How should payments in lieu of notice be taxed from April 2018?

From 6 April 2018 all payments in lieu of notice will be taxable, whether contractual or non-contractual. Income tax and class 1 national insurance contributions will be due on the amount of basic pay that an employee would have received if they had worked their notice in full.

What are the current tax rules on payments in lieu of notice?

Currently, if you have a contractual right to make a payment in lieu of notice (‘PILON’), that payment is subject to income tax and national insurance contributions (‘NICs’).

If you don’t have a contractual right to make a PILON (because there is neither an express term in the employment contract nor an established custom and practice of making a PILON), any payment made in respect of an employee’s notice entitlement is generally regarded as ‘damages for breach of contract’ and the first £30,000 can be paid tax-free and without deduction of NICs.

What tax rules will apply to payments in lieu of notice from April 2018?

From 6 April 2018, all payments in lieu of notice will be taxable. The principle is relatively straightforward but there is a complex statutory formula for calculating the sum that should be taxed, known as ‘post-employment notice pay’ (‘PENP’). PENP is, broadly, the salary the employee would have received during any unworked period of notice minus any contractual PILON. It is calculated by reference to:

  • Basic pay only (before any salary sacrifice), disregarding bonus, overtime, commission, benefits in kind etc.; and
  • How much statutory or contractual notice (whichever is longer) the employer is required to give to terminate the contract.

PENP is subject to income tax and NICs in full. The balance of the termination payment is eligible for the £30,000 tax exemption and full NICs exemption (provided it is an ex gratia payment).

Statutory redundancy payments are exempt from PENP calculations and qualify for the £30,000 tax exemption, provided they are genuinely paid on account of redundancy.

The new rules will apply only where employment terminates on or after 6 April 2018.

There may be significant tax implications for non-contractual PILONs made from April 2018. For example:

  • An employee’s employment is terminated without notice on 30 April 2018. The employee is paid £5,000 monthly (basic pay); has a 3 month notice period; and there is no contractual PILON. They receive £35,000 compensation on termination. This an ex gratia damages payment, not linked to any contractual terms such as bonus entitlement.
  • Under the current rules, the whole compensation payment qualifies for the £30,000 exemption. Income tax is due on the balance of £5,000.
  • Under the new rules, income tax and NICs (both employer and employee) are due on the PENP of £15,000. The balance of £20,000 qualifies for the £30,000 exemption.

And from April 2019?

Currently if a termination payment qualifies for the £30,000 exemption, tax is due on any excess over £30,000 but no NICs are payable. From April 2019, employer NICs will also be due on the balance over £30,000. With employer NICs currently at 13.8% this will significantly increase the cost of some termination payments.

In practice

All employers should be aware of the new rules and think about how they might impact on any termination negotiations. It seems that PENP will need to be calculated for each employee whose employment is terminating including those with contractual PILON clauses (although we are still waiting for guidance from HMRC).

Where there is currently no contractual PILON clause:

  • Making a PILON where the termination date is 6 April or later will potentially result in significantly increased costs for both employer and employee.
  • Consider whether to exit any employees prior to April 2018 to take advantage of the more favourable tax position.
  • Think about including PILONs in contracts going forward. Having a PILON clause allows a payment in lieu of notice to be made without being in breach of contract, thereby preserving any post-termination restrictions. There will no longer be any tax benefit in not including one.

Please get in touch with us if you would like to discuss the impact of the new tax rules on your termination arrangements.

More about Protected Conversations

An employment relationship can sometimes run its course necessitating a frank conversation with an employee. It may be in the best interests of both parties to bring the employment to an end by way of a settlement agreement.

Often, the best way to start that process is by having a protected conversation.

What is a protected conversation?

The law allows an employer and an employee to have an ‘off-the-record’ conversation in certain circumstances.

If you or your employee are proposing to end your employment on agreed terms, the conversation can be kept confidential. This means that what you say can’t be used as evidence in an unfair dismissal claim. Although there are some exceptions, generally the conversation is protected.

