Discrimination legislation
In 2004, across 368 claims for unlawful discrimination, £6.2 million compensation was awarded, with average payouts of over £16,000. The potential risk for tribunal action is compounded by amendments to sex and disability discrimination legislation which will afford more protection to employees. With important changes to employment law having already occurred and with others scheduled for the coming months, I thought it may be useful to look at how these changes may be affecting, or may begin to affect small businesses.
Sex Discrimination
From October 1st 2005, amendments to the Sex Discrimination Act claim to clarify the law on sex-based harassment (on account of a person's gender) and sexual harassment. Although these are not significant developments, (tribunals already having established these rights), the new Regulations now formally protect workers from acts of verbal, non-verbal and physical conduct which violate a person's dignity, or create an intimidating, hostile, degrading or offensive environment. As a result, it will now be easier for an employee to pursue a claim over sexist jokes, for example.
Additionally, indirect sex discrimination has been redefined. It will no longer be necessary for an employee to prove, by statistics, that they were subjected to treatment which disadvantaged one sex, considerably more than the other. Statements by colleagues may be sufficient to convince a tribunal over the unlawful nature of the condition, criteria, or procedure. This amendment, again, will make it easier for employees to succeed in a claim.
Legislation will now also offer protection to those on unpaid work experience.
These changes further clarify the need for good management which ensures fair, consistent treatment and deals with harassers, bullies and those who discriminate so staff feel safe at work. As before, an Equal Opportunities Policy which unambiguously spells out what your company regards as acceptable behaviour and states how employees who flout the terms will be dealt with, is key to complying with the legislation. Putting the policy into practice, training any managers who will be responsible for upholding it and dealing with any grievances promptly can help head off potential claims.
Disability Discrimination
The average award case made in Disability Discrimination cases during 2004 was just under £29,000. Such enormous sums for firms to find after substantial legal fees may merely be the tip of an iceberg. The Disability Rights Commission estimates that an additional 175,000 people will be covered by additional protection offered to employees as a result of the forthcoming amendments, due to take effect on December 5th, 2005.
Two single expansions of the Act are set to increase the burden on firms exponentially: employees will soon be protected from discrimination as soon as they are diagnosed with certain conditions and the requirement for mental illness to be 'clinically well recognised' is to be removed.
It will no longer be necessary for an employee to show they are suffering from any symptoms or that their condition has a substantial and long term adverse effect on their daily activities if diagnosed with HIV, certain types of cancer or multiple sclerosis in order to be protected under the Act. Consequently, you will be under a duty to maximise employment opportunities by making reasonable adjustments. This may involve allowing time off so appointments for treatment or counselling can be honoured. Although an employee who claims to be suffering from depression brought on by work-related stress will find it easier to bring a claim because their mental ill health will not need to be confirmed by a medical expert, they will still need to show that their condition has a substantial adverse effect on their daily activities and is likely to last at least 12 months. This is perhaps the commercial saving grace that companies need to help fend off allegations of discrimination. As before, but with more urgency now, maintain contact with the employee through all spells of absence, commission a medical report to determine the underlying problems and deal with any working practices that may be aggravating an employee's condition, for example excessive pressure.
General Discrimination guidelines
Direct discrimination occurs when a person receives less favourable treatment on account of their sex, disability or indeed race, sexual orientation, religion or belief. In addition, by October 2006, it will also be unlawful to discriminate on account of age. Direct discrimination is never justifiable. It is vital that you ensure decisions are not made on stereotypical assumptions or on account of somebody's prejudice. The allure of uncapped compensation often spurs on the disgruntled employee to seek redress.
Source: Jemma Brett, Legally Bound. Business Network, October - November 2005
Payroll and the small business
Having focused on the changes to discrimination legislation which may affect your business operations, I shall focus here on payroll and the small business. As an employer, you have a number of legal obligations with regards to the payment of employees. If you fail to follow the correct procedures - including paying your male and female employees equally and fairly - you could have penalties to pay. The following differentiates between the different schemes of which you must be aware. For more information, visit the HM Revenue and Customs website. http://www.hmrc.gov.uk/employers/tmaday-to-day-payroll.shtml
Pay As You Earn (PAYE)
Introduced in 1944, this places an obligation on an employer to calculate and deduct the correct amount of income tax from their employee's pay at source (i.e. before the employee receives it). The PAYE system was introduced to specifically deal with income tax and many aspects of its process have remained unchanged since 1944. Over the years, however, new initiatives have been introduced and are now so fully integrated alongside the processing of PAYE as to appear, to the unwary, to be indistinguishable.
National Insurance
Introduced in the 1940s, the National Insurance Contribution (NIC) has undergone many different guises however, it has been wholly earnings related for many years now. Class 1 NIC is payable both by the employer and employee on earnings, class 1A and 1B may also be payable by the employer should they provide their employee with Benefits-in-Kind.
Statutory Sick Pay (SSP)
Introduced in the 1980s, this former benefit is now, with rare exception, funded entirely by the employer, however its operation is compulsory where the employer doesn't offer an alternative contractual sick pay scheme.
Statutory Maternity Pay (SMP)
SMP followed shortly after SSP (see above) and largely remained unchanged for many years. However, in recent years, thanks to European Directives, a number of successful claims through the courts and more recently UK government policy, this is an area which offers endless opportunity for the employer to fall foul of its obligations.
Statutory Adoption Pay (SAP) and Statutory Paternity Pay (SPP)
Introduced in April 2003, these ensure that no employer can be entirely confident that they may not temporarily lose an employee, on paid leave, due to their family responsibilities.
Student Loans
Introduced in 2000, these require an employer to make deductions from an employee's pay, where they are identified as being due to repay a student loan.
Source: Samantha Mann, IPPM Policy & Research. Business Network. October – November 2005
Employment Law: discrimination legislation and payroll