Kent Businesses Face a Challenging Legal 2006 And Beyond

12 December 2006

The New Year heralds a number of challenging issues Kent businesses may have to face in the coming months. Andrew Masters, partner and employment law specialist at leading south east law firm Furley Page, highlights some of the areas directors and managers might need to review to bring policies and procedure up-to-date.

Pension reforms ‘A-Day’
The Government has been increasingly concerned about declining pension provision and lack of confidence in pensions. Its answer is to simplify the existing tax regime and to increase protection for existing benefits with effect from the new tax year on 6 April 2006 (A-Day). While it seems unlikely that either move will encourage employers to provide additional pension provision, the changes may influence existing benefit design, and change the way that employers view liabilities in their pension schemes. It will also provide considerably greater flexibility for employees in planning for their retirement.

TUPE reforms
Long awaited reforms to the Transfer of Undertakings (Protection of Employment) Regulations 1981 will come into force in April 2006. The proposals include clarifying the position in cases of transferring labour intensive service contracting operations, for example office cleaning, catering, security guarding and refuse collection; a requirement on a transferring business to notify the transferee of transferring employment liabilities; clearer guidance on when employers can lawfully make transfer related dismissals and negotiate transfer related changes to terms and conditions of employment; and introducing flexibility in relation to the transfer of an insolvent business.

Age discrimination
For the first time, October 2006 will see legislation outlawing age discrimination implemented in the UK. When introduced, the Employment Equality (Age) Regulations 2006 will prohibit discrimination on the grounds of age in employment and vocational training, unless the discriminatory aspect can be shown to be objectively justified. The test of objective justification will require the employer to show that it was a proportionate means of achieving a legitimate aim. There is little doubt that, the new laws will have a material impact in the way that businesses manage recruitment, selection and promotion and in their future structures and designs relating to pay and benefits. Workers over the age of 65 will be entitled to bring claims for unfair dismissal and redundancy.

There is to be a ‘default’ retirement age of 65, which means that employers with a lower retirement age may need to increase it to 65, unless they can objectively justify a lower age. There will also be a new procedure for employers to follow when dismissing an employee on the grounds of retirement. This will require the employer to advise the worker of their right to request working beyond the ‘planned’ retirement age between six and 12 months prior to the planned retirement date. Failure to do so could render the dismissal unfair.

Minimum wage
Should economic conditions permit, the National Minimum Wage is likely to increase again in October 2006. Currently, the adult rate is £5.05, the development rate is £4.25 and the young workers rate is £3.00 per hour. The Low Pay Commission will prepare a report for the Government in February 2006, in which it will make any appropriate recommendations for changes to the rates. It is anticipated that the recommendations will include an increase in the adult rate to £5.35 and the development rate to £4.45 per hour.

Information and Consultation of Employees Regulations
The regulations, which came into force in 6 April 2005, set out minimum rights for employees to be informed and consulted by their employers from the planning stage in respect of workplace issues, e.g. the business economic situation, employment prospects, redundancies and proposed company purchases/sales. Currently, the regulations apply to businesses with 150 or more employees. This will be extended in April 2007 to businesses with 100 or more employees and again in April 2008 to businesses with 50 or more employees.

The regulations contain complicated recognition arrangements, but generally (and subject to existing recognition arrangements) consultation and information must take place with employees if at least 10% of the workforce, subject to a minimum of 15 employees requests it. In response to the regulations, recent years have seen the growth of works councils and employee representative groups. This growth will continue with the extension of businesses covered by the regulations, with effect from 2007/2008.

Forthcoming family friendly changes
Recent years have seen the implementation of a number of domestic employment measures aimed at enhancing the work life balance in the UK. These include extensions to maternity leave and pay, new rights to paid adoption leave, paid paternity leave, parental leave, the right for employees to take time off work to deal with family emergencies and the introduction of a new right to request flexible working hours for parents with children under the age of six or disabled children under the age of 18.

Further changes are planned for April 2007 to include, among others, extending the period for paid maternity and adoption leave to nine months (currently six months) with a view to moving to a year by 2010; the introduction of additional paternity leave for fathers for up to six months enabling them to benefit from leave and statutory pay if the mother returns to work after six months, but before the end of her maternity leave period; and extending rights to flexible working arrangements to employees who ‘care’ for elderly or disabled relatives. Further guidance will be provided on the forthcoming changes during 2006.
 

For more information contact  Andrew Masters.

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