Winter and the cost of living crisis

Transcript

Jonathan Rennie

Hello and welcome to Employment Law Focus. I am Jonathan Rennie, a partner in TLT's Glasgow office, and I am joined today by Grace; Grace Caldicott is an associate in our Manchester office.

Now we know that winter presents all kinds of seasonal issues for employers, from a barrage of sickness to office parties and all the things in between. But on top of that, this year sees the addition of Covid-19, the cost of living crisis and the energy crisis, so it’s a very different scene to what we are used to.

In this episode, we will offer up our analysis of how some companies are addressing this and explain where the biggest risks are likely to be. We will also offer our advice on everything from writing hardship policies to offering early access to wages and looking after people's financial wellbeing.

First, let's look at some news Grace.

Grace Caldicott 

Thanks Jonathan. So the first thing we wanted to touch on is New York's pay transparency law, which took effect in November, so it is something that we have seen in the news recently.

So businesses in New York City are now required to list good faith salary ranges for any posting for a new job, whether that be promotion or a transfer opportunity, so this is essentially what they honestly believe that they are willing to pay for a role that they are advertising for.

So the main aim of this new law is to help close gender and race wage gaps, and greater pay transparency which will result in more leverage to discuss and negotiate pay for prospective employees. However, it is interesting when reading about this we have seen some slightly strange results with the New York Post giving a salary rage of $50,000 to $145,000 for the same reporter position.

Jonathan Rennie

Yes, I find this fascinating Grace, because it might mean for example people in the US apply for a job in New York to do some sort of comparison or benchmarking exercise for their own salary in a different state, or simply to ask for that pay level if they were working remotely. So it throws up some interesting consequences.

We know in the UK this is often a point when jobs are advertised about reasonable salary levels or market rates and questions about what that means. There is currently no legal requirement in the UK or Ireland for companies to be transparent about pay in this way that is suggested in New York, and there is no suggestion this is coming to UK cities at the moment.

We do of course have mandatory gender pay gap reporting for businesses with more than 250 employees, and that goes some way to people being able to make enquiry or have information around pay. And we also know that in March this year the UK government launched a pay transparency pilot scheme to try help improve employment opportunities and close pay gaps. It was the Minster for Women, Baroness Steadman Scott, who launched the initiative with the intention being to level up employment opportunities for women.

So, what we are expecting to see is participating employers (and there is a limited number of those) – these participating employers will run pilots in closing the salary gaps by publishing salaries on all job adverts. It is hoped that this salary transparency will empower job seekers and employees and help them with negotiations. From my perspective, it will actually help the people applying for jobs knowing what they will be paid and not wasting their time and not wasting employers’ time in getting involved in all of that time wasting potentially.

If employers are considering doing this, whether as part of the pilot or otherwise, it is worth paying attention to these developments in New York to see what issues arise. That leads us nicely into today's main topic: what can employers do to help their employees during the cost of living crisis?

As we move into Winter and the cost of living crisis continues, then clearly more and more people are at risk of in-work poverty as finances are being squeezed like never before. A particularly scary stat from a recent ONS study detailed that as many as 77% of UK adults reported being worried nearly every day about the rising cost of living. For many people, that stress is likely to impact their job performance, with one in four employees saying that money worries affect their ability to do their job.

Grace Caldicott 

Yeah, and we may well see that percentage increase, which is obviously extremely scary and concerning for employees as the crisis continues to impact people's lives. Employers may for example find a greater number of employees are having to look after their kids because they can't afford childcare, or perhaps they are struggling to sleep because of the stress as a result of the crisis. It's a difficult time for many, many people, and employees are likely to need increased mental health and wellbeing support from their employer as well as considering financial wellbeing support.

Jonathan Rennie

So, I think that takes us then to the obvious question as to what employers can do to help, and we have some experience of that. There was a recent CIPD survey that found one in five employees don't think their employer is doing enough to support their financial wellbeing. It highlighted issues like people not earning enough money to meet their basic needs or to have enough spare monies for emergencies.

