Bonuses: why pay ’em

Earlier this year Eric Daniels (the one-time CEO of the Lloyds Banking Group) successfully sued his ex-employer for an unpaid #bonus of £1.3 million worth of shares.  Litigation of this type outside the financial services sector is thankfully rare, but bonuses do often lead to disagreements, particularly when people leave.

I remain amazed how documentation is often drafted casually, if at all, and how bonus arrangements continue year after year with very little thought about their effectiveness.  If this rings bells for you – read on.

What are bonuses?

Bonuses have long been a part of the pay landscape, with very little evidence about their effectiveness as a motivator.

Wikipedia describes a bonus as ‘an extra payment for doing one’s job well’, and supporters will argue that they reinforce desired behaviours such as a focus on profitability or sales.

In reality, many bonuses are only loosely linked to individual performance, and critics will argue that unless there is a clear ‘line of sight’ between the objectives (levels of profitability, sales, effecting change etc.) and the contribution made by individuals, the prospect of a bonus will not influence behaviour in the job.

They are often little more than a deferred payment.

Detractors will also argue (following in a Maslow/Herzberg tradition) that it is the intrinsic value of the job that motivates, and quote numerous studies where reward comes well down the list of priorities as a motivator. For employees they can be unpredictable, often don’t count towards pay for the purposes of obtaining a mortgage, and they are usually non-pensionable.

On this latter point, care should now be taken to ensure that any bonus, regardless of what it says in the contract of employment, will be pensionable if the employee’s pension does not otherwise reach the upper earnings limit of £46,384 (2018/19). If you are offering a final salary pension scheme, you also need to check the scheme rules to ensure that they don’t require bonuses to be pensionable.

How popular are they?

The CIPD Reward Survey reveals a steady reduction in the number of employers using bonus schemes of one sort or another.  Overall 48% of employers used them (43% of SMEs) in 2017, although the decline is probably largely due to the capping of bonuses in the financial services since the 2008/9 crash.

The figures illustrated below show the decline and also that, outside of financial services (Rest of Economy), bonus payments make up about 5% of total pay compared to 20% in financial services (used with permission).

What are the different types of bonuses?

Very often bonuses are related to profitability or sales, meaning that they are only paid if the organisation can afford it, and managers can (within limits – see later comments) exercise some discretion over pay outs.

Typically, bonuses relate to individual, team or overall organisational performance (in the latter case usually profit) and can be ‘tiered’ to reflect different levels of achievement.  At one time there were tax incentives for schemes that paid all employees a bonus based on profitability, which was thought to encourage an overall focus on the purpose of the enterprise being to make a profit.

In Eric Daniel’s case some of the bonus apparently related to the successful integration of HBOS into the Lloyds Group – sometimes known as a ‘project bonus’.

Commission is a type of bonus usually contractually paid on a regular basis in relation to individual sales performance.

Bonuses are often paid in cash, but in the US, non-cash incentives such as a holiday for the top sales person, or retail vouchers play a prominent part in reward, and share options are often used for senior executives, such as in the Eric Daniels case.

What are the legal implications?

Despite the unlikelihood of litigation (outside of the financial sector), here are five tips for ensuring that things go smoothly.

1. Be clear about the the contractual/discretionary nature of the bonus.  Outside the financial services sector, contractual bonuses are rare, although they may sometimes be given when an employee joins you, and you guarantee a level of bonus for the first year.  The most common bonus arrangements reserve some level of discretion on behalf of the employer, either to award a bonus at all, or to award subject to agreed performance criteria.

2. Avoid acting in an inconsistent manner. Employee’s should be able to trust their employer, and tribunals/courts will be unsympathetic to random or perverse decision making regarding the payment of bonuses, even if discretion has been reserved in the contract.  Discretion is not unfettered.

Also, unless you reserve the right, you cannot withhold bonuses for other reasons such as the employee being subject to disciplinary action or because you cannot afford it.  In instances where substantial bonuses relate to financial performance, companies can reserve the right to clawback payments in the event of it needing to restate its accounts or discovering material wrong doing on the part of the employee.

3. Regularly review bonus schemes so that an employee can’t argue that a particular payment has become contractually binding.  Business priorities change over time, and bonuses should reflect changing priorities.  The best way to achieve this contractually is to give a right to participate in a discretionary scheme which the Board may vary from time to time.

4. Be clear about what happens on termination (the most frequent cause of arguments!).  Commonly, well drafted bonus provisions make it clear that there will be no right to a bonus if the individual has left or is under notice at the time the bonus is payable.  Note, the normal payment date may be different from the, for instance, end of the financial year to which it relates (sometimes referred to as the ‘due’ date).

There is an argument that if someone has earnt a bonus, they should be paid it, but this is a moral or motivational issue, rather than a legal one.

There is certainly the possibility of unintended consequences when it comes to this type of non-payment clause.  It can lead to ‘team moves’ where groups of employees leave together as soon as they have received their bonus, and to less effort and interest when someone is working their notice without needing to maintain performance levels previously motivated by the prospect of a bonus payment.

