Employment Law - Workforce news, November 2016


This video discusses the impact of the Government's changes to how we pay and tax employees in local government. We also look at the new gender pay reporting requirements and hear how councils are managing the equalities issues that lie at the heart of this.

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Luann Donald, Senior Workforce Adviser, LGA
(Time: 00:13 - 01:07)
Hi and welcome to the new edition of Workforce News. Today our focus is really firmly on employment law. We've got some big changes coming up on the payments that we can make to our employees when they leave the organisation.  So, Phil Bundy's here to take us through the finer points of all of that and he's going to be joined by Simon Pannell who's the Lead Pay Negotiator here at LGA, and they're going to talk to us about the gender pay reporting requirements that are coming in. Also, we're going to dig a little bit deeper and look at some of the gender pay issues in local government and the work we're doing with that, and also we're going to hear from a councillor who is doing some great work in this area. So, first of all we have a spotlight on Phil, and he's going to give us an update on some key changes to the payments we can make to staff when they are leaving councils. Phil, first on the list is the cap on exit payments, and you gave us an update on this earlier in the year. What's been happening recently?

Philip Bundy, Senior Employment Law Adviser
(Time: 01:08 - 01:59)
Right, just a reminder first of all what this cap on exit payments is. It's a cap of £95,000 on exit payments, and by that really you mean redundancy payments and crucial for us in local government, it's going to include the money that an employer has to pay to the pension fund where someone aged 55 or over is made redundant. So, this could affect a fair amount of redundancy payments in local government. Now, in terms of what's happening at the moment, we were expecting this legislation to be in place, in force earlier in the year, but the government have just told us now that what there's going to be is a further consultation on the legislation this autumn, and of course the devil will be in the detail of the legislation so that it will then come into force from early next year.  So, watch out for the consultation. The LGA will be responding to it as well, because obviously it's important that the detail does work for us so that, you know, authorities can work with this on a daily basis when it comes into force.

Luann Donald, Senior Workforce Adviser, LGA
(Time: 02:00 - 02:05)
Okay, and a related topic is the Recovery Regulations. What's happening with that?

Philip Bundy, Senior Employment Law Adviser
(Time: 02:06 - 03:06)
Well, the Recovery Regulations are the regulations where if someone earns £80,000 or more in the public sector and they leave that job and return to any part of the public sector within 12 months, they have to pay back some or most of the redundancy payment or exit payment that they get, based broadly speaking on about how soon they get the new job. Now, we were expecting it, a bit like the exit cap stuff earlier this year, but it has been delayed and the government have now said that it's going to be in force by the end of this year, so, watch out for further information on our website but very recently as well we've also been told that the government is going to go ahead with its plans for further caps on exit payments. That includes things like an absolute cap of 15 months pay and further restrictions on what can be paid into the pension, and there will be further information on that. The way it's going to work is that it will be implemented through the relevant government departments. So, DCLG will be looking at this for us with the aim to have it in force by June, next year.

Luann Donald, Senior Workforce Adviser, LGA
(Time: 03:07 - 03:15)
Finally Phil we've got some tax law changes on the table. Now, people might glaze over a little bit about tax but these are really important things that they have to know about, aren't they?

Philip Bundy, Senior Employment Law Adviser
(Time: 03:16 - 05:23)
Yes, you know, with tax it's, sort of, the great temptation to just glaze over and think, ‘Oh well, I'm not going to worry about that,' but these are potentially big issues for us, some less than others. So, the first one is some changes to benefits in kind that are provided through Salary Sacrifice, so when you give up some of your pay, say, to get childcare vouchers or a lease car and the government is going to be limiting the amount of benefits that are going be provided through those Salary Sacrifice arrangements, in terms of limiting the tax and National Insurance benefits of that. Crucially for us though, you are still going to be able to use this arrangement in terms of Salary Sacrifice Vouchers and also things like bikes for work as well, and employer contributions into the pension.  Now, second tax change as well is in terms of tax changes to termination payments. Now, for years we've had the £30,000, sort of, tax-free exemption.  There was a question of that going, but it's actually going to remain in place but there are two changes that are going to come in and they are, first of all, all pay in lieu of notice payments are going to be taxable, irrespective of whether you've got that pay in lieu of notice clause in your contract, and secondly as well for the elements over £30,000, the employer's going to have to pay NI contributions on them. Whereas before they didn't, so that's going to be an additional cost to the employer when they're making termination payments, and the final one that's coming is a change to the IR35 arrangements. This is for people who work off payroll and they work through their own personal service companies. 

