Work It: HK Employment Update – October update

Summary - In this month's round-up of key employment and HR developments, we look at:

26 Oct 2016
"Two business men shaking hands

From 1 October, the National Minimum Wage (NMW) hourly rates for workers aged under 25 will increase as follows:


Age 21 – 24

Age 18-20

Age 16-17


Previous rate





New rate





This does not affect the minimum rate for workers aged 25 and over (the National Living Wage) which remains at £7.20 per hour (but is set to rise in April 2017).

Meeting NMW requirements is increasingly a crucial part of reputation management and corporate governance, as well as employment law compliance, in the wake of the controversy over working arrangements at Sports Direct and HMRC's ongoing "name and shame" approach to non-compliant employers. It's essential for businesses and their payroll providers to be on top of the detailed rules, including what can and cannot be deducted and what payments and allowances are taken into account.

When the shared parental leave regime was introduced, we warned that businesses offering enhanced pay terms could in some cases face sex discrimination claims. A sex discrimination claim recently succeeded against Network Rail, highlighting this risk, although the facts of the case were unusual.

Under Network Rail's shared parental leave policy, eligible mothers and primary adopters were entitled to up to 26 weeks' enhanced shared parental pay paid at full salary, with 13 weeks paid at the statutory rate, while fathers and secondary adopters were entitled to 39 weeks at the statutory rate only. A male employee (whose wife also worked for Network Rail and benefited from the enhanced pay terms) brought a claim alleging that the policy indirectly discriminated against male employees.

Network Rail initially argued that the policy was justified (and hence lawful even if indirectly discriminatory) as a means of recruiting and retaining female staff in a male-dominated environment. However, it conceded prior to the Employment Tribunal hearing that the policy was unlawful. The employee was awarded nearly £30,000 in total, including an uplift of 25% for Network Rail's failure to follow the ACAS Code of Practice in dealing with his grievance. There was a sting in the tail, however, for Network Rail's other employees – it decided to scrap its enhanced shared parental pay scheme altogether.

Because Network Rail conceded that its policy was unlawful, the Tribunal did not consider the strength of its justification argument. An Employment Tribunal hearing a similar claim would be free to reach a different decision. However, the case offers some lessons for businesses. Network Rail's policy was unusual in distinguishing between mothers and fathers who take shared parental leave; many businesses which offer enhanced terms only offer enhanced maternity pay or offer the same shared parental pay to both parents.

A policy which offers the same shared parental pay regardless of sex is less vulnerable to discrimination claims. The case does not answer the tricky question of whether offering enhanced maternity pay but not enhanced shared parental pay is unlawful sex discrimination. The Government's guidance suggests not, but this remains a legal grey area. Cases on this point are currently being pursued in the Employment Tribunals, so further guidance may soon be available.

Businesses looking to offer enhanced shared parental pay schemes should carefully consider potential discrimination issues, including whether an indirectly discriminatory policy could be justified. A clearly-drafted policy is also essential when offering enhanced terms. For further guidance, please contact Jane Amphlett or your usual Employment team contact.

The Court of Appeal has rejected British Gas' appeal in the long-running case Lock v British Gas, which concerns the thorny question of whether commission payments need to be included when calculating holiday pay.

This means that currently commission does need to be included in holiday pay for the four weeks of holiday required under EU law. The same is true of non-guaranteed and voluntary overtime which is undertaken regularly. However, we have no clear practical guidance as yet as to how to calculate the commission to be included in holiday pay, beyond the fact that holiday pay for "EU holiday" should reflect the worker's normal remuneration. In particular, the cases have given no guidance on the period over which commission should be averaged out in order to work out how much to include in holiday pay.

We will not get such guidance until the British Gas case eventually returns to the Employment Tribunal for a remedies hearing (to determine how much compensation the British Gas employee should receive). As British Gas has applied for permission to appeal to the Supreme Court, it could be some time before the remedies hearing takes place.