5. Make sure you are fair towards employees on long term leave.  This is a complex area, which some employers (although unusually) try to overcome by having an ‘active service’ clause which says that you have to be in service (i.e. not on maternity, parental, long term sick leave etc.) at the time the bonus is payable.  The law is not exactly decisive on these types of issues, but generally an employee should not have their bonus affected by being on sick leave (it could give rise to a disability discrimination claim), but it is broadly accepted that bonuses can be ‘pro rated’ for women on maternity leave (and probably men on Shared Parental Leave).  Unless you have stated it clearly in the contract, you should take advice about this.

6. Watch oral promises, they may be binding.  Whilst Tribunals accept that promises made under the influence of alcohol at the office Christmas party cannot be relied on, other promises where they are quantifiable and clearly intended to be binding will be enforceable.

You may not have the €400 million bonus pool exposure that Dresdner Kleinwort had when they were found to have orally promised that amount to employees in 2008, and then tried to rein in the promise by introducing a ‘material adverse change’ clause that had not existed before. In the SME sector agreements are often made orally, so take care.

If you currently operate a bonus system, you are unlikely to achieve much by removing it, but you might want to review it to ensure that it is fit for purpose.  You may conclude that it is merely a deferred payment, but you may also see opportunities to align it more effectively to the strategic goals of the company.

At the very least, you might want to ensure that bonus terms are clear and unambiguous.

Ken Allison | 03 October 2018 | Paradigm Partners | www.paradigmpartners.co.uk

Ken Allison is an engaging trainer and speaker who manages to make his topics, on handling employment law related people issues and other HR stuff, highly interactive, challenging, entertaining, and above all, relevant to the 21st Century executive. Ken uses his understanding of managing businesses to show managers what they ‘can do’ rather than what they ‘cannot do’.

Through his firm’s ‘ExecutiveHR’ service, Ken also provides telephone-based support services to businesses throughout the UK.

This blog is not a substitute for taking legal advice!

 

Is #Carrie Gracie a 21st Century Dagenham Lady?

In the same month (June 2018) as the 50th anniversary of the ‘Dagenham Ladies’ strike, the BBC gives £280,000 (according to The Telegraph) back pay to Carrie Gracie following her complaints about #equal pay.

On the same day as the #BBC publishes it’s 2018 list of top earners I take a look at what this case was really about, and what can be learnt from it.

In 1968, a strike by sewing machinists in the Ford plant in Dagenham, became a focal point that led to an intervention by the then Employment Minister, Barbara Castle.  Many credit this with leading to the Equal Pay Act 1970.

Fifty years on, we still have a national gender pay gap of 18.4% (worth noting that the BBC reported less than half the national average at 9%), we see the first publishing of gender pay gap reports by companies with more than 250 employees, and there is a major row between female presenters and BBC management.

What does the law say?

The right to equal pay is now enshrined in the Equality Act 2010 (and supported by a Statutory Code) and has the effect of incorporating into every contract of employment the right to the same terms and conditions as a comparator of the opposite sex in the same organisation providing they are doing ‘equal work’.  ‘Equal work’ means ‘the same or broadly similar’ (like work), work rated as equivalent by a job evaluation process, or, work of equal value in terms of the demands made such as the effort, skill and decision making involved.

Is it always unlawful for people to be paid differently for equal work?

No. There can be many reasons why differentials exist, the key is that they must not be to do with a gender difference.  For example, differences may exist because of past performance, length of service, geographical location, or even because of a genuine mistake.

What are the risks?

Equal pay claims are complex, and for this reason they are usually brought before a Tribunal on a collective basis by Trade Unions, or by highly paid individuals such as broadcasters. A Tribunal has the power to award up to six years back pay.

The effect of these judgements can be huge.  Currently before the courts are claims against major retailers such as Tesco, Morrisons and Asda, where employees on check-out tills are claiming equal pay on the basis of their work (largely done by women) being equal to the work in distribution warehouses (largely done by men).  In one of these (Tesco) the award may be the largest ever claim at £4billion.

Was Carrie Gracie’s case really about equal pay?

In her open letter to the BBC, Carrie Gracie says:-

“The BBC belongs to you, the licence fee payer. I believe you have a right to know that it is breaking equality law and resisting pressure for a fair and transparent pay structure.”

The BBC may have been resistant to transparency, but I’m not sure that it was breaking equality law.  Carrie claimed that two male international editors were being paid at least 50% more than the two women editors (Katya Adler is the other women whose salary has now also been adjusted according to today’s BBC 2018 top pay list).

Now, the BBC may well have had a reason for these differentials which was not to do with gender.  It could, for instance, have argued that John Sopel occupied the top international job as the Washington editor, and Jeremy Bowen effectively worked in a war zone.  In other words, there were other differences largely to do with geography or political significance.

The real reason why this case has been settled, and we may never know the detail, may be more to do with Carrie’s understanding that when she accepted the job in China, she had secured pay parity with these other male editors.   Her argument may really have been a contractual claim that she did not get what she was promised, and when the BBC published figures in 2017, all was revealed.  With some justification she may well have a case that the lack of transparency masked a wider approach which rewarded men more highly than women without justification, but the crux in her case may still be that she was promised something she did not get.

Is a promise like that, even if only verbal, enforceable?

Yes it most probably is.  An oral promise that she would be paid the same as others, particularly if it was given in the context of a recruitment discussion, could amount to a contractual undertaking.  A Court may well uphold it provided it was satisfied that the fact that it was said is not contested (the BBC admitted it), that it was clearly quantifiable, and intended to be a binding undertaking.

What can be learnt from this situation?

