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Fair Pay: Strategy and Compliance

The future of work is changing quickly and we all need to be ready to evolve.

As businesses continue to embrace this evolution head on, we all need to ensure we have appropriate strategies and enabling policies in place that support the growth of a truly diverse workforce that is treated fairly, paid equitably and without bias.

In facing this global change together, we face several key objectives:

  • The need to improve productivity, respond to business changes with agility and protect reputation; 
  • Workers’ desire for more flexibility, control, and improved wellbeing (not just more pay);
  • Governments’ desire to achieve fair pay and provide workers with “good work” that has both job security and quality development opportunities; and 
  • Societal pressure to ensure diversity and inclusion for all, delivering better outcomes by encouraging business to act responsibly and with fairness.

We need to ensure we have effective leadership and focus over our internal policies, processes, systems and data flows to meet the increasing and ever changing demands of the regulations that underpin fair pay and all worker rights.

Fair Pay Compliance

Are your workers paid fairly and appropriately for their contribution? We can support you in establishing and communicating practical policies, processes, systems and data capture which enable you to ‘get it right’ in real time.

We can also advise you if you have a review into your compliance with fair pay, whether that comes from an official enforcement body such as HM Revenue & Customs or via a direct challenge from your workforce.

Our teams are made up of experienced advisers that can navigate reviews of this kind in a strategic, practical and pragmatic way, supported by SME’s, including employment lawyers, allowing you to focus on your other priorities. We bring our experience of working directly with the regulators and enforcement bodies to all aspects of a review.

We know that Governments are continuously developing new regulations and increasing connected enforcement strategies and penalty regimes, particularly in the UK through the planned establishment of a ‘Single Enforcement Body’ which is due to be created following the recommendations arising from the Good Work Plan. The Department for Business, Energy & Industrial Strategy (“BEIS”) released guidance for calculating holiday pay for workers without fixed hours or pay in 2018, with the most recent iteration of this guidance released in July 2020.

It is also known that the Government estimate underpayments of holiday pay of over £3 billion annually across the UK and the headlines which have been naming and shaming employers found to be underpaying employees through NMW breaches are also widely reported on. The Government’s view is that workers are not receiving all rights they are entitled to and in many cases this could lead to underpayment of pay. The Government are planning to tackle this ‘fair pay’ non-compliance through more effective enforcement activity.

We have significant experience of advising clients across a broad range of fair pay matters, please see below for more information on these matters:

Fair Pay Strategies

The first step to effectively evolving your approach is by defining your measurable objectives and developing a workforce strategy that helps you deliver these. We can support you in planning and executing this with our experienced consultants who bring insight and challenge, but also in communicating your initiatives and impact with our communication specialists.

There has been increased focus on pay and progression for specific cross-sections of workers, be that through the lens of ethnicity, gender and/or all other aspects of diversity. Ensuring your workforce strategies, including fair pay, delivers against your diversity ambitions is more important now than ever.

We can assist you in gaining maximum insight from your workforce data, supporting your strategy as it continues to evolve and ensuring you can measure your progress accordingly against any agreed metrics. Our communication specialists will transform your data and strategy into a compelling narrative that engages your audience and delivers tangible results.

Recent updates

April 2023

NMW

From 1 April 2023 NMW rates will increase to £10.42 for workers aged over 23, up from £9.50 in 2022.

January 2023

Holiday Pay

Government consultation on holiday entitlement for part-year and irregular hours workers. The consultation seeks views on the Government’s proposals to introduce legislation to ensure holiday pay and entitlement is directly proportionate to the amount of time worked. This will have broad implications on the legal position and how entitlement and pay is calculated and managed in practice.

Please see a short Deloitte Legal blog here for further details.

September 2022

Worker rights

Retained EU law proposals: implications for Fair Pay, including holiday pay and equal pay

The government published a draft bill which will in essence force a review of all law derived from the UK’s membership of the EU. The new legislation proposes the automatic repeal of any retained EU law with effect from 31 December 2023 (although that date can be extended until 31 December 2026 by the government), unless specific legislation is introduced to retain it. Therefore, the potential impact of this bill on our UK law could be huge - especially in relation to laws around worker rights.

Please see the Deloitte Legal Blog which provides further details on this.

July 2022

Holiday Pay

The Supreme Court has handed down its judgement in the case of Harpur Trust v Brazel. The judgement confirms that “part-year” workers are entitled to the same holiday entitlement as workers who work all year (5.6 weeks). The case also confirms that employers should not apply a percentage of pay (e.g. 12.07%) when calculating holiday entitlement/pay.

Please see the Deloitte Legal Blog which provides further details on this.

July 2022

Equal Pay

The EU Pay Transparency Directive (which comes into force from 2024) aims to bolster equal pay protection across the EU with important new measures which employers, including UK employers, should be aware of.

Please see the Deloitte Legal Blog which provides further details on this.

June 2022

EBA flyer

The EBA published its final guidelines on gender pay gap reporting under both the Investment Firms Directive (IFD) and the Capital Requirements Directive. Aimed at financial sector businesses across the EU, the guidelines aim to harmonise the approaches taken to calculating gender pay gap metrics and apply cross-border.

Please see our Deloitte flyer for further details

December 2021

NMW

208 named companies failed to pay 2 million pounds to over 12,000 workers.

April to June 2021

Equal Pay

  • Asda and Tesco Equal pay cases.
  • Thousands of female shop floor employees brought equal pay claims to an Employment Tribunal arguing they receive less pay than male distribution workers.

Asda

  • The Supreme court dismissed Asda’s Appeal was in favour that the role of shop floor workers could be compared to those in distribution centres.

Tesco

  • The case was taken to the ECJ who concluded Article 157 could be relied upon and that roles of shop floor workers can be compared to those in distribution centres.
  • The case will return to a UK employment tribunal to determine whether the work of the shop floor workers is of equal value and the reasons for the discrepancy in pay.

1 April 2020

Holiday Pay

Increased holiday pay averaging period from 12 weeks to 52 weeks for UK (Regulation 13A) leave

NMW

Changes to the salaried work conditions and to HMRC enforcement policy

Worker rights

Removal of the Swedish derogation (relating to pay between assignments) for Agency workers.

The minimum number of employees required to request an information and consultation agreement reduced from 10% to 2%.

Workers are entitled to a written statement of particulars on or before their first day of employment.

Employed parents have the right to 2 weeks' paid Parental Bereavement leave if their child aged under 18 dies, or if they have a stillbirth at 24 weeks or later.

How we can help

  • Understand – facilitating a workshop with key stakeholders to explain the rules and risks relating to the different areas of Fair Pay to relevant personnel. This can be a general understanding or a workshop covering a specific area of Fair Pay in more detail.
  • Identify – Undertaking a review of contracts, policies, pay elements, systems and processes to identify any areas of Fair Pay risk.
  • Calculate – Assessing and calculating any potential historical cost impact and future potential cost of being compliant with the different Fair Pay areas.
  • Systems and processes – Updating systems, processes and policies to be robust and improve compliance with the different areas of Fair Pay.
  • Support with worker challenges or government reviews – Worker challenges or government enquiries / reviews, such as HMRC NMW reviews, can be time consuming for employers and key personnel. We can help manage these.
  • Ongoing compliance – Undertaking periodic reviews to assess whether systems are working appropriately and general compliance with the different areas of Fair Pay.
  • Legal advice – Many of the areas may require legal advice, some of which could potentially be subject to legal professional privilege in certain circumstances.
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