OTHER CHAPTERS
I. SETTING UP AN ORGANISATION
Ch.1: Trusts & unincorporated associations
Ch.2: Companies & other incorporated structures
Ch.3: Charitable status, charity law & regulation
Ch.4: The objects clause
Ch.5: The governing document
Ch.6: Setting up an organisation
Ch.7: Registering as a charity
Ch.8: The organisation's name
Ch.9: Branches, subsidiaries, partnerships & mergers
II. GOVERNANCE & MEMBERSHIP
Ch.10: Members of the organisation
Ch.11: Members of the governing body
Ch.12: Officers, committees & sub-committees
Ch.13: Duties & powers of the governing body
Ch.14: Restrictions on expenses, remuneration & benefits
III. RUNNING AN ORGANISATION
Ch.15: The registered office and other premises
Ch.16: Paperwork requirements
Ch.17: Meetings & decision making
Ch.18: Legal agreements
Ch.19: Organisational & personal liability
Ch.20: Insurance
Ch.21: Financial difficulties & winding up
IV. EMPLOYEES, WORKERS, VOLUNTEERS & OTHER STAFF
Ch.22: Employees and other workers
Ch.23: Rights, duties & the contract of employment
Ch.24: Model contract of employment
Ch.25: Equal opportunities in employment
Ch.26: Taking on new employees
Ch.28: Working time & leave
Ch.29: Disciplinary matters, grievances & whistleblowing
Ch.30: Termination of employment
Ch.31: Redundancy
Ch.32: Employer-employee relations
Ch.33: Employment claims & settlement
Ch.34: Self-employed workers & other contractors
Ch.35: Volunteers
V. SERVICES & ACTIVITIES
Ch.36: Health & safety
Ch.37: Equal opportunities in provision of goods & services
Ch.38: Confidentiality, privacy, data protection & freedom of information
Ch.39: Intellectual property
Ch.40: Publications & publicity
Ch.41: Campaigning & political activities
Ch.421: Public gatherings & entertainment
Ch.43: Food & drink
VI. FUNDING & FUNDRAISING
Ch.44: Funding & fundraising: General rules
Ch.45: Fundraising activities
Ch.46: Tax-effective giving
Ch.47: Trading companies
Ch.48: Contracts & service agreements
VII. FINANCE
Ch.49: Financial procedures & records
Ch.50: Annual accounts, reports & returns
Ch.51: Auditors
Ch.52: Corporation tax, income tax & capital gains tax
Ch.53: Value added tax
Ch.54: Investment & reserves
Ch.55: Borrowing
VIII. PROPERTY
Ch.56: Land ownership & tenure
Ch.57: Acquiring & disposing of property
Ch.58: Business leases
Ch.59: Property management & the environment
IX. BACKGROUND TO THE LAW
Ch.60: How the law works
Ch.61: Dispute resolution & litigation
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UPDATED INFORMATION FOR CHAPTER 27:
VOLUNTARY SECTOR LEGAL HANDBOOK
This page contains information that has appeared on Sandy Adirondack's legal update website for voluntary organisations at www.sandy-a.co.uk/legal.htm. For current updates, including potential changes that are in the pipeline, see the legal update website.
These websites for each chapter update
the 2nd edition of The Voluntary Sector Legal Handbook by Sandy Adirondack and James Sinclair Taylor (Directory of Social Change, 2001). The websites are not intended as a comprehensive update and should not be treated as such.
To order a copy of The Voluntary Sector Legal Handbook, print out the order form at www.sandy-a.co.uk/bookserv.htm or send an email order by clicking
. It costs £50 for voluntary organisations or £80 for others, plus 10% p&p. We expect the third edition to be published in 2007.
The information here covers the law applicable to England and Wales. It may not apply in Northern Ireland and/or Scotland. These news items are not a full or definitive statement of the law and are not intended as a substitute for professional legal advice. No responsibility for loss occasioned as a result of any person acting or refraining from acting can be taken by the author.
Chapter 27
PAY AND PENSIONS
MINIMUM WAGE
Updated 19/3/08. This information updates s.27.2 in The Voluntary Sector Legal Handbook 2nd edition.
Subject to parliamentary approval, minimum wage will be increased from 1 October 2008 from £5.52 to £5.73 per hour for over-21s, from £4.60 to £4.77 for 18-21 year olds, and from £3.40 to £3.53 for 16- and 17-year-olds who are above school leaving age and are not apprentices.
General information for employees and employers about all aspects of minimum wage is available from 0845 6000 678 or on the Department for Business, Enterprise and Regulatory Reform's national minimum wage website which can be accessed via www.berr.gov.uk/employment/pay/index.html. In addition there is an interactive website, enabling workers and employers to find out how the minimum wage applies to them, at www.tiger.gov.uk.
The new accommodation offset rate (the amount that can be taken into account for living accommodation) has not yet been announced. Until 1 October 2008 it is £4.30 per day (£30.10 per week). Guidance for workers and employers on how the accommodation offset operates is at www.berr.gov.uk/files/file38769.pdf.
The National Minimum Wage Act 1998 is at www.opsi.gov.uk/acts/acts1998/19980039.htm.
The National Minimum Wage Regulations 1999 (Amendment) Regulations 2007 are at www.opsi.gov.uk/si/si2007/20072318.htm.
Updated 13/10/06. This information updates s.27.2 in The Voluntary Sector Legal Handbook 2nd edition.
Although the age discrimination regulations allow for these age differentials in the national minimum wage, it is likely that they will be challenged.