  • Be careful about oral promises.  They can be as equally binding as the written word.
  • Have a look at the pay differentials in your organisation.  If people are doing equal work, can the differences be explained by factors which are not due to gender differences.
  • Having an overall gender pay gap (see ACAS Guidance) may not be unlawful but may be indicative of other structural issues that need attention.  For instance, is their unconscious bias towards men when making senior appointments.  Some organisations are attempting to overcome this by banning single sex selection panels.
  • If you are nervous about employees finding out about what each other are paid, ask yourself why.  It may well be because you can’t justify it.  Worth remembering pay secrecy clauses, which were very common in the financial services sector, are now, effectively, unlawful.
  • Review how you handle issues that affect the career progression of women, such as returning from maternity leave and flexible working.

Carrie Gracie is undoubtedly passionate about the issue of equal pay.  She insisted on it when she took the job, resigned when she found out that promises had not been honoured, and is donating her back pay to the Fawcett Society (an organisation that campaigns for women’s rights).

On top of all that (I think!) she is a great journalist, but, is she a 21st Century Dagenham lady?  Yes and no!  She is clearly passionate about the same issues, but her actual circumstances were probably more about a failure to honour a contractual undertaking than they were about equal pay.

Essentially, Carrie appears to have been compensated for the failure on the part of the BBC to honour a contractual undertaking that she would be paid the same as someone else, this does not mean that the BBC was breaking equality law, as it may have been able to justify the difference in pay.

In their statement on the matter, the BBC said:-

The BBC acknowledges that Carrie was told she would be paid in line with the North America Editor when she took the role of China Editor, and she accepted the role on that understanding……..The BBC acknowledges the specific circumstances relating to Carrie’s appointment, apologises for underpaying Carrie, and has now put this right. 

Despite these specific circumstances, it has been acknowledged by others including Clare Balding, that she has been fighting the cause for all women.  With only 2 women in the top 20 earners in today’s list, there’s still quite a way to go.

 

If you have enjoyed this blog, and would like to read another recent one, go to http://bit.ly/10documentsyouneed

Ken Allison | 11th July 2018 | www.paradigmpartners.co.uk

Ken Allison is an engaging trainer and speaker who manages to make his topics, on handling employment law related people issues and other HR stuff, highly interactive, challenging, entertaining, and above all, relevant to the 21st Century executive. Ken uses his understanding of managing businesses to show managers what they ‘can do’ rather than what they ‘cannot do’.

Through his firm’s ‘ExecutiveHR’ service, Ken also provides telephone based support services to businesses throughout the UK.

This blog is not a substitute for taking legal advice!

If you know all about #GDPR, you probably don’t need to read this article!

Like me, you have probably been plagued over the last six months with offers of reports, consultancy services, webinars and conferences about the apocalyptic effects of GDPR (General Data Protection Regulations) and the prospect of €20 million fines.

I’m no expert on this (that’s a disclaimer!), but the truth is, there is nobody who knows all the answers yet, if they ever will.

There are still differing opinions about the impact of these regulations which stem from the EU and will be implemented (by 25 May 2018) into UK law when the Data Protection Bill finally passes through parliament.

The purpose of this blog is to set out the essentials that need to be carried out in a typical SME organisation (large organisations are probably well on with all this) in regard to the use of employee data.  The same principles will apply to other personal data, for instance on customers or clients, about which you may need more specialist advice.

There is lots of ground I won’t cover, but if you want an overview, this is my favourite from the European Commission, and if you want more detail, perhaps you are an HR professional responsible for this stuff, try this 35 minute webinar.

The underlying message is that data protection needs to become proactive, and to help you do this, here are three ‘musts’ and two ‘shoulds’:-

  1. A ‘privacy statement’ ‘must’ be given to employees whenever you collect data.

    At the moment you probably rely on a data processing statement in your contract of employment. This will not be sufficient under the GDPR which requires you to tell data subjects about the lawful basis for using the data (with employee data this is usually for compliance, performance of a contract or because of your legitimate business interests – which you must outline), your retention policy, and their rights in relation to their personal data. etc.

    You can provide this notice via your website, intranet or Staff Handbook, but as many organisations already do with Health and Safety, it is advisable to make specific reference to it when collecting personal data and obtain evidence that it has been read.

    You may also want a shorter version for use when recruiting.

  2. Responding appropriately. You ‘must’ keep a record of any personal data protection breach, including its effects and remedial action you have taken.  Even the loss of a mobile phone or laptop could amount to a breach.

    It may need recording.  It will need reporting to the Information Commissioner within 72 hours if it’s likely to cause a risk to the rights and freedoms of individuals, and where the risk is regarded as ‘high’, individuals must be told.

    You must also respond appropriately to subject access requests (SARs), the right to be forgotten, and requests for corrections or restrictions etc.

  3. You ‘must’ make sure you have adequate contracts with third party data processors (pay bureau and recruitment consultants being two of the most common). You will want assurances that they only process data you provide to them on written instructions, that staff involved with your data are subject to confidentiality agreements, and that they have adequate technical arrangements to ensure compliance.

    Sample contract clauses have been promised by the Information Commissioner’s Office (ICO).

  4. Underlying much of the GDPR, is a new data protection principle of ‘Accountability’. Can you demonstrate that you take appropriate steps to protect the personal data of employees and comply with the requirements of the regulations.