Now, it's going to change in the public sector. At the moment it's the individual through their off-payroll arrangements through their own companies that decides what their IR35 tax status is, i.e. whether they, sort of, get taxed on an employee-like basis, but the duty for making that assessment is going to pass to the public sector body. So, authorities, when they hire these sort of people, they are going to have to decide whether the IR35 applies and also if they're hired through an employment agency, that duty will be on the agency. Now, there was a consultation on this over the summer. We responded to the government pointing out some of the issues, such as potentially increased costs, so people should watch out for this one in the future.

Luann Donald, Senior Workforce Adviser, LGA
(Time: 05:24 - 06:07)
Thank you Phil, and obviously Phil will be updating the website with information as we get it from the government on all of that, but we're going to move on now to talk about the Gender Pay Gap and all the new reporting requirements, and we have Simon Pannell joining us for that. Welcome Simon. The government is concerned about the continuing inequality in pay between men and women, and is introducing new requirements on employers to make them take action on any inequality that exists. So, we're going to look at what that means for councils and what we're doing in councils around this topic. So, Simon, it might seem like a very obvious question but what do we mean when we talk about the Gender Pay Gap?

Simon Pannell, Principal Adviser Employment & Negotiations, LGA
(Time: 06:08 - 06:46)
Well, it's not about equal pay per se. Obviously, local authorities for the last decade and a half have gone through the process of Single Status and carrying out pay and grading reviews. I suppose more widely, it's about looking at the differences between men and women's pay that have come about for a variety of reasons. I think most importantly, probably, whilst a lot of our workforce is part-time, part-time work, it seems to be easier to get part-time work in lower skill and, therefore, lower paid roles. So, I think that plays out in terms of when you actually look at average pay rates within the sector.

Luann Donald, Senior Workforce Adviser, LGA
(Time: 06:46 - 06:49)
So, as an employer what are councils doing on this?

Simon Pannell, Principal Adviser Employment & Negotiations, LGA
(Time: 06:50 - 07:56)
Well, I think more generally one of the factors, historically, will have been around issues relating to occupational segregation, but certainly there's already a requirement under the Public Sector Equality Duty for councils to gather information on pay, and a number will have carried out equal pay audits, so the data is actually, sort of, out there already. So, they're used to doing that.  I mean, the current data, although it needs to be treated with caution, suggests that in terms of the gender pay gap for full-time workers, is pretty much zero, but I think that there is still a significant problem within the wider workforce and the differences between hourly rates for part-time workers and full-time workers. As I said earlier, the availability of part-time work, it does tend to cluster towards the lower-graded jobs. In some cases, that's structural, so some of the lower graded jobs are only available on a part-time basis, some of the jobs related to social care or schools. That's sort of built into the way the work is delivered.

Luann Donald, Senior Workforce Adviser, LGA
(Time: 07:57 - 08:04)
So, Phil, we mentioned already the government's plans to introduce reporting on the gender pay gap. Can you give us some more details on what that means?

Philip Bundy, Senior Employment Law Adviser
(Time: 08:05 - 08:42)
Sure. What there is going to be is a mandatory requirement for all employers, public sector and then separately there'll be one for private sector and voluntary sector employers, where they have 250 or more employees, to report gender pay gap information, and this is going to start from effect from April next year, and you're going to have to look at your pay data as of 5th April next year, and then report on that the following year. So, you would have a year from April next year to get that together ready to be reported in April 2018 that will be, but then there will be an annual requirement thereafter. So, authorities need to start thinking about this now, about how they're going to gather that data.