So, what did the CIPD suggest? Well fairly obviously firstly they suggested that employers pay a fair and liveable wage. A PwC study suggested half of large employers are doing this. Secondly, provide financial wellbeing support, for example targeted benefits, signposting free financial advice and trying to normalise conversations about money; and of course, training line managers to talk about it – so there is an educational piece. The CIPD also suggested that there could be support for in-work progression to help people increase their earnings potential.

So not only is there a moral duty to support employees through this difficult time, there is also a business case for doing so, including enhanced reputation, easier recruitment, better labour relations and improved employee commitment and motivation.

Grace Caldicott 

So, if we move on to look at some of the trends that are arising out of the cost of living crisis, and some of which have been picked up in the CIPD suggestions.

So, the first one (and apologies that this is very obvious), but employees can obviously support their staff through an increase in pay and benefits. So as we know, employers need to be mindful of any legal minimums, for example the real living wage (which is now £10.90 across the UK and £11.95 in London).

Whilst employers are not generally under a legal obligation to increase wages, many employment contracts will of course include an annual pay review clause, and it is important to remember that any annual pay review must be carried out in good faith, otherwise the employer will be in breach of the implied duty to maintain their employees’ trust and confidence.

Jonathan Rennie

Of course, I am old enough to have been through a financial crisis in the past, and I think we will know from those experiences that actually many people might just be happy to have a job at this time and they might not therefore kick up a fuss; they might not resign and claim constructive dismissal if they are not given a pay rise. But clearly there are these technical interpretations of contract terms and there are as Grace says issues around trust and confidence.

We know that we have employees under enormous financial pressures and employers will expect no doubt to be pushed into difficult conversations, and it's really the extent to which employers can meaningfully manage these difficult conversations I think that makes the difference.

I think we know the statistics and we see and hear it in the news. The ONS figures for October 2022 show that in real terms, adjusted for inflation, that total pay fell in this year by 2.4% and regular pay by as much as 2.9%. For many employers of course this drop in real pay may trigger a review of current pay and increasing wages, and that's what we all hope for.

Grace Caldicott 

That's really interesting Jonathan and as we know there is so much in the news about this at the moment, and it is really on everybody's minds. And we wanted to point out as well that we have seen several large employers (an example being John Lewis) giving a one-off cost of living bonus payment to staff to try and combat these issues as well.

Jonathan Rennie

Yes, that's a great example Grace, and you and I both want to see more imaginative remuneration strategies from employers over the next months, and we will update listeners with those as we go.

Grace Caldicott 

So, another perhaps less obvious option for employers is the introduction of employee hardship funds, which will help employees and potentially their dependents who are facing increased financial hardship. So, this is essentially a fund (for anyone who doesn't already know) to support staff who are struggling to pay their bills. With this though, and it comes with a warning of caution, it is important that it is accompanied by a robust and unambiguous policy setting out how the fund can be accessed by employees.

Jonathan Rennie

And I think that can be a tricky thing to draft. There are some key considerations and basic ones like whether any payment out of the fund will be a loan or whether it's an outright grant. If it is to be a loan, it will need to be paid back. How does that work? When does it need to be paid back? What happens if somebody leaves the business? What happens if there are disciplinary issues? What happens if they've perhaps overestimated the state of their financial distress? Questions might arise as to whether an employee will need to have a certain length of service to qualify. Whether they will have to do anything to prove their hardship, for example providing bank statements. There will be questions about how the applications would be made and any circumstances in which the payment will not be made, which could include for example the financial performance of the business.

Grace Caldicott 

So we know we are being classic lawyers in plugging very robust written policies, but it is really important that they are in place to ensure consistency and to avoid accusations of bias or discrimination. So our suggestion would be a flat sum to be paid out to all individuals who meet the criteria, and if you do want to pay a different sum according to the employee’s individual circumstances then this should be very clearly set out in the policy. And it's also really important that you do seek legal advice before putting this policy in place or considering a variation of the payments depending on the circumstances, because there could be a number of employment law or tax implications.