    You are going to have difficulty demonstrating this if you have don’t even know what personal data you use.  You ‘should’ carry out a personal data audit to help you demonstrate compliance.

    You will probably want to record what, where it comes from, who handles it, where it is stored, and two technical points, what is the lawful basis for using each item and how long do you keep it (retention).

    An audit is not compulsory, but without it you’ll have trouble doing some of the other things you have to do.  A couple of sides of A4 may well do this for many SMEs, and it should enable you to identify risks which can be mitigated.

  5. You ‘should’ appoint a responsible person (it might be you!) or know where you can go for advice when you need it. If your core business involves data processing, or you are involved in large scale processing of the special categories of data, then you must appoint a Data Protection Officer.

    If this is not the case, you may find it useful to have one person responsible for data protection issues, with a key role to educate and train other staff, but this will not be a requirement for many small businesses.

Is that all there is to it?  No, but an audit, a well drafted privacy statement, and regular Board level reviews and staff training/communication are likely to ensure that most SMEs who are only processing employee personal data will be able to show compliance with the 6 + 1 (Accountability) GDPR data processing principles.

Yes, there is much more including how you deal with transferring data outside the EU, responding to records of criminal convictions, automated decision making, personal data relating to children etc.  These are unlikely to be issues for most small businesses, so complex policies and procedures are probably not necessary.

If you want to sort all this out yourself, there is a self-assessment tool available on the Information Commissioner’s website, although as you might expect, it’s stronger on questions than it is on answers.

You may have also noticed (!) that there are plenty of consultants like ourselves, ready to assist.

Finally, what about those €20 million fines we mentioned at the beginning, and nearly every other communication about the GDPR has headlined?  There have been very few data protection convictions to date, and the evidence is that the ICO is not seeking to be over zealous in the future either.

So, this is not an issue to be driven by the prospect of fines or criminal convictions.  Its far more positive to see it as an opportunity to review systems and assure yourself that the data you are collecting is necessary.

We live in an age where people are becoming increasingly conscious about the security of their personal data and taking these matters seriously will increase employee confidence and enhance your employee brand.

 

Ken Allison | 05 March 2018 | Paradigm Partners | www.paradigmpartners.co.uk

Ken Allison is an engaging trainer and speaker who manages to make his topics, on handling employment law related people issues and other HR stuff, highly interactive, challenging, entertaining, and above all, relevant to the 21st Century executive. Ken uses his understanding of managing businesses to show managers what they ‘can do’ rather than what they ‘cannot do’.

Through his firm’s ‘ExecutiveHR’ service, Ken also provides telephone based support services to businesses throughout the UK.

This blog is not a substitute for taking legal advice!

 

How to deal with a poor performer in 50 tweets…Part 4

This blog (originally published in March 2013) is being re-posted following our WordPress account being hacked, resulting in the loss of all our blogs prior to June 2017.

These are the final tweets in this series of 50, and deal with how to short circuit a performance procedure where the parties are prepared to agree to a mutually acceptable alternative.

Part 1 in this series of tweets dealt with some informal motivational tips, and Parts 2 and 3 covered a typical formal procedure.

Since many people do not want a dismissal for poor performance on their record, they often leave before any procedure is complete, but in some instances, particularly in small organisations, it may be in the interests of the organisation to encourage them to leave more quickly.

In legal terms this is not risk free, so, ‘don’t try this at home’ without HR or other appropriate professional assistance!

UK law currently provides for disputes between employers and their staff to be resolved using a ‘compromise agreement’, and at the present time (Spring 2013) the Government is proposing to introduce new ‘settlement agreements’ which will be simpler and easier to use.

They will be ideal for situations where an employment relationship is not working out due to conduct or performance, but will not be suitable for more complex issues, for instance, where there are discrimination or ‘whistleblowing’ issues involved.

We have seen earlier in this series that everyone has the right not to be unfairly dismissed providing they have been employed for the ‘qualifying period’ (two years or more if they started work with you on or after 6th April 2012).

Put simply, this means that you must have a fair reason for dismissing someone (and poor performance usually is regarded as fair) and you must behave reasonably, i.e. follow a fair procedure, such as is outlined in Parts 2 and 3 of this series, when you dismiss them.

There are circumstances where the length of time this will take is unacceptable from a business point of view, and circumstances where the procedure will be undesirable from the employee’s perspective.

For instance, an employee with long and loyal service may no longer be performing adequately, and it may be more appropriate to find a solution that enables them to leave with some dignity and without having to be put through an elongated process.

It’s only really safe to do this when you are contemplating dismissing someone, and this may mean that it is not worth doing.  If the lack of performance is genuine and you have got as far as Stage 3 in our procedure, there may be little point in not simply completing the process.

So, in many instances, employers want to offer staff an alternative route out of the organisation at an earlier stage.  This may not be quite so safe, but the fact there is not a lot of case law on this topic, suggests that it usually works!

Here’s a series of steps which might lead to an alternative mutually acceptable solution, but remember, don’t do this without appropriate advice from a HR professional or lawyer.

Tweet 37/50: Discuss your performance concerns with the employee and tell them that you intend to start a disciplinary process which would start with a hearing and could lead to them getting a warning.

Tweet 38/50: They will be given the opportunity to improve, but if they cannot improve after being warned, it may lead to their dismissal.

