October and April are the key months for the introduction of new employment legislation and set out below are details of this month’s main developments.

1 October 2008

The annual increases in the national minimum wage take effect as follows:

• the adult rate (workers aged 22 or over) increases from £5.52 to £5.73 an hour    
• the development rate (workers aged between 18 and 21) increases from £4.60 to £4.77 an hour
• the young workers' rate (workers aged 16 and 17) increases from £3.40 to £3.53 an hour.

It was almost ten years ago that the national minimum wage legislation was introduced and the adult rate at that time was £3.60 an hour. It is estimated that around a million workers are covered by the increase each year and effective enforcement of the legislation has been an ongoing priority for the government. The Employment Bill, currently going through the Parliamentary process, will introduce new inspection powers for national minimum wage compliance officers and a strengthening of the criminal penalties for employers’ non-compliance, as well as automatic fines for employers who fail to pay the minimum wage. These measures are expected to take effect in April 2009.

1 October 2008

The Companies Act 2006 introduced seven new statutory duties on company directors and these were introduced in two stages: four last October and the final three from today. These new duties are:

• to avoid conflicts of interest
• not to accept any benefit from third parties
• to declare any interest in an existing/ proposed transaction or arrangement.

If for example, an individual is a finance director who also acts as a trustee of a company’s pension scheme then the statutory duty to avoid conflicts of interest (section 175 of the Act ) is particularly relevant.

There may be times when the interests of the company and the pension fund diverge.  However, the Pensions Regulator and the Institute of Chartered Accountants do not presume that, just because someone is a director, they should not bring their skills to bear as a trustee for the pension fund. Section 175 allows for this and provides that this dual role can be authorised by the company’s other directors. Conditions can be attached to the authorisation such as requiring the director to abstain from voting on company decisions where they are conflicted. 

It is important therefore to be up-to-date with trustees’ responsibilities, to clarify the director and trustee roles and to give thought as to how to manage conflicts when they arise. Tools such as risk registers, conflicts declarations and agreed processes for information sharing will be useful.

Although the dual role of director and trustee gives obvious potential for conflicts to arise, a trustee does not need to be a director of the company to be conflicted. For example, there may be a divergence of views between the employer and the member-nominated trustees in relation to the employer’s ability to meet its obligations to the pension fund. The Regulator has clarified that best practice is to have in place a Conflicts of Interest Policy for the pension fund which sets out the procedure for managing actual and potential conflicts.

5 October 2008

In 2007, the Equal Opportunities Commission brought successful judicial review proceedings against the government arguing that the UK legislation on maternity pay and benefits failed to meet EU requirements. 

As a result, changes were made to the sex discrimination legislation, removing the distinction between ordinary and additional maternity leave so that women would no longer be treated differently whilst on maternity leave. This was followed by the Maternity and Parental Leave etc and the Paternity and Adoption Leave (Amendment) Regulations 2008 which came into force on 23 July 2008 and which extend the rights of those employees where the expected week of childbirth or adoption placement is on or after 5 October 2008.

Currently, during ordinary maternity and adoption leave (a period of 26 weeks) the employer must continue to provide all benefits save for remuneration but this obligation does not apply during additional maternity and adoption leave (a further period of 26 weeks). The changes to the Regulations mean that, where the expected week of childbirth or adoption placement is on or after 5 October 2008, employees will have the right to the same terms and conditions during additional maternity or adoption leave as they presently enjoy during ordinary maternity or adoption leave.   

Maternity and adoption policies which provide different benefits depending on whether ordinary or additional leave is taken will need to be reviewed and amended. There is a good opportunity to do this now in the time before employees start their additional maternity or adoption leave under the new Regulations.

27 October 2008

Although agency workers are treated as employees of the agency for statutory sick pay purposes, where the duration of the contract is less than three months, there is no entitlement to SSP. The Fixed-Term Employees (Prevention of Less Favourable Treatment) (Amendment) Regulations 2008 will remove this exemption.

For further information on any of these key changes please contact one of our employment team.