Brexit means Brexit
The new UK Prime Minister, Teresa May, has made it clear that although she did not vote to leave, that there will be no attempt to remain inside the EU or to return by some backdoor mechanism, like a second referendum.
So the only question to be answered is what kind of divorce will it be?
The answer to this question will depend on the extent to which the negotiations can achieve a balance between the value to the UK of access to the single market versus the pressure to control immigration.
The biggest issue to be sorted out is how trade will be managed between UK and EU – so what are the options:
- ‘Hard’ exit – UK does not participate in the single market and relies on the World Trade Organisation rules for trading with EU or negotiates a completely new bilateral trade deal with EU.
- ‘Soft’ exit – UK joins the European Economic Area (EEA) which is made up of EU member states plus Norway, Iceland & Liechtenstein. EEA provides for free movement of goods, services, capital and people; however, participation in the single market comes at a financial cost and requires free movement of people, two of the main arguments for leaving the EU.
The Brexiteers would probably have a preference for the Swiss model – UK joins the European Free Trade Association (EFTA); access to the EU market is governed by a series of bilateral trade agreements by economic sector. Switzerland is excluded from certain sectors, most notable Financial Services.
Post Brexit – taking back control
Under the ‘freedom of movement ‘ principle EU citizens had the right to work in any member state and access social services, healthcare and education in the same way as citizens of the host country.
There are an estimated 3 million EU citizens in the UK and 1 million UK citizens in the EU. The opening position of both sides to the Brexit negotiations is that the status and rights of these groups must be protected.
EU citizens now make up 10% of the UK workforce, with a much higher percentage in the NHS, construction, food manufacture, agriculture and hospitality.
In the white paper published in February 2017, the Conservative Government declared that it will ‘take back control of inward migration from the EU’. It has set an extremely challenging target – to reduce immigration to ‘tens of thousands’ per year – the white paper identified immigration in 2016 = 363,000.
To achieve a reduction in immigration the UK Government will have to consider:
- The status of the 3 million EU citizens in the UK
- Future systems for the control of immigration the EU
- How the new regime will be enforced particularly at the external borders
Common Travel Area (CTA) Employers, workers, citizens beware!
The CTA is a special arrangement which allows free movement of people between the UK and Ireland which is extremely important in the daily lives of citizens, particularly in the border region:
- 30,000 people commute to work across the border
- 841 flights per week between Dublin and London the busiest route in Europe
The CTA is not just about travel, it provides reciprocal rights for the citizens of the UK and Ireland:
- unrestricted access to employment and social welfare;
- access to healthcare and education;
- the right to vote in local, national elections.
The special arrangement dates back to 1922 to an agreement between the British Government and the new Irish Free State.
The status of Irish citizens in the UK was formalised by the ‘Ireland Act 1949’ which states that “Ireland is not a foreign country for the purpose of any law in force in any part of the United Kingdom”.
The Irish government responded with ‘Citizens of the United Kingdom and Colonies (Irish Citizenship Rights) Order 1949’ which provided that UK citizens enjoy the same rights in Ireland as Irish citizens in the UK.
Social Media – dos and don’ts
The best approach is for an employer to make it clear to employees what conduct online is acceptable, and what is not. The employer should include social networking in its discipline policy; giving clear examples of what will be regarded as gross misconduct – for example, posting derogatory or offensive comments on the internet about the company or a work colleague.There can be confusion over what is acceptable use of social media, some employees can see it as a platform for free speech and believe they should be able to say what they want.
Employers may be keen for employees to promote the organisation’s brand on social media, but not at the cost of making unwelcome posts.
Employers should make it clear when employees will be seen as representing the company and what personal views they can express – employees may be forbidden from expressing political views.
Employees may be required to use a disclaimer on any blogs, comments on social networking sites or tweets – include a statement that the views expressed are their own and do not represent the employer’s view.
Staff should be made aware that the use of social media will be monitored and where abuse is uncovered action may be taken under the disciplinary procedure.
Social media – the dilemma for employers!
The impact of social media is blurring the distinction between work and personal life, with most people always connected whether at home or at work.
Employers may be concerned that some employees use company computers and smart phones for sending emails to friends, accessing social network sites, or even shopping online.
Monitoring employees’ use of social media might seem reasonable but it may infringe an individual’s right to privacy. Employees have a legitimate expectation of personal privacy which is not overridden by the fact that the phone, laptop, or tablet may be provided by the employer.
However, the right to privacy may be balanced with the interests of the employer:
- To prevent abuse of social networking sites, e-mail or text;
- To protect their business and reputation;
- To prevent cases of cyber bullying in the workplace.
Pension – the funding crisis
In the past 10 years there has been a switch from the established ‘Defined Benefit’ schemes (DB) to the more secure ‘Defined Contribution’ schemes (DC). The under funding crisis has affected the majority of DB schemes and a number of high profile cases hit the headlines – Bank of Ireland, Aer Lingus, ESB, Ryanair and the Irish Times.
The combination of low interest rates and volatile stock markets has caused DB funding levels to reach crisis levels. The Irish Times 13th August 2016, reported ‘that the pensions hole in Ireland has almost doubled in 2016, at the start of the year the deficit was just under €3 billion and by the end of July it had jumped to €5.7 billion’.
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