Tweet 39/50: Indicate that if they would prefer to have a ‘without prejudice’ (wp) conversation regarding a mutually acceptable alternative termination arrangement, then you would be happy to have that conversation.

Tweet 40/50: Give them time to think about the situation, pressurising them may lead to a constructive dismissal claim.

Tweet 41/50: If they agree to proceed on a wp basis there and then, you can proceed but take the precaution of having another senior person present to ensure that there is no subsequent argument as to the nature and content of the discussion.

Tweet 42/50: Emphasise that you would be happy to give them the opportunity to improve, but if they don’t think they can, or they don’t want to go through a series of warnings, you are happy to propose an alternative.

Tweet 43/50: Indicate that an alternative approach would involve them signing a compromise agreement.  This would prevent them from bring claims against the organisation in the future, but in return for this they would receive an ex gratia payment.

Ex gratia payments are not always made, but are usual.  There may be some circumstances where it is simply agreed that the individual departs with pay in lieu of notice.  This may be the case, for instance, where the person’s performance is bordering on negligence, and they are fortunate to be given the opportunity to leave without a dismissal for poor performance on their record.

Tweet 44/50: Make a proposal with regard to the ex gratia payment.  You may have some negotiation about this and other issues such as notice payments and outstanding holidays etc.  Any settlement above their contractual rights would normally be tax free for the first £30k.
Tweet 45/50: If they do not want to go down this route immediately, you should proceed with the invitation to the disciplinary hearing, but verbally indicate that the offer of a wp discussion (or the offer if you have got as far as making one) is on the table for a few days.

Tweet 46/50: If the offer is not accepted, have your hearing and if justified issue a warning (or dismissal if you are at that stage) in line with your contract/staff handbook, or follow the procedure outlined in Parts 2 and 3 of this series.

Tweet 47/50: There is nothing to stop you leaving the door open on the wp conversation, regardless of the fact that you are commencing with the disciplinary/performance procedure.  But don’t leave it indefinitely; they’ll be little to gain from reaching an agreement after you have expended your time and energy on a fair process – assuming that there are not other issues such as discrimination or ‘automatically unfair dismissal’ involved.

Tweet 48/50: As ever, you should draft written notes of any meetings, and mark all correspondence based on the wp discussions as ‘Without Prejudice and Subject to Contract’.

Tweet 49/50: If they do agree to a deal, you will need to confirm the details in writing, and arrange for a compromise agreement to be sent to them.

Tweet 50/50: You will have your own, and it is normal to make a contribution to their, legal costs.  Their solicitor may well come back to you on details of the proposed agreement, but after agreement is reached it will be for you (or your representative) to finalise the compromise agreement and send it to the employee for signature.

Tweet 44/50 may take a few meetings, and it is quite normal in these circumstances to agree a mutually acceptable termination date, and for the person to leave before the agreement is signed.

In this series of 50 tweets we have suggested informal, formal and alternative approaches to dealing with a poor performer.

The various steps should be seen as a model/sample approach, which cannot in any way be taken as a substitute for seeking professional advice on any particular situation.

The approach is offered as a way of encouraging the tackling of performance problems in the workplace, and to give managers confidence to initiate conversations about their concerns.

Above all, it should be remembered that prevention is better than cure, but poor performance can be an infectious disease that should not be allowed to spread!

Ken Allison | 19 September 2017 | Paradigm Partners | www.paradigmpartners.co.uk

Ken Allison is an engaging trainer and speaker who manages to make his topics, on handling employment law related people issues and other HR stuff, highly interactive, challenging, entertaining, and above all, relevant to the 21st Century executive. Ken uses his understanding of managing businesses to show managers what they ‘can do’ rather than what they ‘cannot do’.

Through his firm’s ‘ExecutiveHR’ service, Ken also provides telephone based support services to businesses throughout the UK.

This blog is not a substitute for taking legal advice!

How to deal with a poor performer in 50 tweets…Part 3

This blog (originally published in March 2013) is being re-posted following our WordPress account being hacked, resulting in the loss of all our blogs prior to June 2017.

In Part 1 of this series of tweets I looked at 10 tips for encouraging good performance without having to resort to formal procedures.

Part 2 explored ‘Stage 1’ of a procedure that might be used when someone fails to respond to the motivating behaviours of their manager, and they need to understand that the continuing level of performance is not going to be tolerated indefinitely.

In this final part of this series I will look at how to continue with a procedure that, as far as it is possible, will ensure that if it comes to it, any dismissal will be fair.

You may have got this far without any specialist HR assistance, but if this is the first time you have used such an approach, you would be well advised to seek some HR or legal advice for the first time you do this.

When dealing with poor performance under a disciplinary or capability procedure, or just by following the steps in these tweets, it’s important to focus on improving the performance.

Giving somebody a warning should not be designed to encourage them to leave, it should be designed to encourage an improvement in the performance. If that’s achievable, it’s a much more cost effective solution than somebody leaving.

So, on with our last 20 tweets, and what would normally be described as Stage 2 of the procedure!

Tweet 31/50: Start again at tweet 16 – as modified below!

Meet with them and let them know that since the previous warning has not resulted in the required performance improvement, you will now have to move onto the next stage.