For now, as a minimum, businesses should consider the following:

  • Assess the likely costs of including averaged-out commission in holiday pay, using a range of different reference periods, and factor this into business planning
  • Consider the legal and practical implications of altering or withdrawing any commission schemes or closing schemes to new entrants
  • Consider whether rolled-up holiday pay or other such strategies could help to mitigate overall exposure.

For further guidance, please contact Jane Amphlett or your usual Employment team contact.

Board diversity and corporate governance: The House of Commons Business, Innovation and Skills Committee (BIS) has launched an inquiry on corporate governance, looking at executive pay, directors' duties, worker representation on boards/remuneration committees and Board diversity. Submissions must be received by 26 October 2016. Howard Kennedy intends to submit a response to the inquiry and have created a survey. We hope that you can spend a few minutes completing and submitting your answers to our questions‎ to enable us to make a comprehensive submission. To complete the survey, click here.

References for senior bankers: The Financial Conduct Authority and Prudential Regulation Authority has published their long-awaited statement setting out how the regulatory reference regime will operate from 7 March 2017. Banks and insurers will need to seek references going back six years for individuals being hired for certain senior roles and, if they provide a reference, will be obliged to update the individual's current employer with any new information which comes to light during the six years following the individual's resignation.

Immigration – intra-company transfers: Changes to the Tier 2 entry route are due to come into force later this Autumn, primarily affecting the Intra-Company Transfer (ICT) route. All ICT migrants will now need to pay the Immigration Health Surcharge (£1,000 per migrant worker). The ICT Skills Transfer route will be closed to new applications and the minimum salary threshold for the Short-Term sub-category will be raised to £30,000. For more details, please contact Antonia Torr,  our Head of Immigration Services.

Brexit – timetable announced: At the Conservative Party conference, the Prime Minister announced that Article 50 (triggering the two year notice period to leave the EU) would be invoked by the UK by March 2017. She also gave the strongest indication yet that the UK may leave the Single Market. The position of EU migrants currently living and working in the UK is expected to be clarified over the next few months. In the meantime, HR and in-house counsel should ensure that workforce planning considers the impact of Brexit. Our detailed guide is here.

Equal pay in the private sector: An Employment Tribunal has ruled that a group of Asda store workers can compare themselves to distribution depot workers in order to pursue an equal pay claim. The decision will enable over 7,000 claims to proceed; the claims are estimated to have a total value of over £100m.

Jane Amphlett on the Great British Bake-Off and why keeping the talent sweet matters (Times - subscription needed)

Alex Mizzi on tattoos, piercings and workplace dress codes

LAW network: Howard Kennedy is a member of Lawyers Associated Worldwide (LAW), a global association of more than 95 independent law firms, spanning more than 50 countries. This week, we hosted LAW's annual general meeting, where we were joined by our contacts from across the globe.


Bringing your key talent to the UK: A toolkit - 2 November 2016: We are holding a seminar on 2 November 2016 at 6.30pm , looking at key practical aspects of bringing international talent to the UK, with insights from our employment, immigration and tax specialists. With international assignments increasingly common, we will look at what options businesses have and the pitfalls they need to avoid.

HR network breakfast for retail, leisure and hospitality - 15 November 2016: Our first HR Network Breakfast will take place on 15 November 2016 at 8.00 am for an 8.30 am start. The first breakfast will focus on the retail, leisure and hospitality sector, discussing workforce Brexit-proofing, holiday pay and tips and service charges.

These quarterly roundtable breakfasts will create a network for those responsible for staffing/HR matters in particular sectors to discuss key current workforce issues. The aim is to connect attendees with ideas, knowledge and people who can share and discuss their views. The breakfasts will take place at our offices in London Bridge, hosted by Howard Kennedy's Employment team.


This newsletter is for general information only and is not a binding offer to provide legal services. Nothing in this newsletter constitutes advice, nor does the transmission of any information or materials create any contractual relationship or retainer. Individual circumstances vary and you must instruct us formally if you would like us to assist you with a specific legal issue. We disclaim all liability and responsibility arising from any reliance placed on any materials in our newsletter by any recipient of our newsletter or by anyone who may be informed of its contents.


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