Under the age discrimination regulations, the "older workers' development rate", for workers over 21 who start working for a new employer and receive accredited training, is abolished. Such workers must be paid the full adult rate. Special rules apply for apprentices.
When minimum wage was introduced in 1999, minimum wage enforcement officers could only act in relation to current workers. But under the National Minimum Wage (Enforcement Notices) Act 2003, enforcement officers can from 8 July 2003 require employers to pay arrears of minimum wage owed to former workers, backdated for up to six years.
DEDUCTIONS FROM PAY FOR GAS AND ELECTRICITY
Added 1/3/07. This information updates s.27.2.2 in The Voluntary Sector Legal Handbook 2nd edition.
Where an employee lives on site, a specified amount (currently £4.15 per day or £29.05 per week) can be taken into account for the purposes of minimum wage. A Court of Appeal decision on 16 February 2007 confirmed this includes provision for heat, light etc, and a further deduction cannot be made for these if it would bring the person's pay to below minimum wage level.
The case involved Butlin's and Haven Holidays who were deducting £6 per fortnight for utilities, in addition to the amount the minimum wage rules allowed them to deduct for accommodation. The £6 fortnightly deduction meant that pay was below minimum wage level.
Leisure Employment Services v HMRC is at www.bailii.org/ew/cases/EWCA/Civ/2007/92.html.
ON CALL WORKING, PAY AND WORKING TIME RIGHTS
Updated 1/3/07. This information updates ss.27.2.3.1 and 28.2.1.1 in The Voluntary Sector Legal Handbook 2nd edition.
A live-in care centre manager who was required to be on call and within three minutes of the workplace was held by the employment appeal tribunal to be working for the purposes of both minimum wage and working time rights. This decision, made on 31 January 2006, may have serious implications for any organisation with staff who have to be on call, and legal advice should be sought.
In a similar decision on 30 May 2006, the EAT said a hotel night manager was entitled to contractual pay for hours when required to sleep at the hotel overnight, even though there was minimal likelihood of his having to work (in nine months he had only been required to work on one occasion, to deal with rowdy guests).
The decision in Mrs E MacCartney v Oversley House Management is at
www.bailii.org/uk/cases/UKEAT/2006/0500_05_3101.html.
Anderson v Jarvis Hotels is at www.bailii.org/uk/cases/UKEAT/2006/0062_05_3005.html.
ON CALL WORKING AND MINIMUM WAGE
Added 30/12/02. This information updates s.27.2.3.1 in The Voluntary Sector Legal Handbook 2nd edition.
In October 2002 the Scottish Court of Session confirmed the Employment Appeal Tribunal decision that a night watchman who had to be on duty at the employer's premises from 5 p.m. to 7 a.m. but was allowed to sleep was entitled to minimum wage for the full time on duty--even when he was sleeping rather than working.
The decision in Scottbridge Construction Ltd v Wright is at
www.bailii.org/scot/cases/ScotCS/2002/285.html.
PAYE FORMS AND FILING
Added 19/3/08. This information updates s.27.3 in The Voluntary Sector Legal Handbook 2nd edition.
From 6 April 2009 all employers with 50 or more employees, and from 6 April 2011 employers with fewer than 50 employees, must file certain PAYE forms online. These are P45(1) when an employee leaves, P45(3) when an employee starts work, and P46 when an employee starts work and does not have a P45. When an employee of any age starts to receive a pension, a new form P46(Pen) or a P45(3) will have to be submitted. P46(Pen) will replace the current pension notification forms P160 and PENNOT.
INCAPACITY BENEFIT:
EARNINGS FROM PERMITTED WORK
Updated 30/4/07. This information updates s.35.10.4 in The Voluntary Sector Legal Handbook 2nd edition.
From 1 October 2006 the amount that people on incapacity benefit can earn when undertaking "permitted work" (formerly referred to as therapeutic work) is increased to £86 per week.
From 2008 a new employment support allowance will, for new claimants, replace incapacity benefit and income support paid on grounds of incapacity or disability. All ESA recipients, not just those who would have been on incapacity benefit, will be able to undertake permitted work.
TAX ALLOWANCES AND NATIONAL INSURANCE THRESHOLDS
Updated 19/3/08. This information updates ss.27.4.1, 27.4.6 and 27.5.1 in The Voluntary Sector Legal Handbook 2nd edition.
From 6 April 2008 the basic personal allowance is £5,435. The 10% starting rate for tax is abolished, and the basic rate is changed from 22% to 20% for earnings from £0 to £36,000. Higher rate remains 40%, for earnings above £36,000.
The starting point for national insurance contributions (the primary threshold) is increased from £100 to £105 per week, and the upper earnings limit for employee's NIC from £670 to £770 per week. Employee's NICs remain 11% between the primary threshold and upper earnings limit and an additional 1% on earnings above the upper earnings limit. Employer's NICs remain 12.8%.
The lower earnings limit (the lowest level of earnings that can count towards entitlement to contributory benefits such as statutory sick pay, maternity, paternity and adoption pay and statutory redundancy pay) is increased from £87 to £90 per week.
The tax and national insurance rates and thresholds are at www.hmrc.gov.uk/rates/index.htm.
PAYMENT OF WORKING TAX CREDIT
Updated 19/3/06. This information updates s.27.4.2.5 in The Voluntary Sector Legal Handbook 2nd edition.