    Let them know that you want to discuss the situation at a meeting that may lead to a further warning. You will confirm the details in writing

Keep your eye on the ball here. Your goal should still be to get the performance improvement you are after. We will call this ‘Meeting 2’

Confirm ‘Meeting 2’ in writing and make it clear what your concerns are about. As well as this, deal with domestic details (time, place, who will be present etc.) and you should include any documentary evidence to which you will refer and advise them of their right to be accompanied. There are lots of useful templates for letters to deal with this type of process at http://www.acas.org.uk/index.aspx?articleid=1439.

Avoid unnecessary delay before meetings, but do give enough time to prepare. Usually, unless the issues are very complex, a couple of days may be adequate time for preparation, particularly when there have been extensive informal discussions. Your procedures may require a specific notice period for a meeting – typically 5 or 7 days.

If they ask for someone to speak in support of them (a witness), you will have to give the matter some consideration. You can ask them to get their witness to write a statement, rather than attend a meeting, but, in any case, employees rarely do this for performance issues. It is more common when you are dealing with poor conduct.

‘Meeting 2’, explain the issue (the performance shortfall and its impact), outline the evidence, hear what they have to say, and thoroughly discuss, before making your decision. You should be concentrating on the performance of the individual since ‘Meeting 1’, try not to dwell on stuff from further back!

If they have brought a companion with them, check if they have anything they want to say. They have a statutory right to ‘address the hearing’.

It is normally recommended that you have an adjournment before making a decision.

Assuming you decide to proceed with another warning, reconvene if you have adjourned and, deliver a warning (you can call it a second warning if that is what your procedure calls it).

Explain how you have arrived at your decision, demonstrating that you have heard any points that they have expressed.

Clearly confirm the performance issues, the standards you are looking for, the review period, additional support that might be available, and the consequences of the improvement not happening. Remember that if there is insufficient improvement this time, this may lead to the termination of their employment, and they need to be told this.

Tell them everything will be confirmed in writing and advise them of any right to appeal.

As last time, try to end on a positive next step. ‘I’m going to arrange for somebody in the Finance Team to sit down with you and see if there is a better way of organising the way you are keeping your records’.

Confirm everything in writing!

Make sure there is regular support during any review period – it will help ensure that the employee takes your concerns seriously.

You will have just completed ‘Stage 2’, what in many organisations will be called a ‘second written warning’.

So now things are getting serious, and the process so far may have taken you a month or two.

Tweet 32/50: Surprise, surprise, its back to Tweet 31/50 above, but this time around things will be a little different.

Adapt the bullet points above to reflect the fact that a possible outcome of this ‘Stage 3’ is that the employee could lose their job. You will need to review the situation thoroughly, and this time round you definitely will need to adjourn before you make your decision.

Tweet #33/50: Assuming you decide to dismiss (another option could be to extend their review period) tell them they will be dismissed and do it face to face. This will usually be with immediate effect with their pay in lieu of notice (check on the contractual and tax implications of this), outstanding holiday pay and compensation for any other benefits (Company car etc.) they are losing. Everything will be confirmed in writing and advise them of any right to appeal.

Tweet #34/50: Depending on the individual’s contract, you may decide to ask them to work out their notice (very unusual for poor performance situations) or put them on ‘garden leave’ in order to preserve any restrictive covenants – take some advice!

Tweet #35/50: Confirm everything in writing!

So, there we have it. How to deal with a poor performer in less than 50 tweets. So where have the rest gone?

They’re in Part 4, which covers how to arrive at an alternative solution that does not involve the need to follow this process which can often take two or three months, and be difficult for both the employee and the manager.

Tweet 36/50: Read on, the rest is available now!

Ken Allison | 27 September 2017 | Paradigm Partners | www.paradigmpartners.co.uk

Ken Allison is an engaging trainer and speaker who manages to make his topics, on handling employment law related people issues and other HR stuff, highly interactive, challenging, entertaining, and above all, relevant to the 21st Century executive. Ken uses his understanding of managing businesses to show managers what they ‘can do’ rather than what they ‘cannot do’.

Through his firm’s ‘ExecutiveHR’ service, Ken also provides telephone based support services to businesses throughout the UK.

This blog is not a substitute for taking legal advice!

 

How to get rid of a poor performer in 50 tweets…Part 2!

This blog (originally published in February 2013) is being re-posted following our WordPress account being hacked, resulting in the loss of all our blogs prior to June 2017.

In Part 1 of ‘How to get rid of a poor performer in 50 tweets’ I explored some tactics for avoiding getting as far as thinking about having to dismiss someone who is not performing.

Parting company with someone is expensive and time consuming, but nonetheless, sometimes necessary.

In the UK, where everyone has the right not to be unfairly dismissed once they have accrued the ‘qualifying service’ of one or two years service (the law changed on 06 April 2012), anxieties about falling foul of the legislation can prevent managers taking decisive action when an employee is failing to respond to concerns about their performance.

‘It will take too long’, ‘HR won’t back me’, ‘they’ll accuse me of harassment’ are frequent concerns.

The main thing to remember is that the law seeks to strike a balance between the employer who needs staff who can do their job, and the individual who needs to be treated fairly (told clearly, given the opportunity to improve, warned etc.).

Essentially, much of this process of ‘fairness’ is covered in the ACAS Code of Practice 1: Disciplinary and grievance procedures, (pick up an A4 ‘mindmap’ aide memoire) and many organisations will have their own procedures for dealing with this sort of issue.

