Case Studies

"If an employer provides for pro-rata bank holiday entitlement for part-time employees, how should it calculate this?"

 "What happens when a promoted employee does not make the grade?"

"If an alternative but less well-paid position is offered to a redundant employee, is there any obligation on the employer to continue paying the employee at his or her current level?

“If an employer agrees to loan their employee money what should be done to ensure the loan is repaid?”

 


One of the most frequently asked HR questions is on part-time holiday entitlement.

"If an employer provides for pro-rata bank holiday entitlement for part-time employees, how should it calculate this?"

Because most bank holidays fall on a Monday or Friday, part-time employees who do not work on these days could be entitled to proportionately fewer days off compared with full-time employees, depending on shift patterns and annual leave arrangements within the organisation.

Employers must ensure that all employees have at least the statutory minimum annual leave entitlement and that part-time employees are not treated less favourably than full-time employees. To avoid a complaint of less favourable treatment under the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000 (SI 2000/1551) many employers provide part-time employees with a pro-rated bank holiday entitlement.

While there may be no arrangement that will have entirely fair results for all employees whatever their working pattern, one option is to calculate pro-rated bank holiday entitlement according to the number of hours that the part-time employee works, irrespective of whether or not he or she works on the days on which bank holidays fall.

For example, if full-time employees are entitled to eight bank holidays a year, in addition to their normal annual leave entitlement, a full-time employee working a five-day week of 37.5 hours would be entitled to 60 hours of leave on bank holidays (ie eight days of seven and a half hours). A part-time employee working a three-day week of 22.5 hours would be entitled to a pro-rated bank holiday allowance of 36 hours (22.5 ÷ 37.5 x 60). Calculating an hourly entitlement has the disadvantage of potentially resulting in an employee working for, for example, only one or two hours on a particular day.

The employer should allow the part-time employee to book the 36 hours’ pro-bank holiday entitlement as annual leave under the organisation’s normal procedure. If the employee is scheduled to work on any bank holiday, he or she would have to book this as annual leave to take the day off. If the business is closed on bank holidays, the employer could require the employee to take annual leave if he or she is scheduled to work on these days, by including this in the employee’s contract or giving the appropriate notice.

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"What happens when a promoted employee does not make the grade?"

Managers should give careful consideration as to an employee's suitability for promotion in the first place, and make sure that the employee is given adequate training before the promotion takes effect.  Just because an employee is a competent technician, accountant or secretary, for example, does not mean that he or she will be a competent supervisor of staff. The skills and knowledge needed for the promoted post may be quite different to those that the employee is accustomed to using in his or her current post.

The principles for handling a situation where a promoted employee fails to make the grade would be the same as for any other lack of capability situation, with the individual being granted a full and fair opportunity to discuss the problem areas without being blamed for the fact that he or she has not succeeded in meeting the standards required in the new job.

Where a promoted employee continues to fail to reach the standards required in the new job, the employer is not under an obligation to offer the employee his or her old job back, unless there is agreed provision for this. Such a move could, in any event, create other problems if, for example, someone else has been appointed to the post left vacant by the promoted employee.

Nevertheless, a way out of the problem may be to offer the employee an alternative position elsewhere in the organisation if this is possible and if the move is acceptable to the employee. The manager should discuss all the available possibilities with the employee concerned.

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If an alternative but less well-paid position is offered to a redundant employee, is there any obligation on the employer to continue paying the employee at his or her current level?

An employee who is under notice of redundancy should be offered any suitable alternative vacancy that arises prior to his or her termination date within the same organisation or an associated organisation. 'Suitable' in this context means work that the employee can reasonably do and that is on terms and conditions not substantially less favourable to him or her.

A job on a lower wage or salary will therefore not, technically, be suitable. Nevertheless, it is advisable for the employer to offer a redundant employee the option, if it arises, of a less well-paid position, because a failure to do so may turn an otherwise fair dismissal into an unfair dismissal. The issue will be whether the employee is prepared to accept the new job on a lower rate of pay. If the employee is agreeable to this, then the employer should ensure that this agreement is put in writing and signed before the employee begins the new job. If the employee is not prepared to agree to the lower rate of pay, then the redundancy dismissal will stand. An employee in these circumstances would have the right to refuse the alternative lower-paid post on the grounds that it was not suitable, and would therefore retain his or her right to a statutory redundancy payment.   The employer is not obliged to continue paying the employee at his or her current level, although it may choose to do so if it wishes, perhaps by freezing the employee's pay until such time as pay rises elsewhere in the organisation bring it back into line.

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“If an employer agrees to loan their employee money what should it do to ensure the loan is repaid?”

To avoid any misunderstanding of the loan arrangement a written Agreement should be drawn up which confirms the terms and conditions of the arrangement. Such an Agreement should be issued on Company letter headed paper, signed on behalf of the Company by an authorised person and signed by the employee to signify acceptance. A copy of the Agreement should be placed on the employees personnel file and stored confidentially within the guidelines of the Data Protection Act 1998 and any amendments thereafter.

The Agreement should include:

  • Loan amount
  • If Interest is to be charged and at what rate
  • Repayment method/monthly deductions via payroll
  • Date loan to commence/end
  • What happens if the employee leaves before the loan is repaid in full

Employers should also check whether their Contract of Employment contains an express clause. In which the Company reserves the right to require the employee to repay monies owed either by deduction from salary or any method acceptable to the Company that could be relied upon should the employee leave before the loan has been repaid in full.

Section 13 of the Employment Rights Act 1996 makes it unlawful for an employer to make deductions from an employee's wages unless the employee has given prior written consent, or a relevant provision exists to this effect in the employment contract. Therefore, to ensure that a loan will be repaid if the employment is terminated for any reason, the employer should include a clause in contracts of employment stating that it has the right to make deductions from the employee's salary for various purposes including the repayment of an outstanding loan.

Employees should be made aware that if the loan is in excess of £5000 and is interest free or, the interest is less than the official Bank of England interest rate on a loan, then the loan may constitute a taxable benefit. If this is the case the employee will have to notify the tax office and be advised to contact HM Revenue & Customs for clarification.

Whilst employers are under no legal obligation to assist an employee in financial difficulties, if they wish to, they are advised to publish a policy and procedure on Loans and Lending Money. Whilst personal circumstances may vary, adopting a consistent approach to loan applications will help avoid allegations of discrimination.