Luann Donald, Senior Workforce Adviser, LGA
(Time: 08:43 - 08:45)
So, what exactly will they have to report on?

Philip Bundy, Senior Employment Law Adviser
(Time: 08:45 - 09:49)
Well, as I said, you will look at the pay as of 5th of April, and you'll take a snapshot of that data based on the average hourly pay for that pay period, and then you've got to publish your mean and median averages of the difference between men and women's average hourly pay, and don't ask me what mean and median is. I always have to look it up, but, you know, underneath this though it may seem quite simple, but underneath it, you know, what is pay? The legislation will define what pay is and we know that it will include basic pay, but it's not going to include things like overtime. So, the legislation and guidance is going to have to be clear on this, so we can be absolutely certain what categories of payment we're going to have to report on and what will actually be excluded from it. The other issue as well, of course, is when you're saying, ‘Well, what's the average hourly rate of pay?' That's really easy to work out when someone works, you know, set hours a week per work on a full-time, part-time basis but not all employees work like that. You know, people like teachers, they don't have those set hours set out in their contract, so we're going to need the legislation and the guidance to clarify what you do in situations like that, to work out what an hourly rate of pay looks like.

Luann Donald, Senior Workforce Adviser, LGA
(Time: 09:50 - 09:53)
So, we're going to have lots of Excel spreadsheets, being very busy, I imagine.

Philip Bundy, Senior Employment Law Adviser
(Time: 09:53 - 09:53)
Yes.

Luann Donald, Senior Workforce Adviser, LGA
(Time: 09:54 - 09:56)
Anything else that we need to know about this?

Philip Bundy, Senior Employment Law Adviser
(Time: 09:57 - 11:00)
Well, it's not just about average rates of pay across the whole workforce we're going to have to report. You're going to have to break it down into quartiles, and what that means is you look at, you know, take an example as the easiest way of understanding this, say you've got 4,000 employees, you rank your employees from one to 4,000 based on their rate of the pay from the lowest to the highest.  Then, within the first quartiles of one to 1,000, you report what the gender pay gap is in that, and then 1,000 to 2,000 and so on. So, you'll have to report that as well. You're also going to have to separately report all bonuses that you have paid in the year up to 5th April, and then thereafter, you know, year on year on year on, and in local government you might think, ‘Well, actually bonuses, there aren't many of those around so that's quite simple for us,' but, you know, this could capture things like CPD payments paid to firefighters. It could capture, sort of, golden handshakes paid to people like planners, you know, when we need to pay them something to deal with recruitment issues. So, again, this is a situation where we're calling on the government to make sure that we've got clear legislation on this, and clear guidance.

Luann Donald, Senior Workforce Adviser, LGA
(Time: 11:01 - 11:10)
Simon, I know you were part of the team that worked on putting LGA's response into the government consultation on this. Are there any particular issues that we flagged up for local authorities?

Simon Pannell, Principal Adviser Employment & Negotiations, LGA
(Time: 11:11 - 12:49)
I mean, one of the bigger practical issues was about the position of schools. I mean, Phil has already mentioned the issue about school teachers and working hours. I suppose there's a more fundamental one than that, that for the maintained schools, the local authorities have no control over the pay arrangements. Those are determined, sort of, by the governing bodies and in practical terms, that makes it quite difficult to bolt on their data in any meaningful way. I mean, I suppose, also more fundamentally, local authorities in many cases don't do the payroll data, don't do the payroll for schools. So, actually having access to the information is going to be difficult, and certainly we wanted to give early warning to schools and, sort of, any guidance making it clear that you expect governing bodies to cooperate with their local authority. I suppose, also, if we're trying to gather information on behalf of the whole school sector, in many cases the 250 threshold clearly isn't going to cover small standalone academies.  It might pick up some of the multi-academy trusts, well it's clearly, local authority schools won't be viewed as a separate unit. Their data will need to be included in the overall reporting that's provided by local authorities. These are sort of technical details and local authorities, you know, support the issue of pay transparency but I think it is important that in terms of the technical detail that government does actually sort of get the final product right so something meaningful can come out of this.