If the employee you are dealing with does not have the ‘qualifying service’, you may decide not to follow this sort of procedure, but before you do that, check out ‘Has it really got easier to dismiss employees’.

Here I deal with the process for dealing with a poor performing employee who has the ‘qualifying service’ and has not responded to your informal efforts to improve their performance – see tweets 1 to 10!

Tweet #11/50: It’s the job of managers to set and uphold standards. Employees must be told what the standards are. You will need to be able to demonstrate that you have fulfilled your responsibilities in terms of providing any appropriate training if the employee is being asked to do something new, or if it is something that they could not have reasonably have expected to be able to do.

Tweet #12/50: Don’t be afraid of saying ‘this is how I want it done’. The ‘I’ word is very powerful, avoid blaming ‘the Company’ or ‘my boss’.

Tweet #13/50: You can move the goal posts, as long as you behave reasonably when you do this. Change is an accepted fact, and Employment Tribunals (ETs) accept that the content and standards of a role may change over time. How a job is performed, or the standards required are rarely contractual, but employers do owe employees a duty of ‘trust and confidence’ which in this context would mean, amongst other things, that changes should not be introduced without time to adapt, or as a means of making life uncomfortable for staff.

Tweet #14/50: Make sure that the problem really is the individual’s capability to do the job. If they have the skills, and are just not using them, then that could be poor conduct, and not poor performance.

So, let’s now assume that we are dealing with an employee who is not performing adequately, has not responded to our informal motivation (Tweets 1 to 10!), and so now we have to put things formally in order to ensure that they take the issues more seriously, and that we have evidence of a fair process should we not be successful in improving their performance.

Tweet #15/50: Write notes on your final ‘informal’ discussion – the one before you start to use the language of ‘warnings’. Writing notes during a discussion usually has a negative impact on the atmosphere, so you won’t want to be doing it at every meeting. You will, however, benefit from evidence that you tried to tackle the performance issues informally. You can write notes after a meeting (ETs accept contemporaneous notes as evidence, and this usually means written during a meeting or within 48 hours afterwards). In any case, it will be useful to have informal discussions confirmed in writing.

Tweet #16/50: Meet with them and let them know that since your informal discussions have not resulted in the required performance improvement, you will now have to move onto more formal action. Don’t worry if you do not have an organisational policy that covers this situation (much to a lot of people’s surprise, the law does not require you to have one), it is what you actually do that matters.

Tweet #17/50: Let them know that you want to discuss the situation at a meeting that may lead to a warning, and that you will confirm the details in writing. Keep your eye on the ball here. Your goal should still be to get the performance improvement you are after. We will call this ‘Meeting 1’.

Tweet #18/50: Confirm ‘Meeting 1’ in writing and make it clear what your concerns are about. As well as this, deal with domestic details (time, place, who will be present etc.) and you should include any documentary evidence to which you will refer and advise them of their right to be accompanied.

Tweet #19/50: They will need to know that the meeting could result in a warning – in most instances this will be referred to as a ‘disciplinary warning’, but some organisations have separate procedures for performance issues where it may be called something like a ‘performance improvement note’.

Tweet #20/50: Avoid unnecessary delay before meetings, but do give enough time to prepare. Usually, unless the issues are very complex, a couple of days may be adequate time for preparation, particularly when there have been extensive informal discussions. Your procedures may require a specific notice period for a meeting – typically 5 or 7 days.

Tweet #21/50: If they ask for someone to speak in support of them (a witness), you will have to give the matter some consideration. You can ask them to get their witness to write a statement, rather than attend a meeting, but, in any case, employees rarely do this for performance issues. It is more common when you are dealing with poor conduct.

Tweet 22/50: At ‘Meeting 1’, explain the issue (the performance shortfall and its impact), outline the evidence, hear what they have to say, and thoroughly discuss, before making your decision. You will want to avoid over formality at this stage, but you might find our ‘Handling Disciplinary Hearings’ checklist to be a useful guide.

Tweet #23/50: If they have brought a companion with them, check if they have anything they want to say. They have a statutory right to ‘address the hearing’.

Tweet #24/50: It is normally recommended that you have an adjournment before making a decision, but this is probably unnecessary for ‘Meeting 1’. ETs have accepted that formality is less important with performance issues than it is with conduct. An adjournment is probably only necessary if the employee introduces things that have not been said before, and that need further consideration.

Tweet #25/50: Assuming you decide to proceed with a warning, reconvene if you have adjourned and, deliver a warning (you can call it a first warning if that is what your procedure calls it).

Tweet #26/50: Explain how you have arrived at your decision, demonstrating that you have heard any points that they have expressed.

Tweet #27/50: Clearly confirm the performance issues, the standards you are looking for, the review period, additional support that might be available, and the consequences of the improvement not happening. Tell them everything will be confirmed in writing and advise them of any right to appeal. Most organisations allow appeals after any disciplinary action, but some only allow it after higher levels e.g. second or third.

Tweet #28/50: End on a positive next step. ‘So I’d like you to arrange to spend a few hours shadowing Joe who is good at cold calling, and see how he does things, then we’ll meet next week to review that and talk about how to improve X and Y’.

Tweet #29/50: Confirm everything in writing! The law does not require you to do this (and even the ACAS Code of Practice only says ‘it is usual’), but a failure to do this may make a case difficult to defend in front of an ET.

