redundancy pay (among other things), is currently £450. This will rise to £464 from 6 April 2014.

Pension protection regime (TUPE)

Transferee employers will have the option to match the transferor’s level of employee pension contributions into a defined contribution scheme, even if they are less than the current minimum of 6%.

This is to avoid the situation where employees could be in a more favourable position than they would have been if they had not transferred.

Contact Details

For more details about these changes please contact:

fgmedia@fgsolicitors.co.uk

+44 (0) 1604 871143

This update is for general guidance only and does not constitute definitive advice.