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By LegalEdge News

Pay and pay rises

Businesses and individuals are currently grappling with rising prices and mortgage rates as the UK endures a period of high inflation. As staff struggle with a cost-of-living crisis, many employers will want to see how they can assist their workforces at this difficult time. While inflation matching pay rises might not always be possible, there are some other helpful things employers can do.

  • If you’re unable to offer a pay rise, consider if a one-off cost-of-living payment could be made instead. Alternatively, consider if smaller additional payments could be made for a limited period to help employees through the winter. 
  • Whether you do this or raise salaries, it’s important to communicate and explain the reasons to the whole workforce, and make it clear whether it’s a one off payment or permanent rise. 
  • Although a pay rise is technically a change in terms and conditions, there is no need to get written agreement from staff. A communal or individual notification such as an email should be sufficient. 
  • Don’t forget to budget for the knock-on effects, such as increased pension contributions and national insurance contributions – which will also go up.
  • If you are intending to offer different pay rises to different parts of the business be mindful of equal pay laws; men and women are entitled to the same pay for doing the same or similar work. There is a risk where you have high numbers of men or women in a particular part of the business, so take advice early if you are concerned about this.
  • Any time limited payments should be clearly stated to be ex-gratia to avoid any expectation that the payments will be repeated. You should also consider whether any one-off payments will be pensionable. If not, state this clearly to staff, so that everyone knows where they stand. 
  • It has been reported that John Lewis has offered staff free meals to assist with the cost-of living crisis. Consider if there are non-monetary benefits you could introduce like this which would help people.
  • Examples include, buying back unused holiday (over the statutory minimum), setting up a salary sacrifice scheme to help staff make NI savings on childcare vouchers and pension contributions and offering a season ticket loan for those travelling into the office.  
  • If you have staff on the national minimum wage (NMW) remember that this goes up every year, usually in April, so don’t get caught out.
  • Younger staff are also entitled to an increased rate of NMW when they turn 18, 21 and 23 so make sure your systems are set up to recognise when they have had a birthday and need to be paid more.  
  • All workers have the right to an itemised payslip showing earnings and deductions and this must be provided on or before payday, either online or in hard copy. Make sure payslips accurately reflect any changes. 
  • It’s common for employment contracts to say that pay rates will be reviewed every year by the employer, but that is not the same as a right to a rise every year. Check your contracts to understand what your obligations are.
  • Consider if there is anything else going on in the business such as a need to change terms and conditions or introduce new restrictive covenants, it can be helpful to link this to a pay rise. 

If you want to discuss any of the above or any HR Legal concerns please get in touch today.

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