What are the exceptions?

Protected conversations cannot be held in situations where dismissals are automatically unfair, such as those involving health and safety matters or where the protection of the Public Interest Disclosure Act is invoked. Neither is protection afforded to breach of contract or discrimination claims. This can be a problem. An employer may not know what issues are going to be raised by an employee during a protected conversation so always take advice from an HR professional and research as much of the history about the employee beforehand as you can. Recognise that in some situations having a protected conversation many not be the best route to take.

What should you do if you want to have a protected conversation with an employee?

If you’re planning to have a protected conversation with your employee, make sure you prepare in advance. You need as much information as possible. You may find it helpful to ask/research questions like:

  • Why are you proposing to terminate the employment?
  • Has the employee got a history of anything that might be relevant – grievances, disputes, sickness absence etc
  • How much are you offering and how has that been calculated? (Any notice pay would be taxable)
  • Will you expect your employee to work their notice period?
  • Will you be offering a reference?
  • What is the alternative if you don’t agree to a settlement agreement? I.e. manage their performance under an internal procedure which may result in termination for poor performance and notice pay only OR investigate an alternative role in the company?

Your employee is not under any obligation to accept any proposed settlement agreement. In fact, the law doesn’t allow anyone to accept it until they have taken independent legal advice on it (paid for by the employer usually capped at £350 plus VAT)

Ask your employee to confirm (once they have thought about it) whether they would like you to confirm the proposal in writing. This could be a draft settlement agreement or simply a letter or email. This will help you to clarify what is being offered but always ensure that any subsequent correspondence has ‘without prejudice’ in the title or heading.

Can an employee initiate a protected conversation?

Although a protected conversation is usually initiated by the employer, an employee can also request one, provided that it is with a view to agreeing a settlement agreement.

If your employee states that they’re willing to have an off the record conversation, you can go ahead with a protected conversation if you are minded to agree a settlement with them to leave. Let them know that the details of the conversation should be kept confidential because it’s with a view to reaching a settlement agreement.  Make written notes of the conversation you have had.

At the meeting, you could propose a settlement agreement yourself or you could ask your employee to make a suggestion for you to consider.

Although the most important aspect of a settlement agreement is usually the financial amount, you should consider non-monetary aspects such as:

  • a detailed reference
  • career coach support (professional help with finding another job)
  • release from anything in your employment contract that restricts you after the end of your employment
  • paying for a training course

What happens next?

You should give a reasonable period of time for your employee to consider any proposed settlement agreement. ACAS recommends 10 days, although employers rarely give this long in practice.

GDPR – Employee record keeping and beyond

In a series of blogs, Amelore begin to look at GDPR from a HR perspective to ensure employers are ready for the new requirements in respect of their employee data and beyond. This will form part of a continuous focus on this hot topic until May 2018 when GDPR goes live. We appreciate many companies may not yet of begun their GDPR journeys, so we will be offering advice and guidance in short blogs.  We will also help to signpost employers to useful information which extends beyond the processing of employee data.

GDPR is itself an extension of existing UK data protection laws. This new legislation builds on the Data Protection Act (DPA) which employers already need to adhere to. DPA principles cover areas such as ensuring employers keep accurate, secure information.

The ICO (Information Commission’s Office) are at the forefront of helping organisations understand this evolution of our data protection laws. They recently published GDPR Myths. This series of blogs helps to demystify the new regulations.

Data breach – what an employer needs to do?

In ICO’s latest blog they provide valuable advice and guidance on how employers need to respond if a data breach occurs. They report that some employers have expressed concern that any data breach needs to be reported and that huge fines will ensue. The ICO say this is not the case and that only breaches that are likely to risk people’s rights and freedoms will need to be reported.