Since 7 November 2005 working tax credit for new claimants has been paid direct into bank accounts, rather than being paid by employers through the PAYE system, and by 31 March 2006 HM Revenue & Customs should have instructed employers to stop paying working tax credit through PAYE to employees who previously received it this way.
Helplines are at 08457 143 143 for employers and 0845 300 3900 for employees. Employers who have not received notification to stop payment of working tax credit should contact the helpline immediately.
TAX RELIEF ON HOMEWORKING EXPENSES
Added 8/11/05. This information adds to s.27.4.3.2 in The Voluntary Sector Legal Handbook 2nd edition.
From October 2005 HM Revenue & Customs has changed its rules on tax relief that can be claimed by employees who work at home and incur expenses which are not reimbursed by their employer. Until now, such employees could claim a portion of council tax/rates, rent, water rates, mortgage repayments and endowment premiums, and household insurance premiums. Such expenses will now be able to be claimed only if the duties carried out at home are "substantive duties" of the employment, and cannot be carried out on the employer's premises (or the nature of the work requires the employee to live so far from the employer's premises that it is not reasonable for the employee to drive to the premises on a daily basis).
Where work is carried out at home and the above criteria are not met, the employee will be entitled to tax relief only for:
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the additional unit costs of gas and electricity used while a room is being used for work and the metered cost of water used in the performance of work duties, or £2 per week if it is difficult to calculate an exact figure for gas, electricity and water use; and
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the unit costs of business telephone calls (including dial-up internet access).
The new rules are in Tax Bulletin 79, issued October 2005, at www.hmrc.gov.uk/bulletins/tb79.htm#a. They apply only to tax reliefs claimed by an employee. They do not apply to agreed arrangments for reimbursement by employers for homeworking, or to deduction of expenses by self-employed people who work from home.
MILEAGE REIMBURSEMENT RATES
Updated 11/4/05. This information updates s.27.4.5.1 and s.35.2.1.2 in The Voluntary Sector Legal Handbook 2nd edition.
From 6 April 2002 the tax rules on reimbursement for vehicle use changed. "Authorised mileage rates" were replaced by "approved mileage allowance payments" (AMAP). The rates that can be reimbursed free of tax and national insurance during tax year 2005/6 remain:
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Cars and vans, up to 10,000 business miles: 40p per mile (regardless of engine size)
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Cars and vans, additional business miles: 25p per mile
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Motorcycles: 24p per mile
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Bicycles: 20p per mile
Employees and paid volunteers can be reimbursed at these rates free of tax and national insurance only for journeys for work purposes. Unpaid volunteers can be reimbursed free of tax not only for work journeys, but also for journeys between home and the usual place of work.
Further information is at
www.hmrc.gov.uk/rates/mileage.htm.
CHILDCARE VOUCHERS
Updated 13/8/05. This information updates s.27.4.6 in The Voluntary Sector Legal Handbook 2nd edition.
From 6 April 2005, the existing exemptions from tax and both employee's and employer's national insurance contributions for workplace nurseries were extended to the direct provision of childcare (contracted by the employer) and childcare vouchers (under which the parent chooses the childcare provider). The exemptions are limited to £50 per parent per week. The childcare used--whether contracted by the employer or employee--must be registered childcare (such as Ofsted registration) or home childcare approved through the new Childcare Approval Scheme.
The Childcare Approval Scheme operates where care is provided by a nanny, relative or other person in the child's own home (or, for children over seven, in other domestic premises). For details see www.childcareapprovalscheme.co.uk or ring 0845 767 8111.
However the TUC and the Low Incomes Tax Reform Group have warned that some parents could be worse off by opting in to the childcare voucher salary sacrifice scheme, because the salary sacrifice could jeopardise entitlement to tax credits and to benefits such as maternity pay that are dependent on pay.
Further information about childcare vouchers is at www.hmrc.gov.uk/childcare/employers-guidance.htm.
The TUC briefing is at www.worksmart.org.uk/money/viewsubsection.php?sun=32.
TAX ON LATE NIGHT TAXIS
Added 19/3/08. This information updates s.27.4.7 in The Voluntary Sector Legal Handbook 2nd edition.
HM Revenue & Customs has clarified that an employer can pay for (or reimburse) late night taxi journeys free of tax only if the journey is from the employee's workplace to their home, the journey is because the employee has to work on this occasion until 9pm or later and this is later than usual, such occasions occur only irregularly, public transport has ceased to be available for the journey or it would not be reasonable for the employee to use it, and the transport is by taxi or similar road transport. No more than 60 such journeys can be provided free of tax in any tax year. If more than 60 journeys are provided, the value of the journey is subject to income tax.
Full details are at www.hmrc.gov.uk/manuals/eimanual/EIM21831.htm.
TAX ON TREATS
Added 14/12/03. This information updates s.27.4.7 in The Voluntary Sector Legal Handbook 2nd edition.
Clients or service users sometimes want to give tips to staff, or make a donation to be used specifically to thank staff. Derriford Hospital in Devon put such tips and donations into a special fund to be used for Christmas parties or treats for staff... but the Inland Revenue has now said that such treats are benefits in kind and are therefore subject to tax. An Inland Revenue spokesperson was quoted in the Guardian (5 December 2003) as saying "Donations or gifts of this nature would be deemed as income arising from their work as nurses, and so will be liable to tax and national insurance contributions in the same way, for example, that restaurant tips would be."
TAX TREATMENT OF "TRIVIAL" BENEFITS
Added 19/12/04. This information adds to s.27.4.7 in The Voluntary Sector Legal Handbook 2nd edition.
