Corporate Governance: Positivity adds greater value

Corporate Governance: Positivity adds greater value

A more positive approaches to corporate governance could add greater value. Too many boards focus upon compliance rather than business development.

Board of Directors

Many boards could contribute much more to business growth and development if they adopted a different approach to corporate governance according to Professor Colin Coulson-Thomas, the author of Developing Directors. Speaking in Singapore he told Asian directors, board chairs and company secretaries that his recent investigations have identified opportunities for boards to add greater value by shifting the focus of their attention.

He finds: “In seeking to avoid interference in operational matters many directors are overlooking areas that are properly the responsibility of the board.”

According to Professor Coulson-Thomas: “The approaches to corporate governance adopted by some companies are excessively negative and are inhibiting innovation, entrepreneurship and responsible risk taking. Directors need to understand that competitive success can require both prudence and creativity, and practical and cost-effective approaches are available that can reconcile the two. For example, building checks into performance support tools can make it easy for people to comply and difficult for them to act in ways that cause quality, commercial, regulatory and other problems while exploring different solutions, bespoking responses and developing new options. ”

Hoping for the best is no longer enough

Coulson-Thomas’ evidence of what more effective directors do differently reveals how much more value boards could contribute if they shifted their questioning to areas such as ensuring executives focus on better supporting those work-groups that contribute the most to key corporate objectives: “Handing demanding objectives to a CEO and senior executive team and hoping for the best is no longer enough when one can challenge the expensive, time-consuming and disruptive approaches being adopted when quicker and more cost-effective options exist. Boards need to be aware of approaches that avoid traditional trade-offs and allow the simultaneous achievement of multiple objectives. They should champion quicker routes to high performance organisations.”

colour figures backgroundThe Professor mourned the lack of innovation and diversity in board practices: “There are so many options for operating boards today and a variety of different ways in which they can discharge their responsibilities. The prevalence of corporate governance codes, a focus upon compliance and the practice of resorting to advisers and consultants who have climbed aboard the corporate governance bandwagon appears to have produced a dull uniformity of practice. Too many directors are doing just enough to comply rather than thinking through what form of board structure, composition and practice would be best suited for the situation a particular company is in, its stage of development, its priorities, the nature and geographic scope of its operations and the challenges that it faces.”

Coulson-Thomas suggests: “With vested interests and well meaning people calling for ever more detailed reporting and governance requirements we are in danger of losing sight of their purpose. What happened to relevance, economy, simplicity, proportionality, adaptability, flexibility, diversity, innovation and business development? Human nature is such that shareholders need protection but it is not unreasonable for the owners of companies to expect that the directors they appoint to look after their interests will also be diligent in stimulating, encouraging, enabling and supporting the profitable and sustainable growth of the businesses for which they are responsible.”

End note:
Professor Coulson-Thomas has just returned from India where he spoke at events in Mumbai and Bengaluru. His presentation on “What’s keeping boards awake and what should they do about it?” was delivered to the Bangalore Chapter of the Institute of Directors of India at the Hotel Royal Orchid Central.


About the Author

Colin Coulson-ThomasProfessor Colin Coulson-Thomas, author of Winning Companies: Winning People and a new report on talent management and creating high performance organisations, is an international consultant who has helped over 100 boards to improve board and corporate performance. He is chairman of Adaptation, process vision holder of complex transformation programmes and a business school academic at the University of Greenwich. Reports covering his investigations are available from www.policypublications.com

Tel: + 44 (0) 1733 361 149
Fax: + 44 (0) 1733 361 459
Email: colinct@tiscali.co.uk
Web: www.coulson-thomas.com

Zero Hours’ Contract Interview

Zero Hours’ Contract Interview

Introduction

There has been much ado recently about zero hours’ contracts.  So much so that a zero hours’ contract bill is currently passing through parliament.

window shot

The purpose of the bill is to limit the use of zero hours’ contracts and it had its first reading on 2nd July 2014 and the second reading has been postponed until 27th February 2015.  This bill is an attempt to remedy the current mischiefs. Employers that offer zero hours’ contracts have to treat workers the same as employees with fixed regular working hours. They are also required to give reasonable notice on when they are needed as well as notice in writing of the minimum hours their workers are required.