Luann Donald, Senior Workforce Adviser, LGA
(Time: 12:51 - 13:02)
Thank you, Simon. We're now going to talk to Councillor Sarah Hayward, and she's the Leader of Camden Council, and they've been doing a lot of work on this. Can you tell us about the work you've been doing in this area?

Cllr Sarah Hayward, Leader, Camden Council
(Time: 13:03 - 14:36)
Yes, Camden has a really proud tradition of equalities work going back many decades actually, and really I stand on the shoulders of giants in terms of previous leaders. We like to be at the forefront of identifying what the problems are now in the modern economy, in modern people's lives and really getting under the skin of those equalities challenges and finding solutions for them. We did an Equalities Taskforce back in 2012, it reported in 2013, and a number of things have come out of that to help a broad cross-section of Camden residents.  Some of the most innovative are our work on flexible working, high quality flexible and part-time working. Not, you know, shoddy zero-hours contracts and not paid for travel time and stuff, but really some of our most senior roles being available flexible and part-time. We published our pay gap data and obviously everyone has to publish their gender pay gap data now. We did it a year in advance and actually we didn't stop at gender.  We published our disability and ethnicity pay gap data as well. So, our staff, (a), know that they're being paid fairly, can interrogate that data and apply challenge where appropriate.  If we're not always getting it right, they can help us be a better employer and be a more equitable employer. We've done stuff around childcare, with helping young people into employment, housing's one of the biggest challenges in Central London and we've really tried to help a broader cross-section of people access Central London's economy by being able to access housing in the borough.

Luann Donald, Senior Workforce Adviser, LGA
(Time: 14:37 - 14:40)
What benefits have you seen as a result of this work?

Cllr Sarah Hayward, Leader, Camden Council
(Time: 14:41 - 15:48)
For me it's actually not just about the organisational benefits. Actually, I think we all have our role to play in making sure everyone can participate equally in the society in which we find ourselves, and that means treating people fairly. Actually, for people who are inclined to look at the bottom line, there are some very, very real organisational and financial benefits to pursuing an equalities agenda. So, for example, our work on flexible working for our staff has seen productivity and staff satisfaction increase, where people are able to make better choices about work-life balance. This includes flexible hours, working from home, perhaps being able to pursue an outside interest, like further education or balance caring responsibilities by working a different pattern of hours. This all contributes to making people happier in the work environment and knowing their employer doesn't just care about what they do 9am to 5pm in the office building, but they care about the wider impact of employment on their lives, and that's really important and we can lead the way in demonstrating that productivity gain and staff satisfaction gain to other employers in Camden.

Luann Donald, Senior Workforce Adviser, LGA
(Time: 15:49 - 15:53)
Finally, what messages would you give to other councillors who are looking at this?

Cllr Sarah Hayward, Leader, Camden Council
(Time: 15:54 - 16:22)
I'd really say, ‘Go for it.' It would be too easy for councillors to shrink away from the big challenges at the moment, you know, we're all facing cuts, massive policy upheaval, Brexit creates uncertainty, but actually for me that's all the more reason to grab hold of some of the really innovative stuff and really talk to your staff about what they need to be more productive and happier in their work, because after all that's what delivers better services for residents and our communities, and that's what we're all here for.

Luann Donald, Senior Workforce Adviser, LGA
(Time: 16:23 - 16:42)
Thank you, that was really useful and thank you also to Phil and to Simon.  As always, you can find more information on everything we've discussed today, on our website and if you have any questions or you have any information you'd like to share on any of the topics, you can email us on our usual email address, which is workforce@local.gov.uk.