The ICO also point out that fines will be proportionate and that companies who are open, honest and report without undue delay can avoid fines. It is expected that by now, larger organisations will already have appointed a Data Protection Officer (DPO). However, smaller organisations are also advised to consider who in their organisation is responsible for data. We would advise all organisations, no matter how small, to know who is responsible for data (again not just employee data) and who is responsible for reporting a breach should it occur. This starts to form a robust approach to data governance.

Employee data processing

Employee data processing will be a key focus for many organisations, however some employers may be worried about any potential changes to how they currently store their data.

All organisations will be storing employee records in some way, shape or form; so you are now advised to review these filing systems, including the security of the data you are processing in respect of employing people, to ensure robustness. We have already observed some organisations writing to their third-party data processers asking for evidence of their compliance.

Handlers of this data need to make sure they are processing data fairly and for legitimate purposes. Furthermore, if they are transferring it outside of the EEA there are specific safeguards in place.

For those employers wondering if the UK’s exit from the EU will affect GDPR the government has already confirmed it will not. However, please note that International companies operating across EU states will need to work out who their lead data protection supervisory board is.

Further still, forming a data protection working party or project team to audit what data is being processed is also advisable. Many companies are already helping organisations with data mapping and auditing. Amelore work closely with Mazars to provide a range of services for our clients.

In summary, the good news is that common sense does prevail and that the processing of data where it is necessary for the performance of a contract will be a valid reason for processing. If you have any queries or questions in relation to any of the points made please contact Amelore for further advice and guidance.

We will continue to focus on this topic as we approach next year tackling other aspects of the GDPR (link to first blog) in further detail; such as consent, the right to be forgotten, and subject access requests.


Christmas. It’s the time of year when…

This is the ultimate advice checklist for how HR should deal with Christmas issues…
1. Employees sometimes do stupid stuff. At Christmas time and otherwise. It’s a fact of life.
2. Just deal with it.
3. Resist the urge to worry too much about vicarious liability, discrimination and constructive dismissal. Although it is probably a good idea not to put any mistletoe up in the office.
4. Resist the urge to write any sort of policy.
5. Resist the urge to put any sort of disclaimer about behaviour in any Christmas party related literature. If someone wants to punch Bob from Accounts on the dance floor after 12 pints of beer then they will do it anyway. See points 1 and 2.
6. Resist the urge to write special rules about absence from work after social events. See point 2.
7. Apply Christmas common sense.
8. Avoid sprouts in an office environment at all times. This is especially important in small or poorly ventilated offices.
9. Never, ever, buy Secret Santa presents from Ann Summers.
10. Put a tree up; Eat some Quality Street; Wear a Christmas jumper; and remember to enjoy yourself.

The impact of the Uber case and other recent employment law changes.


You may not normally pay a lot of attention to the world of employment law – after all that’s what HR professionals are for – but you may well have noticed the recent case about Uber in the media. So what does the recent case ruling mean for you and your business?

Put simply the Uber case was about whether the taxi drivers working via the Uber app are self-employed or actually work for Uber, so are classed as “workers”. Why does it matter?  Being a “worker” gives you a number of rights and protections under current UK employment law that you don’t get if you are self-employed.  Being a worker is a big advantage for the people driving for Uber as it now means that they are entitled to earn at least the National Living Wage (if they are aged 25 years +) or National Minimum Wage (if they are under 25), as well as being entitled to paid holiday and other benefits.  Up until now many Uber drivers had complained that they weren’t earning even the National Minimum Wage and were being treated as “slave labour”.  This is now set to change, pending an Appeal of the case by Uber.

A lot of businesses use self-employed people, be they consultants, skilled tradesman or technical experts.  This is particularly true of small businesses and new “start-ups” who don’t necessarily have the budget or need for staff all of the time.  However, neither you as a business owner, nor an individual, can just decide that you want someone to be self-employed – they have to meet certain criteria or conditions, which can be complex to interpret.    If you get it wrong, both the business and the individual are liable for some hefty penalties from HMRC. You can find more information about this here  but we also recommend that you get some appropriate professional advice on this if you are in any doubt – we can assist with this.