Jonathan Rennie

Another area for employers to consider is fringe benefits. These are sometimes small things that cumulatively can make a very big difference for staff. It can make a very big difference – particularly for those on the lowest incomes – so for example discounted food has been offered by supermarkets and some retailers. Help with travel costs (we have seen the cycle to work schemes over a number of years now). Perhaps seasons ticket loans, free eye tests and shopping discounts. I would say from personal experience, free meals and snacks at work go down very, very well. And for those people working at home, we have seen some employers provide support for home insulation costs.

Grace Caldicott

I know personally Jonathan, I really look forward to going into TLT's offices because they have plenty of healthy snacks and fruit, so I can corroborate your comments on that.

Jonathan Rennie

Nice one.

Grace Caldicott

I do genuinely look forward to them!

Obviously, we are talking mostly about employees’ needs during this podcast, but obviously employers are under a significant cost pressure at the moment as well, so there is going to be a limit on how much they can invest in these kinds of initiatives, which is something that we wanted to acknowledge. But we are seeing some other ideas too aren't we Jonathan?

Jonathan Rennie

I think as always technology can provide some support and help here, and particularly we have heard of initiatives from employers operating early access to wages. So they might be thinking about a hardship fund but perhaps they can't afford to do that. And organisations have partnered with schemes like Wagestream; there is one called Hastee Pay; and Revolut – technology applications to give employees early access to wages.

So essentially these schemes allow employees to access a percentage of their wages before payday, in exchange for what I am told is a small transaction fee. And it might allow employees to change the frequency of their pay periods. For example, somebody that gets paid monthly might be able to choose to get paid fortnightly.

Grace Caldicott

So this appears to be particularly popular with employers with shift-based frontline workers, but we wanted to flag that there are a number of concerns to look out for around these applications. So, whilst employers in areas such as hospitality and healthcare say they are better than payday loans, as Jonathan has already pointed out there is a transaction charge and it could simply delay the financial difficulties for those individuals.

Some critics have also warned the sector is unregulated, and there are potentially also issues with employees becoming reliant on getting their earnings early. Particularly prevalent if employees are advancing small amounts regularly, the transaction fees can of course add up.

Jonathan Rennie

Yes, there is something of the feel of the gambling apps a little bit about this, where we might be looking back on these applications in a period of time with a different lens, but I hope not and they are worth looking at.

Financial wellbeing policies is something that employers are looking at also, and this can be an alternative or in addition to the other options, and it can be about providing financial education and budgeting tools. There can be messages or promotions around saving more into pension schemes and trying to signpost staff towards debt advisors where that is needed.

As Grace has said, there is a tendency to lean towards policies when we are looking at managing these issues. Certainly, we do have clients that have financial wellbeing polices and this is something that we have tended to see more of since Covid. A financial wellbeing policy could set out the financial support and benefits available to employees and advise on how they can be accessed.

Grace Caldicott

So here at TLT, we have six wellbeing pillars that drive activities in this space and of course financial wellbeing is one of those. It is really useful because it informs decisions and talking about it normalises conversations about money, which helps break the stigma.

Jonathan Rennie

The stigma point is an interesting one Grace for sure. Nobody likes talking about money (says the Scotsman!). For example people might be worried about being prejudiced at work, even if it can sometimes work in your favour, and obviously socioeconomic status is not a protected characteristic in law.

Grace Caldicott

So that's a really interesting point actually Jonathan, as I know there has been a recent call by the UN Special Rapporteur to add povertyism (which is essentially a negative stereotyping of the poor) to anti-discrimination law alongside racism and sexism. Whilst that doesn't seem to be on the government's agenda at present, employers should certainly be trying to create a workplace culture where employees don't feel judged or stigmatised due to their financial position, for example their postcode. And the same can obviously be reflected in any financial wellbeing policy.

Jonathan Rennie

Unfortunately, as we all know it will be those on the low incomes who will be hit the hardest by the cost of living crisis, and so it's important that they feel supported at work so far as possible, and that these conversations about money worries are normalised.

