The review of Employment Policies is necessary to achieve the objective of bringing all employees under single legal employer and ensure fairness and consistency across a range of policy areas – – pay, promotion, training and development.
Employment policy statements establish basic ground rules for decisions relating to the compensation and treatment of employees. The Policy framework allows the BoD to delegate decision making responsibility to the management team by determining appropriate action, providing guidance and defining limits.
The policy framework should be decided by the BoD, the following list is typical of the area’s that may need to be reviewed:
- Remuneration policy
- Internal selection & appointment
- Sick pay policy
- Retirement age
The policy should determine the appropriate pay rates and benefits for staff and should reflect the tasks and level of responsibility required in their job. It is the principal means of rewarding people for their hard work and commitment.
Staff rates of pay will be subject to annual review by the remuneration committee. The committee should comply with the governance and risk management regulations as specified in the ‘Credit Union Handbook’.
In determining future rates of pay and benefits the committee should consider:
- The credit unions ability to provide pay increase for staff
- Labour market survey to determine trends in pay increases in the Credit Union sector
- Projected cost of living increases as determined by the Consumer Price Index (CPI)
- CU dividend policy as determined by the BOD and ratified at the AGM.
Many Credit Unions continue to rely on pay scales linked to civil service rates which have a number of fundamental flaws:
- Scales do not reflect economic conditions and result in pay rates well above market levels
- Scales do not reflect the CU ‘ability to pay’
- Scales do not reward commitment and performance
- Scales eventually become obsolete
Internal Selection & Appointment
The C U should be committed to providing opportunity for internal candidates to develop their skills & qualifications and achieve promotion within the organization.
Selection and promotion decisions should be based on objective criteria – qualifications, experience, skills, personal traits needed for the job.
Staff members will be encouraged and supported to participate in training programmes and achieve Credit Union related qualifications.
If there are no suitable internal candidates vacant positions will be advertised in the external market.
The TUPE legislation protects the terms and conditions of staff involved in the transfer, which ensures that staff carry all of their existing terms and conditions to the new legal employer.
The contract of employment is a legal agreement between the employer and the individual employee and any changes to the existing agreement needs the employee’s consent.
Balancing the cost of payroll against providing a reward package that will retain key employees and stimulate performance can be a very demanding task. Already CU’s are encountering problems recruiting and retaining sufficient skilled and experienced staff to meet the demands of the new legal and regulatory regime.
Establish contractual arrangements
It will usually be clear who transfers with an undertaking but in some cases there may be some employees in respect of whom it is not so clear. There are obvious uncertainties where an employee may not technically be employed (volunteer) or where the employee only works part of their time or where they are employed on a temporary contract.
To decide on this issue we need to examine the following information:
• Payroll records for at least one month prior to transfer;
• Establish the rates of pay, hours of work, holiday entitlements, and general terms & conditions of employment;
• Date of hire and continuity of employment;
• Outstanding legal claims / liabilities, e.g. personal injury, employment tribunal claims;
• Performance/ disciplinary record;
• Individual agreements that may affect the employment relationship, e.g. flexible arrangements – start times, hours of work, payment arrangements;
• Pension/ PRSA arrangements.
Employee pension rights do not automatically transfer to the new employment because group pension schemes often have more than one Participating employer. The result is that the Group Pension Scheme does not transfer with the business being transferred.
However where there is a pension scheme in place at the time of transfer, the legislation provides that;
• The new employer must ensure that pension rights are protected
• If the scheme is an occupational pension scheme covered by the Pensions Acts, then the protection given by the legislation applies
Negotiations are required to establish what pension obligations transfer to the new employer and other issues need to be considered – PRSA arrangements, life insurance and health insurance.
Changing terms of employment
Following the Transfer, employers often find that they have employees doing the same job on different T&C of employment.
TUPE provides protection for the existing individual contractual arrangements, however if the employee and employer can agree to changes the strict letter of the law need not apply.
The employer may consider applying the most favourable terms or offering incentives for employees to change; buyout of the term of the contract or trade off against another entitlement (increased holiday entitlement v increased mobility).
