The post-pandemic economic climate promises to be a difficult one for employees and businesses across the board, with the cost of living rising dramatically. The latest inflation figures are at 5.5 per cent, with the cost of many things – including energy – rising dramatically, yet annualised wage growth sitting at just 4.2 per cent. This means that wages are not keeping up with the costs of living. Pay reviews and the amount any employer increases their employees’ salaries by is therefore set to become a thorny issue.
Employees will justifiably expect that their pay rises keep up with the rate of inflation and as a result there will undoubtedly be pressure on employers to increase salaries accordingly. This is especially the case in industries where employers implemented pay freezes during the pandemic and did not pay bonuses that were owing. In other sectors, the shortages of labour because of Brexit have meant that new recruits have been offered higher salaries than long-serving existing staff. This, along with the increased cost of living, is likely to lead to existing staff feeling undervalued and therefore at risk of leaving for new employment.
From a legal point of view, unless an employee has a contractual entitlement to an annual salary increase in their contract of employment, such an annual increase is not guaranteed. These days such a contractual entitlement is rare and generally only seen in training contracts that have ‘milestone’ clauses when an individual completes a certain stage of their training. Otherwise pay increases are generally at the discretion of the employer.
The bad news is that there are more things to consider than just the legal side of things. Where pay rises are discretionary employers will need to review salaries and consider pay against the background of the increasing cost of living. The most important thing for employers is to show their employees that they are valued and appreciated. When carrying out pay reviews, it is the best policy to be transparent about what the budget is for all pay rises. If you do that then it can be easily shown that it has been fairly applied. For businesses that are struggling and cannot afford immediate pay rises, one option might be to put in place a bonus scheme which will have the added effect of driving an increase in productivity. Another option could be to allow employees to work a four-day week without a pay cut instead of having a pay increase, or to offer employees personalised benefits instead.
One important factor to consider is benchmarking your pay increases to what your competitors are offering. If you pay less than your competitors, you will lose staff. Unfortunately for businesses, it is currently a good market for employees due to the labour shortage in some sectors. A potential legal danger that employers could face if they don’t increase pay is if an employee alleges that they have been discriminated against. So if for example, you are paying your male staff more than your female employees then this could leave you open to sex discrimination claims.
Overall wage issues are likely to be a difficult issue for several months to come across all sectors.
Recent Tribunal Case
A middle-aged woman has won an age and sex discrimination case after her male boss shouted she ‘must be in her menopause’. The incident happened at Essex-based pet food store ‘Embark on Raw’ where Leigh Best, who was 52 at the time, had been working as a sales assistant for a year. Owner David Fletcher shouted the ‘inappropriate and derogatory’ remark ‘at the top of his voice’ during a ‘relatively small’ argument over an order mix-up – even though his employee had made it clear she did not wish to discuss menopause.
As reported in Metro, an employment tribunal in East London was told: ‘A customer had been describing a “hot flush”. ‘[Mrs Best] put her hands over her ears and said, “I am having none of that, I don’t even want to hear about it, I don’t want to know.” Mr Fletcher continued to pursue the topic even after the customer had departed – that was regarded as unwanted conduct which had the effect of violating [her] dignity and of creating a humiliating environment for her at work.
When Mrs Best complained about the comments to Mr Fletcher’s wife and fellow owner, Andrea, she was told to ‘stop moaning’, threatening her to either ‘get on with everybody or we’ll have to call it a day’. Alongside complaints about discrimination, she had also raised concerns about the way the company and staff were dealing with the pandemic. As an essential business, Embark on Raw was allowed to stay open during lockdown, and Mrs Best was worried about the safety at work, claiming that hygiene procedures were not ‘implemented’ and ‘enforced’. She complained to Mrs Fletcher about the ‘worrying situation in the shop’ after she saw one of her co-workers cough without a mask on.
Instead of being take seriously, she was told she was being ‘paranoid’ and asked to stop ‘digging’ her colleagues and creating ‘a divide in the business’. A month later, in May 2020, the sales assistant was sacked – leaving her with no option but to take her boss to a tribunal. Mrs Best was fired for ‘rude’ and ‘confrontational’ communication with employees and managers – a decision she unsuccessfully appealed.
However, the tribunal ruled she had actually been sacked for raising her Covid-19 concerns and then victimised for complaining about Mr Fletcher’s behaviour. The tribunal, headed by Employment Judge Bernice Elgot, rules: ‘Mr Fletcher invaded the claimant’s privacy, broached a highly sensitive topic for her and acted tactlessly in directly asking her, as an employee having the protected characteristic of sex as a woman, whether she was menopausal. ‘He asked that question even after… she had made it quite clear she did not wish to participate in any such discussion. ‘We are satisfied that part of the reason for the company’s decision to dismiss Mrs Best is that she made a significant allegation of sexism and ageism against Mr David Fletcher.’
The tribunal ordered Embark on Raw to pay Mrs Best £20,057.74 in compensation.