October is one of the two months when changes to employment law currently happen. This October (2016) has seen a few changes that, depending on the nature and size of your business, you may need to take action on. The main changes are:

  • Increase in the National Minimum Wage rates – effects all businesses and sectors

Effective from 1 October 2016 there has been an increase in all levels of the National Minimum Wage that you must pay to any workers or employees.  The new rates are:

Age 21 up to 25                      £6.95 per hour  (+ 25p)
Age 18 up to 21                      £5.55 per hour (+ 25p)
Under 18s                               £4.00 per hour (+17p)
Apprentices                            £3.40 per hour (+10p)

Workers / employees aged 25 years + are entitled to the National Living Wage which is currently £7.20 per hour and has not changed.

  • Modern Slavery statements – effects any business supplying goods and / or services with a turnover of £36m + per annum

The Modern Slavery Act was implemented earlier this year, and it’s first deadline for businesses to take action has just passed.  If you are a business  whose turnover is £35m + and whose financial year ended between 31 March and 30 April 2016, then your business should have published a “modern slavery statement”, signed by a Director, on your company website or have one prepared that you can issue on request.

Hereon in every organisation whose turnover (relating to goods and / or services) exceeds £35m per annum needs to publish their annual “modern slavery statement” within 6 months of the end of their financial year.  If your business hasn’t yet prepared your statement yet and are now or soon required to do so, please contact us for help and advice.

There are other changes on the horizon too, that we recommend that your business starts preparing for:

  • Mandatory gender pay gap reporting – reporting to start from April 2017, for publication in 2018 onwards

This will apply to any organisation that employs 250+ people.  The guidance on what is required in the reports is still being developed and is complex.  Large fines are likely to be issued for non-compliance. If you are a larger business and don’t already analyse and report on your gender pay differences / gap now is the time to start preparing to do so.  We have expertise in this area and are happy to help you prepare – please contact us.

  • Pension auto-enrolment updates – now scheduled for April 2018

This will apply to all businesses who employ at least one worker / employee.  This will see an increase to the minimum employer contribution rate, taking it to at least 2%, as well as an increase to the minimum employee contribution rate.  Given the amount that these increases will be an added employment cost to your business, we would recommend that you start your financial modelling now so you can see how this will affect your future workforce costs.

Company mergers – creating one big, happy family?


mergeIn my HR “life” back in the UK, I often found myself providing advice on managing change, whether it be restructuring, TUPE transfers or subtler cultural change.  I now find myself on the other side of things, as Happy Holidays and one of their former competitors, Smiley Holidays, have both been acquired by a large French company.  While these purchases took place a while ago now, it is interesting to see how the changes have now started to trickle down to the staff (me!).

So, can these changes create one new, contented holiday company / family?  At the moment, the views of myself and colleagues are mixed – we’re not entirely convinced that things will be better, or even as good.  What could be done to change our minds and to keep us engaged and motivated?  Here are some suggestions:

  • Communicate, communicate, communicate

With any changes or takeovers there are always rumours about what will and won’t happen.  Clear, regular communication is key if you are to stop the rumour mill and keep staff feeling engaged, rather than worried for their jobs.  A monthly newsletter is better than nothing but it doesn’t really do all it needs to.  How about using social media and other forms of communication too?  – Especially if staff are based in multiple locations or work different shift patterns.  Certainly face-to-face updates and briefings tend to be the most popular method with staff themselves, so can this be done in any shape or form? (Skype, Facetime, podcasts etc)

  • It’s not all about structures…..

Most people tend to think of “change” as being about restructuring, but that isn’t always the case.  Yes, it can make sense to join up some teams and to make some efficiencies and savings while doing so, however, this shouldn’t be the knee jerk reaction.  If you are keen to keep current brand identities then you need to keep some differences in place, which means not merging and restructuring everything.  Be clear on what structures will change, why and when, so allowing other, not directly affected teams / departments to stop worrying about what might happen to them. (at least for now)  At least they can focus on their roles properly again and not be distracted or worried about what may lie ahead.

