S E R V I C E

FACT S E R V I C E

153 Increase in a 'week's pay' takes effect Having a say on pay

155 Default retirement age stays at 65 — for now

154 Tips and the minimum wage rules change Health problems that impact on work

156 Contraction in the UK economy is not as bad

Annual Subscription £70.25 (£59.50 for LRD affiliates)

Increase in 'a week’s pay' takes effect On 1 October, the maximum amount of ”a week’s pay” for calculating compensation for unfair dismissal and redundancy pay rises from £350 to £380. The one-off increase was announced in the 2009 Budget and becomes law in the Work and Families (Increase of Maximum Amount) Order 2009. www.opsi.gov.uk/si/si2009/draft/ukdsi_9780111480267_en_1

Having a say on pay A shareholder advisory vote on executive compensation has been an effective tool for investor engagement, according to a new study published by the corporate governance advisory firm PIRC and investment group Railpen. The report, Say on pay: six years on, reviews the UK’s experience of shareholders having an advisory vote on remuneration since its introduction in 2003. Overall remuneration at UK companies has risen, according to the report, but directors have faced a high level of opposition on pay this year with four companies losing investor votes — equalling their worst ever year in 2003.

Volume 71, Issue 39, 1 October 2009

The most recent company to face such pressure was housebuilder Berkeley, where earlier this month shareholders voted against a remuneration plan for its top executives. The study argues that this extension of shareholder rights in the UK has encouraged greater investor engagement over pay, and has led to increased, and better quality, dialogue with companies over remuneration policy. It has also resulted in the performance-related elements of remuneration forming a much larger part of the total, as shareholders have sought to use pay policy to align directors’ interests with their own. But the report also highlights the need for investors to use the new right effectively once it has been granted. Other key findings include:  both investors and companies report that since the introduction of the vote there has been an increase in engagement over remuneration. This has led to some friction, it has also created an improved dialogue between companies and their owners over this important governance issue;  there has been a sharp reduction in directors’ typical notice periods since the introduction of the shareholder vote. Over 95% are now on one year's notice compared with 75% in 2001. This has reduced the risk of payment for failure;  performance-related elements of remuneration now account for a much larger percentage of the total, with long-term incentive plans (LTIPs) becoming a more significant element; and

LABOUR RESEARCH DEPARTMENT

Published weekly by LRD Publications Ltd, 78 Blackfriars Road, London SE1 8HF. 020 7928 3649 www.lrd.org.uk

154

Fact Service

 between 2000 and 2008 there was a clear movement away from the use of option schemes towards LTIP share awards. And from 2003 onwards there was a small increase in the number of share matching (or bonus deferral schemes) being introduced, suggesting that following the introduction of the vote in 2003 companies were more innovative in considering their remuneration structure. However, the report says that some shareholders do not appear to have used their voting rights effectively, with the average vote against a company’s remuneration report falling from a peak in the 2004 season. The report argues that shareholders must use their ownership rights actively if it is to have a meaningful effect. www.pirc.co.uk/press/press221.html www.pirc.co.uk/news/story373.html

Volume 71 Issue 39

jobs would help no one and that restaurants and bars should clearly display notices describing their policy towards tipping. “Taking the tips from staff is bad practice and luckily our members are saying they don’t do it, what most of our bars and pubs do is to share the tips out because good service is a team effort,” Robertson said. It is estimated that a fifth of the UK’s 30,000 restaurants do not pass on tips to their staff, despite a survey this year that showed 94% of customers wanted them to. Instead, bosses use the tips to supplement salaries, meaning they can pay a member of staff less than the minimum wage, but top it up by sharing out the tips. www.lowpay.gov.uk/ www.opsi.gov.uk/si/si2009/em/uksiem_20091902_en.pdf

Tips and the minimum wage rules change The National Minimum Wage rises from 1 October. Although the rises are pitifully small, nearly one million people will benefit from the increase. The adult rate is to rise from £5.73 to £5.80 an hour — an increase of just 7p an hour or 1.2%. The rate for 18- to 21-year olds will increase by 6p an hour to £4.83 and the rate for 16- and 17-year olds will go up by 4p to £3.57 an hour. Tips From 1 October, employers are not allowed to count service charges, cover charges, tips and gratuities paid to workers through the payroll as part of the minimum wage. Tips given directly to a worker by a customer and tronc payments paid directly to a worker from the tronc master will continue not to be included as part of the minimum wage. The British Hospitality Association (BHA) said the move could cost restaurants £130 million and as many as 5,000 jobs. Which, if you look at it from a workers' point of view, says employers have been robbing staff of £130 million in wages.