So, if we think about hybrid working, then maybe that is another option for employers who are looking to support their employees. But there's pros and cons of that: allowing staff to work flexibly between home and the office allows people to make their own individual choice maybe even on a particular day whether they want to pay for the train or bus into work versus the cost of heating their home.

Grace Caldicott

And of course as I have already mentioned during the podcast, it is not only employees who are feeling the effects of the energy crisis and several employers will be feeling the pinch with many even looking at whether they can afford to remain open. And of course if you are working from home, you can wrap up, put a blanket around your legs, put your dressing gown on, but if you are going to the office that is obviously not acceptable and employers can't just turn down the heating or decrease the lighting to save on money. And of course, always flipping back to the legals, there is health and safety laws that dictate that employers need to provide a comfortable workplace.

Jonathan Rennie

We saw some of this very recently Grace in a debate in Germany around whether employers could require their employees to work from home in the winter to save energy, and we are not quite at that stage in the UK, and that could be scaremongering. But whilst this might reduce some costs, this doesn't exactly get around the problem; there are still potential costs for the employer in requiring employees to work from home.

Grace Caldicott

Yes and it is also really important to remember that employers have the same health and safety obligations to people working at home as for any other worker. So employers will still need to ensure their risk assessment covers any home workers and considers things like stress, poor mental health, using equipment like computers and laptops safely, which of course will include carrying out a DSE assessment for individual workers where those regulations apply, and the working environment. They must then review that and implement any steps identified.

So, we are trying to be very practical about these health and safety concerns, but let's face it: employee morale is also incredibly relevant here. Rising energy costs may impact employers but so too would a loss of employee productivity and loyalty of employees going somewhere else, so if working in the office is still a preference for a number of staff. Employers might want to evaluate the non-financial impact of pushing for more working from home.

So just moving on to the next topic, we wanted to raise this as we have had a number of clients coming to us with queries on the topic of employees looking for additional jobs. So, we are finding that employers are seeing a greater number their employees wishing to work a second job to help bolster their income. So perhaps it's worth exploring the legal position in relation to this.

So, I think the reality with employment contracts is that they are not tailored for situations of financial crisis or rising costs or astronomical inflation. So the contract term that employers might look at and question whether it applies here is an exclusivity clause.

So there might be such a clause requiring individuals to dedicate themselves to their particular employer, and of course there is an implied duty of good faith and fidelity that restricts employees going and getting a second job and not advising their primary or principal employer. But it is not unlawful for an employee to get a second job.

Normally these things are dealt with by consent, meaning that an employee goes and asks their employer, perhaps describes their financial distress, tries to reach agreement on it rather than focusing on the particular contract terms. And I think we know Grace that in employment law there is a practicality to being able to have those conversations and consultation, rather than employers pulling out a contract and saying in pretty Dickensian terms "You have to work exclusively for us".

Grace Caldicott

So as has been a theme in the podcast today we know that employers want to be seen to be supporting their employees financially, and employers who try to seek to stop their employees working elsewhere (where it has no impact on their current job) are likely to be seen as acting unreasonably. And as employment lawyers we are always thinking of the possibility of litigation, so it's really important that you don't kind of go off on a whim and have a kneejerk reaction to an employee requesting this, and that you think about it carefully and properly in the context of their job.

So, a clause requiring an employee to seek written consent as Jonathan has already mentioned is definitely preferable over a blanket prohibition. So it may be more appropriate for junior members of staff, as the second job is unlikely to cause the first employer harm and they can then of course consider allowing it.

Jonathan Rennie

So, some of you might be thinking about the implications of second jobs from a working time perspective. Clearly all time that an individual spends working counts and accumulates towards their 48-hour working week limit, so that is something to be mindful of. So it might really be worth employers making any consent to work for another employer conditional on the employee signing a 48-hour working week waiver or opt out.