  • Timing is everything

Make sure you understand what the businesses do when and why.  Are there any critical or very busy times when it would be unwise to change things?  For example for Happy Holidays, changing all of the company mobile phones over to a new network provider with new phone numbers perhaps should have been done outside of the holiday season!  There would have been no customers in resort trying to call old numbers or not knowing about new numbers, and would have avoided a number of problems, upsets and complaints.

  • Who are we again?  What do we do?

Staff do identify with the organisation they work for and can often be surprisingly loyal to it.  Staff will feel that they have their “psychological contract” in place with their employer, as well as their actual employment contract.  Any change can potentially challenge the trust between employer and employee, and potentially sever the “psychological contract”.

It’s really important that staff can see and understand what the future holds and what will be changing. They can then choose whether they want to be part of this or not, and act accordingly.  This can include seemingly obvious things such as – are we still planning to deliver the same product(s) or service(s) to the same customer(s)?  Will we keep the same company values (eg. “green” or “ethical” commitments)?  Will I still wear the same uniform?  Will I still work in the same place?  Will I be working the same hours?  Things like this can really make a difference to someone deciding whether they will stay and go through the changes, or leave now to avoid them.

Even though this is about the two holiday companies I hope that the suggestions will be helpful for your business too.  If anyone from Happy Holidays is reading this, you know where I am and I’m more than willing to make this change a positive one!

It’s holiday time – So, how does your holiday policy shape up?

Whilst most employers run the usual January to December holiday year, some companies operate a holiday year which mirrors their financial year. Those very brave employers have a holiday year which follows each employee’s employment start date (administratively this must be a nightmare!)

Employers with an April to March holiday year will find themselves in a peculiar situation for 2016 through to 2018. Remember that all workers are entitled to a minimum of 5.6 weeks’ paid holiday, which means 28 days for a full-timer. Bank holidays count towards this entitlement.

Due to the moving Easter holidays, rather than the typical eight bank holidays in a year, April 2016 – March 2017 will have only six bank holidays, while April 2017 – March 2018 will have ten.

So what can you do about this?

Your first port of call is to check your contractual wording around holiday entitlement. This could throw up a number of different scenarios.

Here are a few (using full-time workers as an example):

  1. When the contract states: “you are entitled to 20 days holiday plus all bank holidays”. For April 2016 – March 2017 this would mean that your employees would only receive 26 days holiday, which is obviously below the statutory minimum entitlement. You would therefore need to give them an additional two days paid holiday. For April 2017 – March 2018 they would receive 30 days holiday, but without specific wording which has anticipated this exact scenario it is unlikely you will be able to deduct the extra two days, as the entitlement is to “all” bank holidays.
  1. When the contract states: “you are entitled to 20 days holiday plus 8 bank holidays”. Again your employees would only receive 26 days holiday for April 2016-March 2017 as there are only six bank holidays. You would therefore need to give your employees an additional two days paid holiday to ensure they receive their statutory minimum entitlement.

However, for April 2017 – March 2018 you could choose not to give employees two of the ten bank holidays (there is no automatic right to time off on a bank holiday). However, unless they agree otherwise, you would not be able to deduct these from the 20 day holiday entitlement as the contract says that they are entitled to 20 days holiday. You would instead have to get them to work two bank holidays, which may not be practical if the office is closed and certainly will not be popular.

  1. When the contract states: “you are entitled to 28 days holiday inclusive of bank holidays”. The result of this is the same as point 2 above. You will have to give two extra days for 2016-2017 and you could choose to require employees to work two bank holidays for 2017-2018.

This situation is bound to arise again in the future so the next time you undertake a review of your employment contracts it would be worth considering whether you want to include wording in the holiday clause so that holiday entitlement can be adjusted each year if necessary to allow for this scenario.