Strictly speaking, everything provided by an employer to an employee is potentially subject to tax (and in some cases national insurance as well). In practice, the employer's tax office may be willing to agree that small gifts or perks, such as birthday flowers or a box of chocolates, may be treated as "trivial" and be excluded from tax. Inland Revenue guidance for its staff, published in mid-2004, does not give a monetary definition of trivial but says each case will be decided on its merits, using a common sense approach.
The following are not treated as trivial and are subject to tax: cash gifts; vouchers; benefits (even if minor) given as a reward, for example for good performance; and benefits which are in effect monetary, such as where the employer has an account with a supplier, and the employee chooses something for himself or herself from the supplier. Benefits which are contractual are unlikely to be treated as trivial.
Organisations which give gifts, perks or benefits to staff should check with their accountant whether these are exempt from tax. If not, the organisation should check with their tax office whether they can be treated as trivial.
TAX TREATMENT OF PENSIONS ADVICE
Added 19/12/04. This information adds to s.27.4.7 in The Voluntary Sector Legal Handbook 2nd edition.
From 14 December 2004, employers can provide employees with tax-free information and advice about pensions. Normally, the value of information or advice provided by an outside consultant or agency would be taxable, but under the new rules up to £150 per year per employee will be free of tax. To take advantage of this, the advice must be available to employees generally, not just to specific employees of the employer.
The Income Tax (Exemption of Minor Benefits)(Amendment) Regulations 2004 are at www.opsi.gov.uk/si/si2004/20043087.htm.
CONSTRUCTION INDUSTRY SCHEME
Updated 1/3/07. This information updates s.27.4.12 in The Voluntary Sector Legal Handbook 2nd edition.
An organisation which spends more than £1 million per year, averaged over three years, on construction work is called a construction contractor and from 6 April 2007 must comply with special tax provisions. Most charities are exempt from this construction industry scheme, but non-charitable subsidiaries are not.
The new rules include checking whether construction sub-contractors are registered with HM Revenue & Customs, deducting tax at a higher rate of up to 40% from all payments to unregistered sub-contractors, and making a monthly return to HMRC which includes a declaration that the tax status of all sub-contractors has been checked and verified. Sub-contractors who are registered at HMRC will either be paid gross or with tax deducted at the standard rate, depending on the type of registration.
The The Income Tax (Construction Industry Scheme) Regulations 2005 are at www.opsi.gov.uk/si/si2005/20052045.htm and HM Revenue & Customs guidance is at www.hmrc.gov.uk/new-cis/index.htm. The CIS helpline is 0845 366 7899.
STATUTORY SICK PAY
Added 19/3/08. This information updates s.27.6 in The Voluntary Sector Legal Handbook 2nd edition.
For employees earning £90 per week or more, the statutory sick pay rate for sickness absence on or after 6 April 2008 is £75.40 per week.
STATUTORY SICK PAY FOR SHORT-TERM EMPLOYEES
This paragraph updates s.27.6.3.5 in The Voluntary Sector Legal Handbook 2nd edition.
Since 1 October 2002 statutory sick pay applies to temporary employees in the same way as to permanent employees. Before this date, people on temporary or fixed-term contracts of less than 13 weeks were not entitled to SSP.
EXTENDED SICK PAY FOR A DISABLED EMPLOYEE
Updated 27/2/07. This information updates s.25.5.4 in The Voluntary Sector Legal Handbook 2nd edition.
In a decision on 9 February 2007 the employment appeal tribunal confirmed that the purpose of "reasonable adjustments" under the Disability Discrimination Act is to enable a disabled person to continue working or return to work. Only in rare cases would it be a reasonable adjustment for an employer to continue paying full salary or sick pay after the employee's entitlement to sick pay had ended, since this would be a disincentive to return to work.
The decision in Fowler v London Borough of Waltham Forest is at www.bailii.org/uk/cases/UKEAT/2007/0116_06_0902.html. An earlier decision in O'Hanlon v HM Revenue & Customs is at www.bailii.org/uk/cases/UKEAT/2006/0109_06_0408.html.
CONTRACTUAL SICK PAY DURING MATERNITY LEAVE
Updated 30/3/08. This information updates s.27.7 in The Voluntary Sector Legal Handbook 2nd edition.
During ordinary maternity leave (OML) an employee is entitled to all contractual rights and benefits apart from remuneration (where the expected week of childbirth starts on or after 5 October 2008, this will be extended to the additional maternity leave period as well). A recent employment appeal case confirmed that contractual sick pay is remuneration and is therefore not payable during maternity leave. So before going on maternity leave a pregnant woman who is ill is entitled to statutory and, if applicable, contractual sick pay; while on maternity leave she is not entitled to sick pay but is entitled to statutory and, if applicable, contractual maternity pay (or maternity allowance if she is not entitled to statutory maternity pay); and if she is ill when maternity leave ends, she is entitled to sick pay.
A short article about the decision in Department for Work and Pensions v Sutcliffe is on the TLT Solicitors website via tinyurl.com/2atlwh, and the full decision is available via tinyurl.com/2axy2x.
STATUTORY MATERNITY, PATERNITY AND ADOPTION PAY
Updated 19/3/08. This information updates ss.27.7.3, 28.7.4 and 28.7.5 in The Voluntary Sector Legal Handbook 2nd edition.