Other current practices that are to be stamped out include:

  • Considering zero hours’ contract workers for regular working hours every 12 weeks
  • If they have worked continuously for that period of time the employer should have a duty to offer the worker fixed and regular working hours
  • It will also be unlawful to subject zero hours’contract workers to detriment
  • The dismissal of a zero hours’ contract worker who refuses to work at the employer’s request will constitute an unfair dismissal
  • A zero hours’ contract worker is also regarded as being employed when he or she works or does not work for that employer

So what is the current landscape? 

The term ‘zero hours’ is not currently defined in legislation.  However it’s generally understood to be a contract between an employer and an individual worker under the terms of which:

  • The employer is not obliged to provide the worker with any work at all, nor any minimum working hours and
  • (usually) the worker is not obliged to accept any of the hours offered.

This absence of mutuality of obligation is a key aspect of zero hours’ contracts; the lack of mutuality of obligation means that in most cases the individual would have a status of worker for employment protection purposes and will not be an employee.

It’s worth noting that zero hours’ contracts may not actually be called a zero hours’ contract but could be offered as “casual work” contracts or “as required or needed” or “flexible work”.  The importance of employment status is discussed in a previous article (read Employment Status: Briefing and Are you a Worker or a Self-Employed person?). In short there are certain rights that are only conferred on employees and not on workers or self-employed individuals. This means that individuals working on zero hours’ contracts do not have the same protection under employment legislation as employees have.  Calling an arrangement a zero hours’ arrangement and issuing a contract labelling it as such is not conclusive. An Employment Tribunal will ascertain all the terms of the contract as well as what actually happened in practice between the parties to analyse whether the individual is an employee. It is the substance not the form of the agreement.

0 hour contract

Zero hour contracts and your rights

Zero hours’ contracts usually fall within the definition of workers, which means that they do have some employment rights. These include, for instance, the right to be paid the national minimum wage, working hours and rest breaks, entitlement to paid holiday, part-time working and pension auto-enrolment.  However it is not certain that an individual on a zero hours’ contract will fall within this definition. It will ultimately depend on the facts of the case and how the relationship operates. This will determine where they fall on the scale between genuinely self-employed and employee status.

With regard to continuity of service, for individuals that are working on back-to-back fixed term contracts or zero hours’ contracts, there may be grounds to establish the existence of a continuing contract. This overarching or “umbrella contract” must still have some level of mutual obligation between the employer and the individual during the period when no work is being performed. There will not be sufficient mutual obligation if the conduct of the parties is wholly explained by mutual convenience and goodwill, and it is not necessary to infer contracts when there is no justification for inferring one.  However the expectation between the parties may give rise to sufficient mutuality of obligation to establish a continuing contract.

Why have zero hours’ contracts?

The purpose of zero hours’ contracts is to allow a flexible workforce, which is necessary for employers who frequently need a change of staff as the workload fluctuates. The employer’s benefit in this case would be a pool of staff on demand, no ongoing requirement to provide guaranteed levels of staff and a cheaper alternative to agency fees. The employee’s benefits would be flexible working hours, no ongoing requirement to accept offers to work, no consequences for not working requested hours and gaining employment experience and skills whilst actually working.

So how does this work in practice? I had the opportunity to speak to a student who works on a zero hours’ contract in a retail store. In order to protect her identity this interview has therefore been anonymised.  Any likeness to real events, persons or companies is coincidental.

Zero Hours’ Contract Interview

Press the arrow to the right hand side of each question to reveal the answer.Question mark

Q: How long have you been working under a zero hours’ contract?

Since November 2013.

Q: Under a zero hours' contract you are not obliged to accept work that is offered to you when you are asked to do it. Have you ever refused work and what was the response?

You are obligated to work when they schedule your hours and if you are unable to work then you have to go on to a Facebook page and try and get someone to cover it. If someone doesn’t cover it then you can get a UPN, which is some sort of punishment. If you get three UPNs you get dismissed.

So there were two times recently when I asked not to work. Over Christmas I was scheduled for a six hour shift and I was in America and my schedule did not go through properly when I was away and I couldn’t get anyone to cover it and so I told my manager. He eventually said “ok, its fine you don’t have to work” but he was very annoyed with me and then gave me less shifts when I came back to work. A few weeks ago, I was in London and I had to call in and you are supposed to call two hours before and they asked “do you want to work” and I said “no, can you ask someone else to cover it if there is anyone else wanting to work” and they said “ok that’s fine but usually you always need to get cover”.