www.guardian.co.uk/business/2009/sep/27/tips-law-waiters-pay

Health problems that impact on work Over 44 million, or one in six, members of the European Union workforce now have a long-standing health problem or disability that affects their ability to work, according to a major study — Fit for work Europe — by the independent Work Foundation consultancy. Musculoskeletal disorders (MSDs) — conditions affecting bones, joints and connective tissue — account for a higher proportion of sickness absence from work than any other health condition. Over 40 million workers in Europe are affected by MSDs attributable to their work. The study looked at the impact of low back pain and work-related upper limb disorders (WRULDs) — two groups of conditions which are usually characterised by short but intense episodes of pain and incapacity — and rheumatoid arthritis (RA) and spondyloarthropathy (SpA), two inflammatory conditions that are often progressive and increasingly incapacitating.

The BHA's claims were rebutted by both the government and by another industry body, the British Institute of Innkeepers (BII), which welcomed the move towards an end of “bad practice”.

Of the four categories of MSDs that the research concentrates on both WRULDs and low back pain affect large numbers of workers and are frequently caused by work — either through physical strain, repetitive movement or poor posture.

Neil Robertson, chief executive of the BII, told the Observer newspaper that scaremongering over

The second two, RA and SpA, while affecting smaller numbers of workers, are not caused by work, but

Volume 71 Issue 39

Fact Service

155

can be made worse by work. However, work can be both a cause, or aggravator, and a cure.

organisation, working time or job design to allow an early or partial return to work.

In all cases there is clear evidence that welldesigned work environments and flexible working arrangements can support job retention. In addition, a phased return to work and that work — especially if it is good work — can be good for health, well-being and recovery.

The health care system should provide sufferers with early referral to physical therapy and effective drug therapies with inflammatory conditions.

Almost a quarter of European workers report that they have experienced muscular pain in their neck, shoulders and upper limbs. The symptoms of WRULDs can present in the tendons, muscles, joints, blood vessels and/or the nerves and may include pain, discomfort, numbness and tingling sensations in the affected area. These conditions can be caused, or exacerbated, by work which involves repetitive movements, prolonged keyboard use, heavy lifting, poor posture or other forms of work-related physical strain. It is estimated that half of the European population will suffer back pain at some time in their lives and in excess of a third of the European workforce suffer from low back pain. Over 2.9 million people in Europe have RA, many of working age. Every third person with RA becomes work disabled and up to 40% leave work completely within five years of diagnosis. Many people with RA want to stay in work but are unable to because their condition is not diagnosed or treated early enough. The report says that people with SpA conditions such as ankylosing spondylitis (AS) are three times as likely to be out of work as the general population. These diseases often affect younger people and if they are not treated early, they can be lost to the labour market and be claiming benefits for decades — often needlessly.

TUC general secretary Brendan Barber said the report highlights what unions have been demanding for many years — access to early rehabilitation for those with muscle and back problems. "In the UK, just 2% of workers have access to comprehensive occupational health services through their employer and most people have to rely on a referral from their GP. This can take many months, by which time the problem may be chronic," he said. "We need a national occupational health service which identifies and treats these conditions at the earliest opportunity. Workers with muscle and back conditions also need more help to return to work once they feel able to. "Many of these illnesses are caused or made worse by work. The huge number of cases shows that the current European regulations on manual handling and working on computers are failing to prevent work-related musculoskeletal disorders." The TUC said the UK urgently needs new and clear regulations, backed up by strong enforcement against those employers that are causing many of these injuries. www.fitforworkeurope.eu/Website-Documents/Fit%20for%20Work%20panEuropean%20report.pdf www.tuc.org.uk/h_and_s/tuc-17034-f0.cfm

Default retirement age stays at 65 — for now The UK’s default retirement age of 65 is not unlawful, the High Court has ruled, bringing to an end three years of “Heyday” litigation.