For payment weeks starting on or after 6 April 2008, statutory maternity pay (SMP) remains 90% of the woman's weekly earnings for the first six weeks. For the remainder of the SMP period the flat weekly rate is £117.18 or 90% of average weekly earnings, whichever is less.
Statutory paternity pay and statutory adoption pay are £117.18 per week or 90% of the employee's average weekly earnings, whichever is less.
The rules on recovering SMP, SPP and SAP remain the same. An employer who paid, or was liable to pay, gross class 1 national insurance contributions of £45,000 or less in the individual employee's qualifying tax year can recover 100% of the SMP, SPP or SAP, plus 4.5% compensation. Employers who do not qualify for this small employer relief can recover 92%.
The government's intention is to increase SMP and SAP from 39 to 52 weeks and to introduce additional paternity pay and leave. These changes are not definite yet, but are expected to come into effect for babies due on or after 6 April 2010.
CIPD's very clear factsheet on maternity, paternity and adoption rights is at www.cipd.co.uk/subjects/emplaw/maternity/matpat.htm.
Other information is available at www.acas.org.uk and www.tuc.org.uk.
MATERNITY LEAVE AND PAY
Updated 21/7/07. This information updates ss.27.7.3, 28.7.4 and 28.7.5 in The Voluntary Sector Legal Handbook 2nd edition.
Where the expected week of childbirth (EWC) begins on or after 1 April 2007:
- Ordinary maternity leave (OML) remains 26 weeks. A woman on OML continues to have the right to return to the same job on the same terms and conditions as if she had not been absent, unless a redundancy situation has arisen.
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Additional maternity leave (AML) remains 26 weeks, but the qualifying period (currently 26 weeks continuous service by the beginning of the 14th week before the EWC) is abolished. A woman on AML continues to have the right to return to the same job on the same terms and conditions, unless a redundancy situation has arisen. If there is a reason other than redundancy why the employer cannot offer the same job, she is entitled to be offered suitable alternative work.
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In a redundancy situation, employers with five or fewer employees are no longer exempt from the requirement to offer a suitable vacancy, if it exists, to an employee on maternity leave.
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Statutory maternity pay (SMP) is payable for 39 weeks (nine months). The qualifying period remains 26 weeks employment with the employer by the 15th week before the EWC. SMP remains 90% of the woman's weekly earnings for the first six weeks, then a flat weekly rate (£112.75 for payment weeks starting on or after 1 April 2007) or 90% of previous earnings, if this is less, for the remainder of the SMP period. Employers will continue to be able to recover most or in some cases all of the SMP they pay. The government's intention is to increase SMP to 52 weeks by the end of 2009.
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SMP can start on any day of the week, rather than only on a Sunday, so can coincide with the start of OML.
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According to a Department for Trade and Industry press release, the administration of maternity payments will be simplified (I'll believe it when it happens).
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The notice the woman must give the employer if she wants to return to work early is increased from 28 days to eight weeks, calculated backwards from the date of the proposed new return date. If she wants to return to work later than the original date, she must give eight weeks notice of the new date, calculated backwards from the original date.
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"Keeping in touch" (KIT) days have been introduced, where the woman can go in to work for up to 10 days to undertake training or work or keep in touch with major developments, without bringing maternity leave to an end or losing her right to SMP. The employer does not have to offer KIT days, and if offered the woman does not have to accept them. It is unlawful for the employer to subject the woman to a detriment if she takes part in, or refuses to take part, in a KIT day, and any dismissal on this basis is automatically unfair. A KIT day cannot be taken during the two weeks after the birth. KIT days do not extend the maternity leave period.
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Employers now have the right to make reasonable contact with their employees during maternity leave. The Department for Business, Enterprise and Regulatory Reform (formerly DTI) is consulting on what is "reasonable".
CIPD's very clear factsheet on maternity, paternity and adoption rights was updated in April 2007 and is at www.cipd.co.uk/subjects/emplaw/maternity/matpat.htm.
ACAS updated its guidance on maternity rights on 2 November 2006. It is at www.acas.org.uk/index.aspx?articleid=1154.
The TUC's "Know your rights" leaflets on maternity pay and leave, adoption pay and leave, and flexible working for parents were also updated in April and are at www.tuc.org.uk/tuc/rights_main.cfm. Hard copies can be obtained from the know your rights line on 0870 600 4882.
The Department for Business, Enterprise and Regulatory Reform (formerly DTI)'s guidance on maternity leave and pay is at www.berr.gov.uk/employment/workandfamilies/maternity-leave-pay/guidance/page21116.html.
The Equal Opportunities Commission launched in March 2007 a pregnancy toolkit, available in English and Welsh and covering the rights of mothers, fathers/partners, and adoptive parents. It is at www.eoc.org.uk/pregnancytoolkit or can be ordered in hard copy from 0845 601 5901.
For a Business Link tool on managing expectant and new mothers at work, click here.
The Maternity and Parental Leave etc and the Paternity and Adoption Leave (Amendment) Regulations 2006 are at www.opsi.gov.uk/si/si2006/20062014.htm.
The Statutory Maternity Pay [etc] (Amendment) Regulations 2006 are at www.opsi.gov.uk/si/si2006/20062379.htm.
PAY RISES AND MATERNITY PAY
Updated 24/10/05. This information updates ss.27.7.3 and 27.7.5 in The Voluntary Sector Legal Handbook 2nd edition.
The Department for Work and Pensions has issued detailed guidance on how to work out maternity pay for women who become entitled to pay rises between the start of the average earnings reference period and the end of her maternity pay period. The guidance is at www.dwp.gov.uk/lifeevent/benefits/ecj_judgement.asp.