Q: Can you tell me a bit about the scheduling, how does it work?

You can make your availability whenever you want. For my position, I need to be available for Friday or Saturday nights. You let your employer know of your availability and then there is an automatic schedule that the manager then caters to what they want and it comes out around every Thursday, sometimes it’s late and it comes out maybe on a Saturday and the shifts start from Sunday for the next week. So if you have a shift on Sunday it is hard to plan anything if it comes out later.

Q: Generally speaking, how much notice are you given when you are asked to go to work?

It depends. If you have regular shifts then you know usually the Thursday before that week and the week starts on Sunday. If you have to call in, you need to call in two hours before on that day.

Q: So what is the call in system? I’m not sure I understand.

My employer has specific hours that they have in a week and they need to use up all of those hours. We have a District Manager that comes in and reviews everything a few times a month and they get in trouble if they don’t use up all the hours each week. So every week they need to get rid of their shifts or hours but it also depends on how much sales they have. It really fluctuates day to day and you never know a day in advance if they are going to need you to call in later. Some times they will write on the Facebook page saying “we have more hours. If anyone can work, please do”. They will call you and say if you’re available to work and will just have you come in if you can.

Q: Do you ever feel that when you are on duty that you are over staffed or under staffed?

Yes. On Saturdays and Sundays. Especially on Sundays because it is the first day of their week. Everyone who works on the floor comes in on that day. There is always way too many people and during certain times of the year there is not enough things to do except really mundane tasks and then other times it’s completely under staffed. I will be the only one on the floor, the managers will be in the back and you have to do everything. You have to do the tills and maintain all the six rooms. That’s quite tiring when there are a lot of people.

Q: Do you find that the unpredictability of when you are going to work has a negative impact on your financial security?

Because I am a student, not really. Because I am a foreign student, I need finances to live here and so for me its not that bad but for other workers they try and cover as many shifts as possible. If people give away shifts literally in two seconds they say “I will cover you” because they need that work and they want it as regularly as possible.

Q: Is that their only employment? Are they working full time there?

People who do work full time are managers or have just become managers and there are people that have had at least two or three jobs at the same time before but it would usually be with promotion for clubs.

Q: The managers, do you know if they are on zero hour contracts or employees?

I believe they are employees as they are on an annual salary.

Q: Given the choice, would you prefer to work on a contract of employment with set hours as opposed to a zero hour contract?

As I’m a student, I wouldn’t want set hours because this way if I am really busy one week, I can give away my shifts and I’m not contractually obliged to work that week. I have friends that have seven hours a week which isn’t a lot but they still have to work those seven hours or get holiday and so I like that. I can give away my shifts when I need to.

Q: Provided they wont get the hump for when you are actually not there?

Sometimes no one will cover shifts, which is very frustrating and other times everyone wants to cover everything so it really depends on the fact that we have a lot of students that work there so it depends on exams and holiday schedules. During Christmas, no one is there and during exams no one wants to work at all so that is very difficult as well.

Q: The penalty system that you talked about. Is that advertised in your contract? The Staff Handbook? How does that work?

I just learned about this UPN recently. I don’t know what it stands for. It’s not in our contract. It’s just what everyone refers to it as. I just looked at our contract and it says that you will have a warning if you aren’t doing your job correctly or if you miss too many shifts. They write on the Facebook page if you miss too many shifts or don’t come to your call ins, or don’t call for your call ins, that you can be dismissed and so they are not very clear about it, but also the managers are quite friendly and so they do try and get good relationships with us and work with us so it’s not usually a problem.

Q: Turning to your contracts. Can you give some basic details of what your understanding is of the contract you have with them?

In my contract, it says that I need to work a minimum of 4 hours even though it says that it is a zero hours’ contract, and I am supposed to represent the brand and be very outgoing and friendly to customers and always make sure the customers are OK. There are no tasks that are really described. It has a lot about holiday. There are also health and safety regulations and when you start you have an induction where you watch a health and safety video and they then sign the contracts. That’s really about it.

Q: What are the termination provisions in the contract?

I genuinely have no idea. I know a lot of people have stopped working recently because they weren’t able to come to their shifts and they kept giving away their schedules. They recently posted on the Facebook page at the beginning of September that if you are not coming to your shifts then you will be dismissed and a lot of people left. But there are also a lot of people coming and going, we have to hire a certain amount of people a week and so there are always new people coming in and people leaving.