This may be even more desirable where you already offer holiday in excess of the minimum statutory entitlement and don’t want to be in a position of having to afford additional days to employees in a particular year.

Eu exit and the implications for your business

Following the unexpected confirmation of a “leave” vote, many businesses will already be turning their attention to what happens next?

The most important message is that the referendum result does not trigger any automatic legal changes; neither does the UK’s formal notification that it will be withdrawing from the EU.

The UK will continue to be a member of the EU for the time being, and the status and effect of all UK and EU law remains unchanged for now, and possibly for some time in the future.

Beyond that, however, much remains to be debated and negotiated – such as the shape of trading agreements between the UK and the EU, the status of EU-derived law, thorny issues such as acquired rights, and the UK’s relationships with non-EU states.

It’s still business as usual for a while – no immediate changes

Neither the referendum result nor the UK’s formal notification to the EU has any immediate legal effect. From a legal perspective, it will be ‘business as usual’, probably for some time to come.

  • The next step is for the UK to give formal notification to the EU of it’s intention to leave. This will start the withdrawal process, which must be concluded within two years unless an extension can be agreed (which requires the consent of all twenty-seven remaining Member States).
  • The future trading relationship between the UK and the EU could take one of a number of different forms; which form it takes will have significant implications in terms of the movement of goods, services, people and capital.
  • The UK will also need to undergo a major legislative project to identify which areas of EU-derived law will stay, which will be modified and which will no longer have effect in the UK.

Each of these processes is likely to involve much consultation with the UK public and industry. Businesses have an important part to play in shaping the environment that they will be trading in, domestically and cross-border.

Employment implications of Brexit for your business

UK employers are unlikely to see any large-scale changes to current employment law in the short-term as a result of the UK leaving the EU.  The UK’s on-going relationship with EU Member States, as well as our own workplace culture, is likely to demand that the UK retains many of the EU-derived laws that have already been incorporated into domestic legislation.

Free movement of workers within the EU

Now we’ve voted to leave the EU, the free movement of workers will certainly be affected. However, changes to legislation are likely to be gradual rather than immediate.

While in theory citizens of EU member states no longer enjoy the automatic right to work in the UK (and vice versa), this will form part of negotiations to establish the UK’s new trading relationship with the EU.

EU nationals already employed in the UK may already have acquired rights under UK legislation, depending on how long they’ve been here. It’s likely that many will be permitted to stay in return for a similar agreement for UK nationals currently employed in EU member states.

For prospective employees, however, it may be a different story. While it will still be possible to employ personnel from EU member states, there may be extra administrative costs to be factored in, such as visa applications. An EU employee’s capacity to remain long-term in the UK may also be affected.

There may also be limitations on the type of workers that will be allowed to seek employment in the UK. If we choose to follow a model more like the US or Australia, visas may only be granted for those in professions identified as having a particular need.

Other employment legislation changes

We also expect some piecemeal reform to specific areas of employment law, such as:

  • Clarification of the rules for calculating holiday pay and how holiday accrues during periods of long term sick leave, under the Working Time Regulations (WTR)1998.
  • There is on-going litigation regarding inconsistencies between the WTR and the EU Working Time Directive (which the WTR implements in the UK), creating wide-spread confusion for UK businesses and potentially significant accrued and on-going liabilities.
  • Whilst the UK government is unlikely to repeal current working time rules, it may well take the opportunity to clarify the rules around holiday pay and provide much needed guidance for employers.
  • Pro-business reform of agency worker rights, given the additional costs and complexities of engaging agency workers since the introduction of the Agency Workers Regulations 2010, which implement the Temporary Agency Work Directive.

Whilst the AWR gives agency workers limited equal treatment rights with comparable permanent employees from day one, following a 12-week period, an agency worker has a right to equal pay, working time and holiday with a comparable permanent employee. The extent of any reforms in this area will depend on the exit terms the government is able to negotiate.


Understand the profile of your workforce. How many are EU citizens? How long have they lived in the UK? Do any have the right to a British passport that you can support?