The guidance arises from the European Court of Justice ruling in Alabaster v Woolwich plc on 30 March 2004, that statutory maternity pay should reflect all pay rises to which the woman is entitled, even if she becomes entitled during or after the eight-week average earnings ("reference") period on which statutory maternity pay is based, or while she is on statutory maternity leave. From 6 April 2005, statutory maternity pay must be backdated to reflect pay rises to which the woman becomes entitled at any time from the start of the reference period until the end of her maternity leave. For most women this will mean that earnings-related SMP (90% of average earnings), payable during the first six weeks, will have to be recalculated if she becomes entitled to a pay rise while she is still at work before the birth, or is on maternity leave. For women who are entitled to earnings-related rather than flat-rate SMP for all 26 weeks of SMP entitlement, the increase will have to be applied to the full SMP period. (But before panicking, remember that 92%, or in some cases 104.5%, of SMP can be recovered from the government.)
The Statutory Maternity Pay (General)(Amendment) Regulations 2005 are at www.opsi.gov.uk/si/si2005/20050729.htm.
PATERNITY LEAVE AND PAY
Updated 21/7/07. This information updates ss.27.7.7 and 28.8.5 in The Voluntary Sector Legal Handbook 2nd edition.
When statutory maternity and adoption leave are extended from 39 weeks to 52 weeks, new paternity rights will be introduced. This will be available not just to fathers, but also to partners and civil partners of mothers and to members of adopting couples who meet the eligibility criteria. No date has been set for these changes, but it will not be any earlier than for babies due in April 2009, and may be later.
- For eligible fathers and partners, the right to two weeks paid ordinary paternity leave (OPL) will remain. The current eligibility criteria are that the father or partner must have 26 weeks employment with the employer by the end of the 15th week before the expected week of birth; must have average weekly earnings of at least £87 (from 6 April 2007); and must be the child's father and have responsibility for the child's upbringing, or if not the child's father must be married to or be the partner or civil partner of the child's mother and must have the main responsibility (apart from any responsibility of the mother) for the child's upbringing.
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Fathers or partners will be entitled to additional paternity leave (APL) of up to 26 weeks, but only if they were eligible for ordinary paternity leave with the same employer and are still employed by that employer.
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APL will not be able to start until 20 weeks from the date of the child's birth, unless the mother dies during or shortly after childbirth.
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APL can only be taken if the mother returns to work before the end of her AML—so both parents cannot be off at the same time (except for the two weeks ordinary paternity leave around the time of the birth). There can be a gap between the end of maternity leave and the start of APL.
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A mother will be deemed to have returned to work if she has ended her maternity leave and stopped receiving maternity pay—even if she is still off work on holiday leave, sick leave or another type of leave.
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APL will end when the mother's AML would have ended. This means that if the mother takes some of her 26 weeks AML, the father or partner will not be entitled to their full 26 weeks APL.
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APL will have to be taken in a single block.
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During APL the father or partner will be entitled to additional statutory paternity pay (ASPP) if the mother has not used her full entitlement to statutory maternity pay (SMP). ASPP will be calculated on the same basis as SMP, and will be payable only for as long as SMP would have continued.
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Fathers or partners will be entitled to 10 "keeping in touch" (KIT) days (see above).
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Fathers or partners on APL have the right to return to the same job on the same terms and conditions as if they had not been absent, unless a redundancy situation has arisen. This is the same right as women have when on ordinary maternity leave.
Flexible arrangements will apply if the mother dies during the year after the birth.
The Department for Business, Enterprise and Regulatory Reform (formerly DTI) is consulting until 3 August 2007 on how the new arrangements will work in practice, and in particular whether the father/partner and mother should self-certify and what paperwork will be needed. Under the proposals the father/partner will have to give eight weeks' notice of intention to take APL, coinciding with the notice the mother has to give of intention to return to work. The father's/partner's employer will not have to check with the mother's employer that she has returned to work, but HM Revenue & Customs will carry out random checks to identify and prevent fraud. There is still no clear proposal about what should happen if one or both parents change their mind and in particular if the employer cannot accommodate the change.
For sources of information see Maternity leave and pay.
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ADOPTION LEAVE AND PAY
Updated 1/4/07. This information updates ss.27.7.7 and 28.8.5 in The Voluntary Sector Legal Handbook 2nd edition.
To qualify for adoption leave, an employee must be newly matched with a child for adoption by an adoption agency, and
have worked continuously for their employer for 26 weeks ending with the week in which they are notified of being matched with a child for adoption. Where a couple adopts, they can decide which one takes adoption leave. The other partner is likely to be entitled to paternity leave (adoption) and paternity pay (adoption). Special rules apply for children adopted from abroad.
Where the adoption placement is expected to take place on or after 1 April 2007 (regardless of when it actually takes place), or where a child adopted from abroad enters Great Britain on or after 1 April 2007:
- The employee is entitled to 26 weeks ordinary adoption leave, followed immediately by 26 weeks additional adoption leave.
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Statutory adoption pay (SAP) is payable for 39 weeks (nine months), at the same rate at statutory maternity pay. The government's intention is to increase SAP to 52 weeks by the end of 2009.
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The notice the adopter must give the employer if they want to return to work early is increased from 28 days to eight weeks, calculated backwards from the date of the proposed new return date. If they wants to return to work later than the original date, they must give eight weeks notice of the new date, calculated backwards from the original date.