If the effects of MSDs on work disability and the general quality of life of somebody are to be minimised then early diagnosis and treatment can often be critical. The report looked at three domains — workplace, the welfare system and the health care system.

The charity Age Concern brought judicial review proceedings in the High Court in December 2006, arguing that the UK’s age regulations breached the ban on age discrimination in the equal treatment directive.

In the workplace, employers should be screening staff looking for early sign of problems and they should have internal health care awareness programmes and education systems. Employers should allow reasonable accommodation to work

The Heyday case — named after a division of the Age Concern charity — was referred to the European Court of Justice. This court ruled in March this year that derogations from the ban on age discrimination could be lawful if they were “justified

156

Fact Service

by legitimate social policy objectives, such as those related to employment policy, the labour market or vocational training”. And the case went back to the UK’s High Court for a decision. Here, Mr Justice Blake ruled that adopting a default retirement age was not “a disproportionate way of giving effect to the social aim of labour market confidence”. However, the judge gave a nod to a government review of the default retirement age which has been brought forward to 2010. He said if the regulation "had been adopted for the first time in 2009‚ or there had been no indication of an imminent review‚ I would have concluded … that the selection of age 65 would not have been proportionate. I would‚ accordingly‚ have granted relief requiring it to be reconsidered." Andrew Harrop‚ head of public policy at Age Concern and Help the Aged, said the ruling was not the end of the campaign: “We will be stepping up our fight to get this outdated legislation off the statute book.... Ministers still have the opportunity this side of a crucial general election to give real help to people in their 60s by outlawing forced retirement. They should amend the Equality Bill which is currently making its way through Parliament.” TUC general secretary Brendan Barber, expressing disappointment at the decision, said: “The decision of the court will be a blow to working people who need, or want, to work on beyond 65. It will allow employers to go on using an arbitrary retirement age as an excuse to weed out staff without having any obligation to compensate them or use fair processes." “We hope that the government will not use this decision as an excuse to delay the promised review of the default retirement age.” Employer opposition to change New research from international law firm Eversheds shows that the vast majority of employers (73%) — surprise, surprise — want to keep the default retirement age in place.

Volume 71 Issue 39

quarter of employers (24%) usually accept requests to work beyond normal retirement age, while 68% consider requests on an individual basis. Only a small proportion of employers (8%) said they usually decline requests to work beyond 65. While the majority of employers said they hoped that the default retirement age would be retained following the DWP review in 2010, a small number of respondents (8%) said that raising the default retirement age would be better than abolishing it altogether, allowing for at least some flexibility to enable workforce planning. The findings show that workforce planning is the main reason for organisations to retain a default retirement age, but issues of health and safety and capability were also raised. Just under a third (31%) said they are concerned about the capacity of some older workers to continue to perform well beyond the age of 65. www.pensionsage.com/pa/Heyday-challenge-on-age-discrimination-overturned.php. php www.tuc.org.uk/pensions/tuc-17024-f0.cfm http://press.eversheds.com/content/Detail.asp?ReleaseID=1235&NewsAreaID=2

Contraction in the UK economy is not as bad The rate of contraction of the UK economy in the second quarter was less than thought, according to the Office for National Statistics. UK gross domestic product (GDP) fell by 0.6% compared with the previous quarter, revised from the previously published figure of a fall of 0.7%. The level of GDP is now 5.5% lower than the second quarter of 2008. Between the first and second quarter of this year output in the production industries (manufacturing, energy and mining) fell by 0.5%, within which manufacturing output fell by 0.1%. Construction output fell by 0.8% over the quarter, while output of the service industries — the biggest sector of the economy — decreased by 0.6%.

The findings revealed a concern among employers that workforce planning would be hamstrung without the clarity that the law currently provides. However, they also showed a willingness among organisations to allow people to continue to work beyond the age of 65.

www.statistics.gov.uk/pdfdir/qna0909.pdf

The research conducted among 250 senior managers and HR professionals, revealed that almost a

Designed and printed by RAP Spiderweb Limited, Clowes Street, Hollinwood, Oldham OL9 7LY Telephone 0161 947 3700

The indications are good for more signs of recovery in the third quarter when preliminary estimates are produced later this month.