Cost of living

Price rises, high inflation, increased interest rates and the Bank of England's depressing prediction that the UK will be in recession by the end of the year do not leave much to feel optimistic about. The one thing it appears we can be certain about is that there will be challenging times ahead – for both businesses and individuals.

In this article, Prettys Employment team identifies some of the risks and issues the cost of living crisis may pose for employers and their staff, and offers some practical suggestions as to how businesses might mitigate these risks and support workers through this difficult period.

Having a second job and the limits on working time

A likely consequence of the rising cost of living is that, in order to make ends meet, employees will find ways to earn more money, possibly with a second job.

Employers will be aware, however, that the Working Time Regulations 1998 (WTR) imposes a 48-hour cap on the number of hours that can be worked in a week. Importantly, this cap does not apply per employer; it applies per employee. Therefore, an employee who already works 40 hours for one employer between Monday and Friday, and then works a further 14 hours over the weekend for another employer will have exceeded the cap. Unless the employee has signed an agreement to opt out of the 48 hour working week (one for each employer), their employer will be in breach of the WTR.

To reduce this risk, we recommend that employers review staff working hours and opt-out agreements and issue a memo reminding staff to advise their line managers if they have, or wish to obtain, a second job.  

If not already done so, it would also be sensible to consider updating employment contracts to include an obligation on the worker to inform their employer if they have an additional job(s).

If staff are working additional jobs, they should be asked to sign a 'Working Time opt-out agreement', which should be held on the individual's personnel file.  

National minimum wage

As businesses start to feel the squeeze and staff are less confident in their job security, there may be a tendency for working hours to increase.  

For staff who are paid by the hour, this is unlikely to be particularly problematic. However, for those who have an annual salary which is at or near the National Minimum/Living Wage (NM/LW) (and where no overtime is paid), this could leave the worker earning less than the NM/LW.

Businesses should be careful to ensure that they are appropriately resourced for their operational needs, and if they require staff to work additional hours, they audit these hours against earnings to ensure they do not breach NM/LW Regulations.

Health and well-being

Inevitably, financial worries can also lead to additional stress and pressure on staff. This may not only have a detrimental effect on employees' mental health but could also lead to low-paid staff cutting back on the essentials necessary for their physical health and well-being.

Both scenarios represent the risk of increased sickness absence, which in turn, increases costs and lowers productivity for employers.

Many employers already have Employee Assistance Programmes in place for employees to access for support should the need arise. As we navigate through the cost of living crisis, it may be sensible periodically for employers to remind staff that these facilities are available for them and/or to signpost them to other support services as necessary.

Another cost-effective option to improve staff health could be met by, for example, providing regular access to fruit and vegetables. Clearly, the extent to which businesses can afford to do this will vary from organisation to organisation. However, it is likely to be cheaper than funding Statutory Sick Pay, which cannot be re-claimed and may help to reduce sickness absence levels.

Financial considerations

As the purse strings get tighter and tighter, every penny that can be saved is worth having. Following the pandemic, many employees may be working from home but still failing to claim tax relief on gas and electricity and business phone calls of up to £6 per week.

In light of this, it is sensible to remind staff that this relief is available, what they can do to claim it, and the evidence they will need to provide. We recommend visiting: https://www.gov.uk/tax-relief-for-employees/working-at-home.

Employers may also see more requests from staff for loans or advances on their salaries. Although there is no obligation on employers to provide these, if they do, there may be tax implications for both parties. In particular, a benefit in kind tax charge will arise on any "employment-related loans" (i.e. loans given by an employer to an employee) and will need to be reported on P11Ds. Employees should be made aware that this is the case.

Employers should also ensure that they document the details of the loan appropriately, together with appropriate clear repayment provisions and repayment timescales. Contracts of employment should be reviewed and, if necessary, updated to ensure that businesses have the right to deduct (from any final salary or other payments due to them) any sums owed to them by their staff on termination of employment.

It is also worth bearing in mind that a tax charge may arise if loans are ultimately written off. We recommend that businesses and employees seek appropriate tax advice before agreeing to the same.

Modern slavery

Finally, as supply chain issues and price rises look set to continue into the foreseeable future, procuring materials and labour for the lowest possible price may seem an attractive option.

Even so, businesses should remain mindful of their obligations under the Modern Slavery Act 2015. In particular, large commercial organisations (those with an annual turnover of £36 million) must produce a statement setting out what they have done to ensure there is no modern slavery in their organisations and supply chains.   

Accordingly, now would be a sensible time for businesses to review those statements, re-publish them and ensure all staff are aware of the issues and risks involved in modern slavery.

If you would like advice and assistance with any of the matters raised above, please contact Prettys Employment Team on employmentexpert@prettys.co.uk