| HR & EMPLOYMENT LAW
Jackie Le Poidevin, Editor-in-Chief, HR Adviser |
P&O Ferries: Understand the Law on Dismissing Without Warning
We’ve all been taken aback by quite how little regard P&O had for UK employment laws when it sacked nearly 800 crew members without warning via a video call. So what was it thinking and what are the learning points for other businesses?
P&O seems to have made a commercial decision that any tribunal litigation, penalties and reputational damage are a price worth paying, given that it felt the alternative was the collapse of the company and the loss of all jobs. Complying with its consultation duties would have led to a protracted dispute with the trade unions (and possible strike action), which it was clearly prepared to do anything to avoid.
Only time will tell whether it has got its sums right but it’s a high-risk strategy which has led to ferries being detained on safety grounds, P&O’s chief executive being grilled by MPs and the Transport Secretary threatening to block the company from replacing staff with low-paid foreign workers.
Understand the Cost of Legal Breaches
If you were to follow P&O’s example and carry out mass dismissals without warning, these are the possible legal consequences:
- If you fail to notify the Department for Business, Energy and Industrial Strategy (BIS) of your plans, you could receive an unlimited fine. Individual directors and the company could also face criminal charges. Because P&O’s ships are registered abroad, it’s exempt from this requirement. However, any UK companies dismissing 20 or more individuals at a single establishment must notify BIS using Form HR1 at least 30 days before the first dismissal (or 45 days for 100 or more dismissals).
- If you breach the collective consultation rules, you could have to pay a protective award of up to 90 days’ pay to each affected employee. However, you would have employed them for another 30 or 45 days if you had consulted them, so in effect the maximum payout equates to an extra 60 or 45 days’ pay. You don’t have to consult if there are ‘special circumstances’ but it’s unlikely you could use this defence in a P&O type situation.
- Employees with 2 or more years’ service could claim unfair dismissal. In P&O’s case, they could claim the company failed to follow a fair dismissal procedure. They might also claim redundancy wasn’t the real reason for dismissal (given that agency staff were immediately taken on to fill the roles, suggesting there was no reduction in work). Compensation would be up to 52 weeks’ pay or about £90,000, whichever is lower. The tribunals can even order employees to be reinstated if they haven’t already found other jobs.
- Some employees might bring discrimination claims. It’s been suggested P&O’s crew could claim nationality-based discrimination because they’ve been replaced by foreign workers. However, a more typical scenario would be employees claiming their selection for redundancy was biased.
It’s also possible P&O has breached the TUPE rules by not offering to let the employees transfer to the incoming agency.
Using Settlement Agreements to Reduce Your Liabilities
As P&O has done, it’s lawful to offer employees an enhanced termination payment in return for them waiving the right to bring any claims against you. As long as the terms of the settlement are generous enough, it’s likely most employees will agree. In the current market, many will find a new job quickly and they will have the money immediately, instead of facing a long wait for compensation.
There are, however, some drawbacks to going down this route:
- It will cost significantly more than making a standard statutory or contractual redundancy payment.
- You will still face protective awards if you don’t consult, and a fine if you don’t notify BIS.
- Some employees may not sign a settlement and will bring unfair dismissal and other claims. P&O says 764 out of the 784 dismissed crew have taken steps to accept its terms but this leaves some risk of legal action.
P&O may be gambling that any employees who do pursue a claim aren’t protected from unfair dismissal because they work on ships registered overseas. However, case law has shown that UK law will apply where the work is closely connected to the UK.
What’s Next?
We may now well see legislation blocking ferry companies from paying less than the national minimum wage to crew on ships entering UK harbours. The government is also intending to introduce a statutory code of practice on fire and rehire, although no date for this has been announced. P&O was just firing (without rehiring) but the code may still apply in such situations as it would ‘clamp down on controversial tactics used by unscrupulous employers who fail to engage in meaningful consultations with employees’.
| PAYROLL
Sarah Bradford, Editor-in-Chief, Pay & Benefits Adviser |
National Insurance Changes Ahead: Key Pointers
In his Spring Statement last week, Rishi Sunak announced that the National Insurance primary threshold would be aligned with the personal allowance from July. This will partially offset the increases in National Insurance rates to fund health and social care costs. The Chancellor also announced an increase the National Insurance Employment Allowance – a measure which will help those employers eligible for the allowance. So, what does National Insurance look like for 2022/23?
Employee Contributions
National Insurance is calculated separately for each earnings period without taking into account any previous earnings in the tax year. Consequently, the thresholds that are of relevance are those for the particular earnings period.
The increase in the primary threshold announced in the Spring Statement does not take effect until July. This means that the 2022/23 primary thresholds previously announced will continue to apply from 6 April 2022 until 5 April 2023. For this period, the primary threshold (the point at which employees start to pay National Insurance contributions at the main rate) is £190 per week and £823 per month.
From 6 July 2022, the threshold is aligned with the personal allowance. From that date, the weekly primary threshold is £242 and the monthly primary threshold is £1,048.
As the increase does not take effect until 6 July, the annual primary threshold (used for company directors who have an annual earnings period) is set at £11,908. It will increase to £12,570 for 2023/24 and be fully aligned with the personal allowance for the 2023/24 tax years.
The lower earnings limit remains at it previously announced level (£123 per week, £533 per month and £6,396 per year), as does the upper earnings limit (set at £967 per week, £4,189 per month and £50,270 per year).
The primary rates of National Insurance are, as previously announced, increased by 1.25 percentage points for 2022/23 only, pending the introduction of the Health and Social Care Levy from 6 April 2023. Consequently, for 2022/23, the main primary rate is 13.25% (payable on earnings between the primary threshold and the upper earnings limit) and the additional primary rate is 3.25% (payable on earnings above the upper earnings limit). HMRC have instructed employers to explain the purpose of the increase on employees’ payslips by including a note to read ‘1.25% uplift in NICs funds NHS, health and social care’.
Employer Contributions
There are no further changes to the employer thresholds applying for 2022/23. As previously announced, the secondary threshold increases to £175 per week, £758 per month and £9,100 per year. A higher secondary threshold of £967 per week, £4189 per month and £50,270 per year applies to employees under 21, apprentices under the age of 25 and armed forced veterans in the first year of their first civilian employment since leaving the armed forces.
A new secondary threshold applies to new Freeport employees of employers with physical premises in a Freeport Tax Zone. This is set at £481 per week, £2,083 per month and £25,000.
Employers pay secondary contributions at the secondary rate on all earnings above the secondary threshold or, as appropriate, the relevant secondary threshold. The secondary Class 1 rate is increased by 1.25% to 15.05% for 2022/23 only, to provide ring-fenced funding for health and adult social care prior to the introduction of the Health and Social Care Levy from 6 April 2023.
In his Spring Statement, the Chancellor announced an increase of £1,000 in the National Insurance Employment Allowance. Consequently, the Employment Allowance is now £5,000 for 2022/23. Eligible employers can claim the allowance, which is offset against their secondary Class 1 National Insurance liability for the year. The allowance is only available to employers whose secondary Class 1 National Insurance liability for 2021/22 was less than £100,000. It is not available to personal companies where the sole employee is also a director.