Q: If someone were to say that you could claim benefits that would be paid to you weekly and were a regular guaranteed source of income and these benefits were significantly more than what you received on average under your zero hour contract, would you be more inclined to claim benefits?

I understand why other people would, but I really just want the work experience and I believe that people who do work there enjoy working there, or just want the work experience, so I don’t think they would. But I understand why other people with a zero hours’ contract would if they were not financially stable.

Q: If you were offered a full time position under a zero hours’ contract, would you accept the position?

Currently, no. But if I were just working there and not a student, I would probably want to be a manager on a full-time employment contract.

Q: And what would you say the reasons would be if you, let’s say, finish university, you really want to stay and you need to have full time income?

Then I would want that regularity in my schedule. The managers sometimes take relationships personally and they won’t schedule you as much if they are a bit annoyed with you and you then have to cover other people’s shifts until they start putting you regularly on the rota every week.

Q: How do you feel about not having any employment rights or rights to statutory sick pay, holiday pay etc?

Well we do get 28 days of holiday instead of 25 but that’s not really holiday I think, you can basically take as much holiday as you want as long as it’s only two weeks at a time and because I don’t work there full time or even really part time, it doesn’t really affect me.

Q: How are you compensated for the holiday? You say that you have 28 days. That sounds like statutory holiday under the Working Time Regulations. Do you get holiday pay?

I get no holiday pay except we do get Benefit Days so if you work New Year’s Eve or something like that or if you work a certain amount of hours in a week, I believe you get a Benefit Day which means that you have one shift where you don’t have to work and you are not allowed to work on that day.

Q: Which of the following things would you think would feel most upsetting to you in terms of the avoidance tactics of your employer? Is it acceptable that they use this to maximise the flexibility of the work force? Is it acceptable that they are doing this as a way to keep costs down, avoiding recruiting agency costs and also what are your feelings on using zero hours’ contracts to generally evade Employment Law obligations?

I understand why they want flexible workers specifically for this retail store because it does depend on the hours they need in the store and they do need people coming in and out. Two days ago, I had a call in and three other people had a shift and one person had their shift covered and I didn’t want to be at my call in and I said I would go in if they needed me and they said they did. Two hours into my shift, the girl who covered another girl who had a regular shift, they decided that they didn’t need her and so they sent her home. She still had a few hours left and they could have just not taken my call in in the first place

And for avoiding Employment Law Regulations, I think this is just taking advantage of students that just want to work there in the first place.

Q: Are there a lot of people who have worked there for years or is it just the managers?

There are a few that have worked there for years. A lot of people work during university or are in college so I think there is about maybe 15 now that have worked for over a year. I have worked for over a year and I have seen at least another 15 people leave as I have worked there.

Q: How do you feel about if you work there for another year, when you should have unfair dismissal rights and rights of redundancy etc. Would your opinion change when you have passed the two year mark?

Possibly, but I feel like if you have a good relationship with the managers, they are more understanding. It is a very personal relationship that everyone has with each other and they are very close and I don’t feel like that would affect anything if you did have a close relationship with a manager, but if you didn’t, then I feel that would be difficult.

Q: Are you currently looking for another job or will you be looking for another job?

I think I’m not sick of this job, but it does get to me and involves a lot of work and can be very tiring. So possibly next year, I don’t know if I would work there but I guess I will see.

Q: Do the call ins annoy you because you can’t plan your life at all?

Yes. You can’t plan anything and no one likes covering them because they are so unpredictable. Recently because I didn’t work a lot over Christmas, they have been giving me a lot of call ins but they always make them regular and I don’t understand why they can’t just say that they’re regular instead of telling me it’s a call in. So it’s really hard to plan things.

Q: Can you give a specific example when this has messed up something in your personal life?

Yes, sure. I had plans a couple of weeks ago and I had a call in and everyone said that they wouldn’t cover it and that they probably won’t need it. So this is when I called and asked “can I please not work” and they said “yeah that’s fine” but they weren’t happy about it at all. I had a whole weekend planned and if I had to go then I would have had to leave early Saturday morning and go all the way back to Brighton from London and just not do anything that I had already paid for.