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"Keeping in touch" (KIT) days have been introduced (see above).
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Employers will have the right to make reasonable contact with their employees during adoption leave.
The Statutory Paternity Pay and Statutory Adoption Pay [etc] (Amendment) Regulations 2006 are at www.opsi.gov.uk/si/si2006/20062236.htm.
CONSULTING EMPLOYEES ABOUT PENSIONS
Added 31/3/08. This information updates s.27.9 in The Voluntary Sector Legal Handbook 2nd edition.
From 6 April 2008, employers with at least 50 employees have an obligation to consult pension scheme members and potential members before making any significant changes to occupational or personal pension provision. The regulations came into effect on 6 April 2006 for employers with at least 150 employees, and 6 April 2007 where there are 100-149 employees.
The Occupational and Personal Pension Schemes (Consultation by Employers and Miscellaneous Amendments) Regulations 2006 are at www.opsi.gov.uk/si/si2006/20060349.htm.
PENSIONS ACT 2004 AND A-DAY 2006
Updated 28/12/05. This information updates s.27.9 in The Voluntary Sector Legal Handbook 2nd edition.
As well as from 6 April 2005 giving pension protection to employees transferred under TUPE, the Pensions Act 2004:
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Set up a new Pensions Regulator to replace OPRA, the Occupational Pensions Regulatory Authority;
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Created a Pensions Protection Fund for employees with defined benefit pension schemes, funded by a levy on employers who operate such schemes;
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Created a Financial Assistance Scheme for employees whose employers have become insolvent with insufficient pension funds);
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Requires a "lifestyle" fund, designed to reduce the volatility of pension returns, to be offered as an option on stakeholder pension schemes;
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Requires employers to notify certain events to the Pensions Regulator;
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Requires employers who provide defined benefit schemes to meet a "statutory funding objective", agree with pension trustees a statement of funding principles and a schedule of contributions that is consistent with the statement, and if necessary agree a recovery plan to ensure the pension meets the funding objective within a specified period (from September 2005);
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Requires employers to consult with employees about specified changes in occupational pension schemes, including increasing the normal retirement age, changing any final salary benefits to money purchase benefits, removing the employer's liability to make contributions, and introducing or increasing member contributions by more than 2% (from 6 April 2006 for employers with 150 or more employees, April 2007 for employers with 100 or more employees and April 2008 for employers with 50 or more employees);
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Requires trustees of pension funds to understand the the law relating to pensions and trusts, as well as the pension scheme's trust deed and rules, its statement of investing principles, its statement of funding principles, and any other documentation setting out administration policy in relation to the pension scheme (from 6 April 2006).
The key date of 6 April 2006 is being referred to as A-Day. The Pensions Act 2004 is at www.opsi.gov.uk/acts/acts2004/20040035.htm.
Explanatory notes are at www.opsi.gov.uk/acts/en2004/2004en35.htm.
The Pensions Regulator has an introduction for employers at www.thepensionsregulator.gov.uk/pdf/changesEmployers.pdf.
Guidance on good practice in employer pension provision is available on the Pensions at Work website, which was launched on 1 March 2005. The website is at www.pensionsatwork.gov.uk.
SORP UPDATE: PENSIONS
Added 10/1/03; links updated 22/12/05. This information adds to ss.27.9.3 and 50.2.10.6 in The Voluntary Sector Legal Handbook 2nd edition.
The Charity Commission published on 10 January 2003 a SORP update bulletin setting out, in particular, how charities with defined benefit pension schemes should deal with their pension costs and surpluses in their accounts (the FRS 17 rules). Although the new rules do not have to be fully adopted until financial years starting on or after 1 January 2005, they can be adopted before this on a voluntary basis.
The SORP update bulletin does not appear to be on the Charity Commission website any more, but the earlier exposure draft, on which it was based, is still on the website at
www.charitycommission.gov.uk/enhancingcharities/frs17add.asp. Information about SORP 2005 is at www.charitycommission.gov.uk/investigations/sorp/default.asp#2.
STATE PENSIONS AND NATIONAL PENSIONS SAVINGS SCHEME
Added 22/7/07. This information updates s.27.9 in The Voluntary Sector Legal Handbook 2nd edition.
Under the Pensions Bill:
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the state pension age will rise from 65 to 66 between 2024 and 2026, to 67 between 2034 and 2036, and to 68 between 2044 and 2046;
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the basic state pension will be linked to earnings (as it used to be) rather than inflation (as it now is);
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the number of years' contributions needed for a full basic state pension will be reduced;
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weekly credits will be introduced for carers;
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from around 2030 the state second pension, which tops up the basic state pension, will become flat-rate;
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personal pensions will be simplified;
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a delivery authority will be established to set up a National Pensions Savings Scheme (NPSS) by 2012.
Under the proposals for the NPSS, every employee aged 22 or over, who earns between £5,000 and £33,500 and is not in an employer's occupational pension scheme, will be automatically enrolled in the scheme and get a personal account. Employees in the scheme will have to contribute a minimum 4% of their salary, matched by 1% tax relief and a minimum 3% from the employer. The employer's contribution will be phased in, at 1% in 2012, 2% in 2013 and 3% in 2014. In order not to compete with other pensions there will be an annual contributions limit, probably £5,000. Employees will have the right to opt out of the scheme, with neither they nor their employer contributing.
Information about the changes, including a link to the Pensions Bill and the government's response to the NPSS consultation, is at www.dwp.gov.uk/pensionsreform.