If you are in a sector recruiting lots of EU nationals or likely to, consider accelerating any planned recruitment before changes are announced to the process. Much more likely that any existing arrangements will be allowed rather than unpicked.

If you are planning to expand into areas of Europe, familiarise yourself with local employment legislation and understand any opportunities to second staff from UK and vice versa.

If you would like to speak to an experienced employment advisor, please contact us.


Job evaluation scheme and gender pay audits

With the new requirements for organisations with 250+ staff to conduct a gender pay audit and publish results from 2018, many organisations are reviewing or implementing their job evaluation schemes.

Employers operate job evaluation schemes for a range of reasons, including the development of clear and orderly pay and grading structures and to help counter equal pay claims, as well to assist with market pricing where required.

A single job evaluation may be implemented to cover the whole workforce or employers may operate different schemes for varying groups of employees. The former approach is often favoured as this is likely to help counter any potential equal pay issues.

Types of job evaluation

There are two main types of job evaluation: analytical schemes, where jobs are broken down into their core components, and non-analytical schemes, where jobs are viewed as a whole. The use of analytical schemes is more popular because of the capacity to help provide a defence against equal pay claims.

Analytical schemes

These offer greater objectivity in assessment as the jobs are broken down in detail.

Examples of analytical schemes include ‘points rating’ and ‘factor comparison’ approaches.

Points rating – the key elements of each job, which are known as ‘factors’, are identified by the organisation and then broken down into components which may also be weighted. Each factor is assessed separately and points allocated according to the level needed for the job. The more demanding the job, the higher the points value.

Examples of factors commonly assessed include:

  • knowledge and skills
  • people management responsibility
  • communication and networking
  • decision-making
  • working environment
  • impact and influence
  • financial responsibility.

Factor comparison is also based on an assessment of factors, though no points are allocated. Use of this method is less widespread than ‘points rating’ systems as the latter approach enables a large number of jobs to be ranked at the time.

Non-analytical schemes

These are less objective than analytical schemes, but are often simpler and cheaper to introduce. Methods include job ranking, paired comparisons and job classification.

Job ranking -puts jobs in an organisation in order of their importance, or the level of difficulty involved in performing them or their value to the organisation.

Paired comparisons – compares each job in turn with another in an organisation. This takes longer than job ranking as each job is considered separately.

Job classification, also known as job grading. Before classification, an agreed number of grades are determined, usually between four and eight, based on tasks performed, skills, competencies, experience, initiative and responsibility. Clear distinctions are made between grades. The jobs in the organisation are then allocated to the pre-determined grades.

Developing job evaluation schemes

Whether adopting an analytical or a non-analytical approach, organisations have three main options over scheme design and development:

  • a scheme may be developed in-house
  • a consultancy’s off-the-shelf package may be purchased
  • a consultancy may tailor its package to suit the organisation’s needs.

The system selected will depend on the size of the organisation and the aim of the job evaluation exercise. The Hay Group’s Guide Chart-Profile Method is the most widely used scheme.

Other factors to consider

Job evaluation is a complex and time-consuming task and many organisations draw on the expertise of external organisations to help. The key issues to consider include:

  • The process is often as important as the results.
  • Job evaluation is an ongoing process.
  • An appeals procedure should be established before the evaluation begins.
  • Clear, detailed and up-to-date job descriptions have to be drawn up.
  • The more complex the scheme, the more detailed the job description needed.
  • Accurate records of decisions have to be kept.
  • The results have to be checked to see if there are any pay anomalies.
  • Effective communications are essential, as employees may have concerns over their future job grading and pay.

Operational considerations

Many organisations don’t have the skills in-house to conduct a Gender Pay audit or review or implement job evaluation schemes. The latter can be a big piece of work and organisations should not under estimate the time and cost implications.  Given we are half way through 2016 and first set of published results will be April 2018 time is tight to really get your house in order though still possible. 