Grace Caldicott

And we all know that exclusivity terms have been unenforceable in zero hours contracts since May 2015, but we wanted to flag that there have been further regulations recently made, which will extend this protection to low income workers. So that is workers who earn less than £123 per week, and it is estimated that that encompasses 1.5 million workers in the UK. So this is going to come into force on 5 December, and it is something that employers need to be wary of moving forward.

Jonathan Rennie

As well as some of these unique issues for this winter, it is worth thinking about how the business as usual issues might play out this year, and of course best practice is always changing in that regard. So we are going to have a little look at sickness and Christmas parties, which hopefully don't go hand in hand.

Grace Caldicott

So employers are of course likely to see increased levels of sickness over the winter period. This is in part as a result of the usual seasonal bugs, including the continued presence of the dreaded Covid, but also due to NHS backlogs which are causing delays in access to healthcare. 

Jonathan Rennie

So our client experience would be that for those employers that attempt to reduce absences for genuine illness, that can be quite counterproductive. The last thing employers want really is for people to come into the workplace sick and to spread their illness to colleagues or perhaps to work through a viral infection and end up with a longstanding post-viral syndrome.

I think for employers to promote a positive attendance culture, they really need to be able to engage in normal dialogue with staff to be able to understand what is going on with them; to be able to measure and monitor of course, but just to have an awareness of how serious the issues are to prevent things escalating. Because often around absence the real issue is communication or stored up grievances.

Grace Caldicott

So employers might also want to ensure that there is a focus on employee wellbeing and health promotion to try and reduce illness in the first place. As we know, prevention is better than cure. In the run up to Christmas in particular, burnout and stress is a real factor contributing to absence.

Jonathan Rennie

For me, that focus on wellbeing might include offering flu jabs, it might be not making it mandatory for staff to attend Christmas parties and therefore being respectful of their family time. It could be recognising that during the darker days staff might overwork and therefore keeping an eye on their work level. And of course looking at healthy practice in the office like wellbeing breaks, yoga, like social events and of course trying to have some fun at work.

As always, employers need to be mindful of their obligation towards employees where their illnesses will classify them as disabled under the Equality Act, but that is a huge topic and one that we won't delve into today.

Grace Caldicott

So just moving on to our final topic of the podcast today…So this year we are expecting to see the return of the in-person Christmas party after a couple of years of festivities held over Zoom. So we thought that it would be a good time to revisit the potential pitfalls of the work Christmas party and what employers can do to avoid them.

So in recent years we have had the Bellman case, which is an awful case actually, in which an employer was liable for brain damage caused to an employee when he was punched by his MD at drinks following a work party. The facts of this are of course very extreme, and the court was very clear in its judgement that it did not support the notion that employers are insurers for violent or other unlawful acts for their employees.

However, if a senior member of staff uses an organised work event or even a follow-on to that event to assert their authority over a colleague, vicarious liability is likely to follow. This would apply not only to violence, as was in the case that I just mentioned, but also other misconducts such as discrimination or sexual harassment. We would therefore recommend employers take action in advance of any parties, such as undertaking a risk assessment, ensuring plenty of non-alcoholic drinks are available and also food (and mainly carbohydrates in my experience to soak up the alcohol!), and also explain to employees in advance ground rules for them to follow at the parties.

So before we go, we have got time for a listener question. And it is one that has been plastered over the news and a really interesting topic that we wanted to pick up on. So Jonathan, just addressing it to you. So we have seen the new Elon Musk policy that employees must be “hardcore” in order to stay employed...

Jonathan Rennie

Yes, I think if it was in the UK that would come back to bite him significantly, around psychological harm, personal injury, wellbeing and existing contract terms. So, all of the staff will have existing contracts that presumably don't use that language. I can't quite think how you define the term "hardcore" in any event. Presumably that is pushing their personal and work boundaries, which can have quite extreme consequences. So as is often the case I think it is quite reputationally damaging, and I think as a soundbite it will be interesting to see how that is followed through because it's not legal and we hope obviously not to see that in the UK.

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