STAKEHOLDER PENSIONS
Updated 21/6/02; links updated 22/12/05. This information updates s.27.9.6 in The Voluntary Sector Legal Handbook 2nd edition.
Since 8 October 2001, many employers have been required to give employees access to stakeholder pensions. This does not mean that employers have to set up pension schemes--but they do have to set up a "pathway" to a registered scheme, and have to provide specified information to relevant employees. Failure to put a stakeholder pension plan in place if required to do so is punishable by a fine of up to £50,000.
Access to stakeholder pensions does not have to be provided if:
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the employer has fewer than five employees;
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the employer has five or more employees but they have not earned more than the national insurance lower earnings limit (£79 per week; £82 from 6 April 2005), in any week in the previous three months;
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the employer has an occupational pension scheme which all employees are entitled to join within 12 months of starting work (employees under age 18 or within five years of retirement age can be excluded); or
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the employer contributes at least 3% of basic salary to a group personal pension plan that all employees are entitled to join within three months of starting work (employees under age 18 or within five years of retirement age can be excluded).
On 10 June 2002 a new government stakeholder pensions website was launched, providing links to stakeholder information webpages of the Occupational Pensions Regulatory Authority (OPRA), the Inland Revenue, other government departments and other agencies. The website is at
www.stakeholderpensions.gov.uk.
Alternatively go direct to the Pensions Regulator website at
www.thepensionsregulator.gov.uk/stakeholderpensions/.
In April 2002 the Financial Services Authority published a guide, "Helping your employees with their pension options", which explains what employers can do to help employees understand the pension scheme they are offering, without needing to be authorised by the FSA or breaching the Financial Services and Markets Act 2000. The guide is available from the FSA on 0845-606 1234 or at
www.fsa.gov.uk/pubs/other/guide4employers.pdf.
PENSION LIABILITY ON INCORPORATION, MERGER OR WINDING UP
Updated 31/3/08. This information updates s.27.9 in The Voluntary Sector Legal Handbook 2nd edition.
The Occupational Pension Schemes (Employer Debt and Miscellaneous Amendments) Regulations 2008 come into effect on 6 April 2008, easing some of the requirements when an organisation which is a member of a multi-employer defined benefit or final salary pension scheme, such as the Pensions Trust Growth Plan, have a cessation event. The regulations are at www.opsi.gov.uk/si/si2008/uksi_20080731_en_1.
As defined under the Pensions Act 1995 s.75 and the Occupational Pension Schemes (Employer Debt on Withdrawal) Regulations 2005, a cessation event includes, for example, an incorporation where the assets and liabilities of the unincorporated organisation are transferred to the new incorporated body, a merger where all or part of organisation's undertakings are transferred to an existing or new organisation such that the original organisation no longer has any members in the pension scheme, winding up an organisation, withdrawing from the pension scheme, or reaching a point where the organisation has no more active members in the scheme and no eligible employees to whom membership can be offered. It will presumably also occur if a charitable company converts to a charitable incorporated organisation (CIO) when this structure becomes available, unless legislation exempts this situation.
Under the 2005 regulations, when a cessation event occurs the organisation's withdrawal debt crystallises, which means it potentially becomes payable in full — even in an incorporation or merger where the organisation's employees are going to remain in the pension scheme under the new organisation to which they are being transferred. Under the withdrawal debt, the organisation could become immediately liable for the full cost of pensions for its employees who are entitled to draw pensions now or in future, if these have not yet been fully covered by contributions to the pension scheme. And because of legal changes in the way the debt must be calculated, the debt is likely to be significant. One organisation with three employees in the Pensions Trust Growth Plan calculated that it would owe more than £70,000 if its withdrawal debt crystallised; a large organisation calculated its debt at £20 million. But it is important to emphasise that the debt does not become payable unless there is a cessation event.
Under the 2008 regulations:
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Where the cessation event is that there are no more members in the scheme, there is a 12-month grace period during which time the employer will presumably try to get at least one employee to join.
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For other cessation events the pension provider and employer can agree a withdrawal arrangement under which the employer pays a specified amount based on how much has already been paid into the scheme. The employer puts in place a guarantor, agreed by the pension provider, who will if required pay the remainder of the potential debt.
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In an arrangement specifically intended for "ongoing organisations with low levels of liquidity such as charities", the Pensions Regulator can agree with the pension provider an approved withdrawal arrangement, under which the employer can pay a lower amount. Where the cessation event is a winding up to incorporate or merge, the guarantor will presumably be the new incorporated or merged organisation.
Please note that I am not a specialist on pensions, and I have not yet taken advice on whether the above is an accurate summary of the new regulations. These issues are complex and if you are in a multi-employer pension scheme and could be in a situation where a "cessation event" will or might occur, you must take specialist advice from your pension provider, auditor and legal advisor.
Background information on the 2005 regulations is available from the following. These will presumably be updated and the new details will be added here.
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NCVO's briefings on how the regulations affect members of the Pensions Trust Growth Plan (October 2006) at tinyurl.com/yo9v3m, and on implications for the voluntary and community sector in general (April 2007) at tinyurl.com/2h5dba.
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A useful article is on page 8 of the Bates Wells & Braithwaite autumn 2006 charities and social enterprise update, at tinyurl.com/272xmp.
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The Charity's Commission's Defined benefit pension schemes: Questions and answers (January 2007) at tinyurl.com/yq4leo covers issues where charities have their own pension schemes, as well as issues for multi-employer schemes.
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