Any company Job evaluation (and market pricing exercises) schemes need to be reviewed regularly to ensure such approaches continue to meet changing business needs. Job evaluation is an assessment of the role, not the person doing it, and should be based on a fair, transparent system that is effectively communicated and understood by employees.

The type of scheme chosen will depend on organisational needs, but any staff making decisions on job roles must remain impartial and may require training in the chosen system.

How can we assist you?

Amelore can provide both job evaluation and gender pay auditing services tailored to your needs.  If you would like more information, please get in touch with us.

Gender pay – How ready is your company?

gender equalityMore than four decades after the Equal Pay Act, the gender pay gap still stands at about 19%, with the average British woman earning around 80p for every £1 earned by a man.

In October 2016 the Government will introduce Regulations that require all companies with 250+ employees to carry out a gender pay review, and publish their data.  This has implications for the company’s reputation, its ability to attract and recruit staff and could also trigger equal pay claims from existing staff.

The Regulations will make changes to the Equality Pay Act 2010, and aim to “end the gender pay gap in a generation” (David Cameron). They will take effect from 1 October 2016 with the first reports needing to be published before 30 April 2018 and then annually by 29 April.

Getting prepared

Has your company ever carried out an equal pay audit? Do you know what your issues are and are you taking steps to resolve them?  If not, we strongly recommend that you consider carrying out an Equal Pay Audit this year ahead of the compulsory reporting dates so that you are not caught by surprise and can address issues early on.

A confidential Equal Pay Audit will:

  • Review and analyse gender pay
  • Identify any gaps and risks
  • Examine which objective justifications exist
  • Make recommendations for resolving areas of high risk.

Facts and Figures

The UK’s gender pay gap currently stands at 19.1% (Office for National Statistics, 2014) – forty four years after the Equal Pay Act was introduced – and lags behind the rest of Europe on 16.4%.

The new duties apply to private and third sector employers, employing 250 or more staff within Great Britain, and include limited companies, LLPs, statutory bodies and unincorporated associations.

Employers will have to provide and publish five items of gender pay information: the mean and median gender pay gap, the mean gender bonus gap, the percentage of men and women in the bonus scheme, and the distribution between men and women in salary quartiles.

The September 2015 Business in the Community Survey reported that 89 per cent of employees said they would feel more negatively towards their employer if the gender pay gap was relatively large in their organisation.

However if it was relatively small, 71 per cent would feel more positively towards their employer.

Do employers intentionally pay women less than men?

Not they don’t do this intentionally but they can often do it unconsciously.  Men are often much better at negotiating when they join an organisation. Women have the expectation that if they work hard and are good at their job so they will be fairly rewarded. Whilst this is true it is extremely rare for an employer or HR professional to review salaries with gender in mind.  If someone is earning less than they could or should, this is seen as operationally savvy and commercial. Good management even.

women high five

We have reviewed many employer data sets and observed stand out discrepancies which are explained away as historical, personality or line manager driven and as such no longer issues.  However if an organisation is paying a woman or women less than men in equivalent roles for no tangible reason, this will not only need to be rectified urgently but could result in resignations and a damaged employer brand and/or Employment Tribunal proceedings.

Benefits to the organisation

Pay is at the heart of the employment relationship, it influences how valued an employee feels and can act as a powerful demotivator if you get it wrong.

As an employer you will need to go public with your data, publish it on your website and upload it to a government website.

It is worth looking at the information early to assess what risks you are carrying and what measures need to be put in place over the next year to two before the first reports are published. Carrying out an audit now will help you comply with the law and good practice.

It is important that you feel confident that any analysis has been carried out reliably and that valid defences are understood or that indefensible issues are tackled so that you have fair, rational and transparent pay for your employees.

Understanding your risk profile and the measures to reduce these risks will protect your company from reputational and financial risks.

How we can help?

Amelore can conduct a gender pay audit and provide you with a report and recommendations now so you can address any issues before this legislation takes effect.