UK: Rural Employment Law Update – June 2014

Last Updated: 14 July 2014
Article by Syma Spanjers

Implications following Abolition of Agricultural Wages Board

Since 1 October 2013, employers have been able to recruit agricultural workers on less generous terms and conditions than previously required by the Agricultural Wages Board (AWB).

In the past, the AWB fixed minimum standards of employment terms for agricultural workers, including provisions relating to pay, holidays and sick pay. With the abolition of the AWB, new agricultural workers will now be afforded the same minimum levels of protection as employees in any other UK industry.

This means that employers can negotiate terms of employment on a commercial basis when recruiting new farm workers and need only ensure that they comply with national legislation by paying at least national minimum wage (more detail on this below), providing statutory sick pay and allowing workers sufficient holidays and rest breaks as set out in the Working Time Regulations 1998. There is no longer any legal obligation to provide additional benefits such as a dog allowance, a birth grant, or a higher hourly rate for overtime.

However, be aware that existing workers employed before 1 October 2013 may be entirely unaffected by the abolition of the AWB. If they have been paid and received benefits throughout their employment in line with the statutory minimums set out in the Agricultural Wages Order (AWO), those terms will continue to be binding. In that case, should an employer wish to alter their workers' terms and conditions to reflect the abolition of the AWB, they should discuss the changes with the individual and ideally obtain their express agreement to the new terms. Forcing a worker to enter into a new contract, particularly on less favourable terms, could result in the worker resigning and bringing a claim for constructive unfair dismissal, unlawful deductions from wages and/or breach of contract.

However, if the existing contract of employment simply refers to paying the worker in line with the "statutory minimum", this could allow employers to reduce pay to national minimum wage in accordance with the new rules.

Therefore following the abolition of the AWB, it is essential that employers:

  • carefully review existing workers' employment contracts before deciding whether any changes should be made to their level of pay;
  • monitor the pay of workers who will continue to be paid in line with the AWO to ensure that it remains in line with any increases to national minimum wage;
  • ensure that any new recruits receive at least the national minimum wage; and
  • familiarise themselves with their employment law obligations in accordance with the rules on minimum wage, sickness absence, holidays and working time.

Minimum Wage Concerns for Employers

Perhaps the most pressing concern for rural employers at the moment will be staying on the right side of minimum wage rules. The Government has introduced tougher measures to crack down on businesses with underpaid workers:

  • A fine of up to £20,000. This is four times higher than under the previous rules. Whilst it is currently a single maximum penalty, it is expected to change so that employers could be liable for up to £20,000 in respect of each underpaid worker;
  • Public "naming and shaming" of employers who fail to pay workers the national minimum wage. This month 25 employers were named by Government for owing wages to their staff of amounts ranging between £100 and £7,500.

To add to these concerns, the adult minimum wage will rise to £6.50 per hour in October 2014, the first time in six years that there has been an increase higher than inflation.

These changes could clearly have significant implications for businesses in industries where minimum wage roles make up an essential part of the workforce, which of course now includes rural businesses. Employers are therefore reminded to ensure they are fully up to speed with their obligations under minimum wage law, including in the following problem areas:

Overtime/Irregular shifts – Workers must receive at least the national minimum wage for each hour they work. If workers receive a higher hourly rate for overtime, this cannot be used to "top up" their usual lower rate of pay. Further complications arise where workers are asked to live in accommodation to be a security presence for employers, as it is not always straightforward to work out whether such "on call" time counts for the purposes of receiving minimum wage and each case will depend on its facts.

Similarly, where employees are engaged on casual or seasonal arrangements, employers must keep track of their variable shifts to ensure they receive at least the minimum wage for each hour worked.

Accommodation - Workers must receive the minimum wage in cash rather than benefits in kind. The only exception is where employers provide employees with accommodation. In those circumstances employers can add some of the value of the accommodation to the employee's usual rate of pay, which would result in an overall increase in their hourly rate. Currently, the "accommodation allowance" is set at a maximum of £4.91 per day.

The position is trickier if employers charge rent. If the rent is higher than the accommodation allowance, this is deducted from workers' pay for the purposes of calculating minimum wage. If this results in the worker receiving less than the minimum wage, employers should either waive the rent over the accommodation allowance or raise their hourly pay.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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