Q: And as you didn’t get a call in then you just don’t get work, is that how it works?

Well you get regular shifts and you can always cover shifts. The Facebook page is really active. You get at least 20 notifications a day of people trying to swap shifts and that’s what’s really great about it is that there is a lot of flexibility for workers and so if you have something to do, someone usually does swap your shift if you’re a regular. Especially if it’s in the morning. Someone just posted “can someone swap a shift from 8 to 12 another day besides Monday?” This way at least it’s fair.

Q: In the zero hours’ contract, does that mean that you are actually being paid below the minimum wage?

I’m paid £6.50 because I’m over 21 and I know if you’re under 21 there is a different minimum wage but they abide by that very carefully.

Q: And how are you taxed?

I get all my tax back. It comes directly into my bank account.

What do you mean?

I’m not really sure. There’s just always a tax refund entry on my payslip and it goes back into my bank account after my salary is paid and I shouldn’t be taxed because I make less than the taxable amount.

Q: But they still process you through the Pay As You Earn system?

I’m not really sure. They told me that I wouldn’t be taxed but then I get about maybe 74p a month or every two weeks back into my account from it.

Q: Ok, alright. So there’s some accounting mechanism at work there?

There’s something a bit strange about it. I don’t really understand it.

Q: Anything else you would like to say about people thinking about going on to a zero-hours’ contract?

I think that for students they are a good idea because then you’re not obligated to work when you can’t and there are a lot of reasons when you can’t work at certain times, like holidays and exams. I just think you need to make it clear with the employer that you do have a right to say “I can’t work” and they shouldn’t punish you for that. That is what they do.

Q: That is clearly not a situation where they can say “come in” or you can say “no I don’t want to”.

Yeah, the good thing is, if they need you, you can come in early, you can ask on the Facebook page. You can just call the store and if you want work and say “do you have any hours left this week” and they might. I do that over the summer. I worked a lot. I worked about 12 hours a day. That was really nice because I was able to support myself instead of asking my parents. I was able to work a lot and because of that I had a good relationship with the managers over the summer and so they always gave me work. When they knew I wanted work, they would always call me if they needed someone to come in.

Q: It's still quite unsettling that its so dependent upon how you get on with this one person isn’t it?

Yes. Yesterday, no Saturday, we had a new manager who no one really gets along with. She is very sweet but she just seems a bit like as if being a manager has gone to her head and she’ll tell you to do a task and then she is very condescending about it. She will tell you to do something which you definitely are able to do, like fold something and make it in a straight line, but then she’ll give you clear instructions and a mini life lesson about it and then she says “well if you would do this properly and smile and talk to customers more, you would get more shifts”. So I think that was, first of all, a rude remark and way too personal and just unnecessary. But she also doesn’t make the schedules so she does not have authority to say that.

Usually the Store Manager is the top manager who’s a lot nicer. But he does get very moody. We have District, Regional and then European Managers that come in and rate the store. Everything needs to be perfect on those days. They will only have employees come in that they know that these managers will like. The District Manager comes in the most so they will have a list of people that they know get along with the District Manager and they’re the only ones that are allowed to work when the District Manager is there. If someone comes in on that day wearing too much makeup or if they’re not in the correct clothing, the managers of the store will tell you to go home if you don’t look the part and this has happened sometimes. One of the girls who was sent home was actually a manager and she was sent home because she had too much makeup on. Another girl was wearing a black bra with a white shirt so she had to go home. Another girl and I were wearing the same dress that was not cut low but showed a bit of cleavage and so they put us on the tills so we would boost sales. It’s very sexist if nothing else. I had a hair tie on my wrist and they told me to take it out. I have a piercing on my upper ear and my manager asked me to take it out and I said I needed pliers to take it out so my manager said put your hair over it. I think that is what’s the most difficult for a lot of employees.

Q: So it’s a sexualised environment?

One of the new managers used to be an employee who worked on the floor a few years ago while he was at uni and now he’s the manager. He’s been hiring only girls lately. So recently we had interviews for new employees every Tuesday and Friday and one of the girls interviewed and she made sure to hire some guys. When the district and regional managers come, everything needs to be perfect.

Q: Would you ever consider the fact that you could be covered under discrimination legislation or sexual harassment legislation? This seems to be quite a sexual environment.