Tweet #30/50: Make sure there is regular support during any review period – it will help ensure that the employee takes your concerns seriously.

So, here in Part 2 we have completed the first stage of a reasonable procedure for dealing with poor performance where an individual has failed to respond to informal encouragement.

In many case there is no need to progress any further. The individual either improves or leaves!

In Part 3 we will look at completing this procedure, and also the alternative approach of agreeing an alternative mutually acceptable termination arrangement which in many instances will avoid the need to put the individual through an elongated procedure.

Watch this space!

All of these ideas are regularly explored in our employment law and http://www.paradigmpartners.co.uk/performance-management.htm courses.

Ken Allison | 19 September 2017 | Paradigm Partners | www.paradigmpartners.co.uk

Ken Allison is an engaging trainer and speaker who manages to make his topics, on handling employment law related people issues and other HR stuff, highly interactive, challenging, entertaining, and above all, relevant to the 21st Century executive. Ken uses his understanding of managing businesses to show managers what they ‘can do’ rather than what they ‘cannot do’.

Through his firm’s ‘ExecutiveHR’ service, Ken also provides telephone based support services to businesses throughout the UK.

This blog is not a substitute for taking legal advice!

The end of compromise agreements!

This blog (originally published in July 2014) is being reposted following our WordPress account being hacked, resulting in the loss of all our blogs prior to June 2017.

July 29th sees the demise of the compromise agreement, but don’t panic, they are simply being renamed ‘settlement agreements’.

Over recent months we’ve had a lot of questions on our helpline or at training events and presentations about this much-heralded change.

It was forecast to be implemented in ‘late summer’, so obviously the Department for Business Innovation & Skills knows something about how long this hot spell is going to last. To my surprise they announced about a week ago, that late summer was going to be 29th July.

A key question on some people’s minds has been whether it has been worth putting off a discussion which may lead to a termination of employment until the changes take place.

The answer to this question has been, that not a lot is changing, so that in many cases it has not been worth waiting. The change does, however, make a difference to the part of the process that most employers find difficult, namely, initiating the conversation.

Up until now, it has been necessary to have a ‘without prejudice’ conversation, and strictly speaking these are only possible where there is an existing dispute between the parties.

Exceptions to this requirement include straightforward dismissals of employees who have not accrued the qualifying service for an unfair dismissal claim (see how to handle these situations) or situations where an employer is making a settlement payment that is sufficiently generous to prevent a Tribunal claim.

If conversations are genuinely without prejudice, then they usually cannot be quoted in Court or at a Tribunal.

As of 29th July, providing there is no improper behaviour (such as a threat to dismiss if you don’t agree) an offer to end an employment relationship on agreed terms will not be quotable in an unfair dismissal claim.

This should mean that it will be possible to have a more straightforward conversation without the ‘war dance’ of ensuring that it is ‘without prejudice’. This, in turn should prevent aggrieved employees resigning and claiming constructive dismissal, which has been the main fear in the past.

‘Things are not working out, so I’d like to discuss a deal with you that would enable you to leave if you wanted to with a settlement payment’ should be become possible.

So, is it really becoming much simpler? I’m afraid the answer is probably no – there are still issues to look out for:-

1. All the other conditions that we associate with compromise agreements remain the same for settlement agreements. Principally, the final agreement has to be in writing, and the employee has to have legal advice from an approved person (usually a lawyer).

So agreements of this nature are not likely to become less costly to implement, which was one of the hopes when the Government first announced these proposals.

2. Discussions will still be quotable (unless they comply with the terms of being ‘without prejudice’) where dismissal has already taken place, or where there is discrimination, automatic dismissal or ‘whistleblowing’ involved.

3. The new Acas Code of Practice on Settlement Agreements suggests that employees should be given at least 10 days to consider an offer. To give less, may constitute ‘improper behaviour’.

4. The ACAS code recommends (although it does not require) that companions should be allowed to attend pre-termination negotiations.

We will have to see how all this works out in practice, and in order to avoid being an early case in front of a Tribunal, many employers will probably prefer to stick with trying to ensure that a conversation is properly ‘without prejudice’.

There is currently very little case law about ‘without prejudice’ discussions in straightforward terminations which are genuinely to do with poor performance, conduct, attendance, or issues such as relationship breakdowns.

This suggests that initiating conversations are not as difficult as is imagined. It is therefore likely that the main impact of this change will be in changing employer confidence, and so issues may be tackled more directly rather than being avoided.

Together with other 29th July changes such as the introduction of Tribunal fees (subject to the judicial reviews being sort by Unison and others), and the capping of unfair dismissal awards to the greater of a year’s salary or £78,600, we may see greater confidence to tackle issues, and less Tribunal claims.

We shall see!

Ken Allison | 27 September 2017 | Paradigm Partners | www.paradigmpartners.co.uk

Ken Allison is an engaging trainer and speaker who manages to make his topics, on handling employment law related people issues and other HR stuff, highly interactive, challenging, entertaining, and above all, relevant to the 21st Century executive. Ken uses his understanding of managing businesses to show managers what they ‘can do’ rather than what they ‘cannot do’.

Through his firm’s ‘ExecutiveHR’ service, Ken also provides telephone based support services to businesses throughout the UK.

This blog is not a substitute for taking legal advice!