September Newsletter

September 18, 2023

Rewarding Loyalty, Parental Leave & Calculating Final Salary…

Don’t Punish Loyalty – Reward it!

The concept of “rewarding loyalty” in the context of employee compensation and retention is an important aspect of building a positive workplace culture and maintaining employee engagement.      

Loyalty

Let’s explore this further…..

Salary Audits for Fair Compensation: Conducting company-wide salary audits is a proactive step towards ensuring that employees are paid fairly and equitably. When salaries are adjusted to match market rates and internal pay equity, it demonstrates the company’s commitment to treating its employees justly. Fair compensation is a foundational element in building trust within an organisation.

Consideration for Longevity: Recognising the contributions of long-serving employees is essential. These employees have likely accumulated a wealth of experience, institutional knowledge, and skills that benefit the company. When new employees are hired at higher rates, it’s important to consider the impact on the morale and engagement of existing employees who may be earning less. It’s not about punishing new hires but about valuing the loyalty and commitment of long-term staff.

Equalising Pay for the Same Role: When hiring externally for a role, it’s crucial to ensure that the salary offered to new hires matches or exceeds the pay of existing employees in the same position. This practice not only promotes fairness but also retains the existing talent pool by demonstrating that their loyalty and experience are valued. Failure to equalise pay can lead to resentment and potentially losing valuable employees.

Retention of Top Performers: Keeping your best employees feeling valued is a priority. High-performing employees are often the backbone of an organisation’s success. If they feel their loyalty and dedication are not recognised or rewarded, they may become disengaged or consider leaving the company. Recognising their contributions through competitive compensation, promotions, and other forms of recognition can motivate them to stay and continue to excel.

Building a Culture of Trust: Rewarding loyalty contributes to building a culture of trust within an organisation. When employees see that their dedication and commitment are acknowledged and rewarded, they are more likely to trust their employers and feel a sense of belonging. This, in turn, fosters a positive work environment where employees are motivated to contribute their best efforts.

In conclusion, the idea of “rewarding loyalty” is about recognising and valuing the commitment of long-serving employees and ensuring that they are fairly compensated and not left behind when new hires are brought in at higher rates. It’s a strategic approach to employee retention, engagement, and building a workplace culture based on trust and fairness. By implementing these practices, companies can create a more harmonious and productive work environment while retaining their top talent.

For further advice and support with salary auditing, contact The HR Team.

What is Parental Leave and how does it work?

Parental leave refers to the time off that eligible employees can take to care for their child or to make arrangements for the child’s welfare. Parental leave is different from maternity or paternity leave, as it is typically unpaid and can be taken by either parent.

Parental Leave

Here are the key details about parental leave in the UK:

Eligibility: To be eligible for parental leave, employees must have at least one year of continuous service with their employer. Additionally, the child in question must be under the age of 18.

Duration: Each eligible employee is entitled to a maximum of 18 weeks of parental leave per child. This can be taken as a single block of leave or as separate periods, but each period of leave must be at least one weeklong, unless the child is disabled. The limit on how much parental leave each parent can take in a year is 4 weeks for each child (unless the employer agrees otherwise). A ‘week’ equals the length of time an employee normally works over 7 days.

Example: If an employee works 3 days a week, one ‘week’ of parental leave equals 3 days. If an employee works irregular weeks the number of days in a ‘week’ is the total number of days they work a year divided by 52.

Carrying leave over from a previous job:Parental leave applies to each child not to an individual’s job.

Example: An employee is entitled to 18 weeks. They’ve used 10 with a previous employer. They can use up to 8 weeks with their new employer if they’re eligible.

Notice: Employers usually require employees to give at least 21 days’ notice before taking parental leave. However, there may be exceptions in case of emergencies or exceptional circumstances.

Payment: Parental leave is unpaid. Employees are not entitled to receive their regular salary or wage during this time off.

Purpose: The primary purpose of parental leave is to allow parents to spend time with their child or to make arrangements for their child’s welfare. This can include activities like spending time with the child during school holidays or settling the child into a new childcare arrangement.

Multiple Children: If an employee has more than one child, they are entitled to parental leave for each child. However, the maximum total amount of leave remains at 18 weeks for each parent.

Protection from Dismissal: Employees are protected from dismissal or any detrimental treatment by their employer for taking or seeking to take parental leave.

Shared Parental Leave: The UK also has a separate system known as Shared Parental Leave (SPL), which allows eligible parents to share leave and pay in the first year after a child’s birth or adoption. This allows for greater flexibility in how parents choose to divide their time off work.

It’s important to note that parental leave is distinct from maternity leave (for mothers) and paternity leave (for fathers and partners), which have different eligibility criteria, durations, and payment structures. Employers and employees should be aware of their rights and responsibilities regarding parental leave and other forms of family-related leave, as these can vary based on individual circumstances and employment contracts.

For expert advice and support regarding Parental Leave, contact The HR Team.

How is Final Salary Calculated?

When an employee leaves a job, they are entitled to receive their final pay, which includes several components. The specific details can vary depending on factors like the employment contract, company policies, and the reason for the employee’s departure. Here are the key components of final pay when a contract of employment is terminated:

Final Salary Calculated

Salary or Wages: The final pay should include any salary or wages owed to the employee up to their last day of work. This includes the regular pay for hours worked, as well as any accrued but untaken annual leave, if applicable.

Notice Pay: If the employment contract requires a notice period, the employee is entitled to receive notice pay for the duration of the notice period. This is typically based on their regular salary or wages.

Outstanding Bonuses or Commissions: If the employee is entitled to any outstanding bonuses, commissions, or performance-related payments as per their employment contract or company policies, these should be included in the final pay.

Pension Contributions: If the employee is enrolled in a workplace pension scheme, the employer should continue to make contributions to the pension until the end of the notice period or until the last day of employment, depending on the terms of the scheme and the employment contract.

Statutory Redundancy Pay: If the employee is being made redundant and meets the eligibility criteria, they may be entitled to statutory redundancy pay. The amount is calculated based on the employee’s age, length of service, and weekly gross pay, subject to certain caps.

Benefits and Perks: Any outstanding benefits or perks, such as healthcare benefits, company car allowances, or share options, should be addressed in the final pay or separation agreement.

Return of Company PropertyThe employee will usually be required to return any company property, such as laptops, keys, access cards, or uniforms, as a condition of their departure. Deductions may be made from the final salary for any unreturned company property, as long as this is stated within the contract of employment.

Tax and National Insurance: Taxes and National Insurance contributions (including both the employee and employer portions) should be deducted from the final pay as per standard payroll procedures.

Holiday Pay: Any accrued but unused holiday pay should be included in the final pay. Employees may also have the option to take their remaining holiday days before leaving the job.

It’s important for both employers and employees to communicate openly and clearly about the terms of the final pay and any other details related to the departure. Employers should provide employees with a breakdown of their final pay, and employees should review it to ensure it aligns with their entitlements based on their employment contract, company policies, and statutory requirements.

Additionally, employers should issue a P45 form to the departing employee. This form provides information about the employee’s tax code and earnings to both the employee and HM Revenue and Customs (HMRC).

If there are any disputes or concerns regarding final pay, employees have the option to seek advice from ACAS (Advisory, Conciliation, and Arbitration Service) or consider legal action if necessary. Therefore, to avoid unnecessary disputes, it is important for employers to ensure each component of the final salary is considered and dealt with accordingly.

For help with final salary calculations, contact The HR Team.

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