The challenge is to review the range of options available and select the right mix – pay rates, hours of work, mobility etc. The decision-making process should include a ‘benchmarking exercise’ which will provide management information to evaluate current levels of pay + benefits; decide future remuneration policy; prepare individual pay + benefit packages.
The Report of the Commission on Credit Unions 2012 identified the issue of governance as at the core of strengthening the regulatory framework for Credit Unions.
The Credit Union Act 1997 sets out comprehensive governance standards that include a clear organisation structure, with well defined, consistent reporting lines that reflect the nature, scale and risk profile of the CU.
The new standards emphasise the importance of the separation of authority and responsibility between the Board of Directors (governance and oversight functions) and the management team (implementation of policy and ‘day to day’ operations).
Governance is the system by which the CU directs and controls it’s affairs to meet strategic objectives; protect member’s funds; and ensure compliance with the legal and regulatory framework.
The organisation structure – the allocation of people and resources – is a matter for individual CU but should reflect the scale, complexity and risk profile.
The Board is responsible to the membership for the performance of the CU, but authority for day to day activities is delegated to the management team.
The CEO / Manager should act as the link between the Board and the executive management team. The separation of functions ensures that there is clarity about individual authority and responsibilities and avoids the possibility of failure of governance or conflicts of interest.
The ‘Transfer of Engagement’ process will usually involve some change to the employment relationship and terms & conditions of employment. Therefore it has the potential to give rise to issues that may make the ‘transfer process’ more complex or contractual problems that may end up in an Employment Tribunal.
However, the transfer process also provides the opportunity to update and develop organisational, employment and contractual arrangements in line with new CU legislation and Central Bank regulations.
The HR challenges & opportunities created by a ‘transfer’ revolve around a number of key issues:
- Governance and management issues
- Harmonising pay and benefits
- Reviewing and updating employment policy
- Changing contracts and terms of employment
- Keeping valuable staff members on board
Governance and management issues
The Report of the Commission on Credit Unions 2012 identified the issue of governance as at the core of strengthening the regulatory framework for Credit unions. The 1997 Act as amended by the 2012 Act, sets out comprehensive governance requirements that are designed to provide a framework for improved governance standards, with a particular focus on the Board of Directors(governance and oversight functions) and the management team (implementation of policy and the operational functions).
The new standards emphasise the importance of the separation of authority and responsibility between the Board of Directors and the management team.
The Due Diligence investigation should seek to understand the current structure and consider future governance and management issues for the new entity.
Harmonising pay & benefits
Balancing the cost of your payroll against providing a reward package that will retain key employees and stimulate performance can be a very demanding task.
The TUPE legislation protects the terms and conditions of staff involved in the transfer, ensuring that staff carry all of their existing terms and conditions to the new legal employer.
The challenge is to review the range of options available and select the right mix – pay rates, performance bonus, sick pay, health care, travel allowances and pension.
Reviewing & updating employment policies
Bringing all employees under single legal employer and ensuring fairness and consistency across a range of policy areas – remuneration policy, working time, sick pay, leave entitlements, retirement age – can be a complex project.
Employment policy statements establish basic ground rules for employees and help protect the credit union from future litigation.
Changing contracts and terms of employment
The contract of employment is a legal agreement between the employer and the individual employee and any variation of an existing agreement needs the employee’s consent.
It is usual to consider incentives for the employee to agree to proposed changes – buyout of the term of the contract or offer an enhancement of the terms of employment, such as, increased holiday entitlement.
The employer will be expected to engage with the employee, take reasonable measures to reduce the negative impact on the employee and consider future employment options.
Keeping key staff on board
Staff members are only able to perform at their best if they understand their roles and rights and have opportunities to make their views known to management on issues that affect them.
Collaborative problem-solving is a critical tool to get the input of employees – it is employees who have the knowledge and experience of the detailed operations, the problems and the pitfalls, and how to improve member services.
Staff members should be given a timeline for the completion of the merger process and weekly meetings should be held to provide a forum for discussion and updates on progress.
It is not enough to have regular meetings and provide loads of information. In dealing with difficult issues it is important to give employees an opportunity to understand the issues and express their views. The time spent in collaborative problem solving will improve the decision making process and gain understanding and commitment to the implementation of the new arrangements.
16th June 2016