It is and it is quite ridiculous and employees should be protected by it, especially for a lot of people who do get sent home if they are not in the correct attire or if the Regional Manager does not like them.

Q: Tell me a bit more about the recruitment process. How they actually recruit people?

We don’t accept CVs. People can come in and they can apply online. There is an application that you have to fill out and there are passwords and so if you come into the store, we give you the passwords and then once you have filled that in, you can call the store and come in on Tuesdays and Fridays and have a group interview. In the group interview they ask you a few questions, then you fill out if you want to work on the sales floor or in the back. Working in the back involves organising new shipments and preparing products to go onto the floor. Employees at the front and deal with all the customers and have to maintain the store. Also people on the front or Managers will look around the store and see customers who look the part and they give them a recruitment card and ask them to work there. That’s how I got employed.

Q: And what about the physical aspect of people. How do they check that?

You have to take a picture of everyone that applies. So when you come in for the group interview, even if you are recruited, you have to come in for the group interview and we take a picture of you. That picture is then sent to the head office. Head Office then decide whether they want you or not based on your picture. The reason they say they do this is because they say they recruit for advertising from the stores and so this is a two way street and they do not have a separate agency for the advertisements. Once the head office has recruited you, then you have to come in and you have to be dressed. We have “in season” looks and there’s a look book and you have to dress in an outfit exactly as it is in the look book. We then take a picture of your full body in that outfit. They then send that back to the head office so they would have it on file and then you start working.

Q: Has there ever been anyone where you have worked with that actually became models?

Yes there are a few people. I had a picture with two other girls that was reposted onto the store page and onto their Instagram and that had so many hits that they wanted to recruit all three of us. This was over the summer and none of us just went through with it. There are two girls that have been on adverts that are in our store. So it is quite frequent.

Q: Alright, so it’s not just something they tell you?

Yeah, it’s not something they tell you. They do take it very strictly. Also our store has been voted the best managed in the UK and in Europe and we also have the best employees in the UK and Europe and so I think our recruitment is very strict but our managers also get rewarded for it. When our Instagram picture blew up on their Instagram, our store manager got so much appraisal from the Regional Manager and she favours us a lot because of that.

Q: Did that ever then trickle down in monetary terms to you?

No and they didn’t ask if they could repost. The other two girls that I was with really like the attention of being on everyone’s Instagram. I just don’t like everyone looking at my picture so I found that a bit uncomfortable but one of my managers asked if they asked me if it was OK and I said no and she was like “that’s strange”. Since our picture was reposted they started doing this a lot with other peoples pictures so it started quite a trend.

Thank you very much for your time.

New Changes to Holiday Pay and Commission – Euromillions, anyone?

New Changes to Holiday Pay and Commission – Euromillions, anyone?

I think most of us have already had our summer holidays and are lamenting the fact that we are now firmly back in our work routines.  If your job involves a pay structure where you are paid a basic salary and a commission and/or bonus you may be coming into some extra cash in the not too distant future.

More holiday and more money, you say? Will I win the Euromillions?

EuroMillions

New Changes to Holiday Pay and Commission – Euromillions, anyone?

You may not be far off. A European Court of Justice (‘ECJ’) Judgment earlierthis summer redefined holiday pay as we know it. According to this judgment, the holiday pay under the Working Time Directive (‘WTD’) is to include an allowance for commission, regardless of the fact that commission or bonus is technically paid on sales made when you are not actually at work.  At the moment, under the Working Time Regulations 1998 (‘WTR’), a week’s pay is based on basic salary and excludes payments such as allowances, expenses, overtime, commission and bonus payments.  These are all elements of salary, the general definition of which is any sums payable to the worker in connection with his/her employment,  even if it refers to specific work done by someone while performing their duty.

So, how can you actually accrue commission when you are not actually at work?  Interestingly enough, the WTD states that all workers must be entitled to paid annual leave, but the manner in which a worker is paid is calculated is left to national legislation or practice.

Following the ECJ ruling in Lock V British Gas Tradings Limited, employers should now calculate holiday pay based on average weekly remuneration (including commission and similar payments) over the previous 12 complete weeks if:

  • A worker does not have normal working hours or;
  • A worker has normal working hours but their pay varies according to the amount of work done or the time of work.

This case also states that in order to comply with the WTD, if a worker has normal working hours, employers should, when calculating holiday pay, in summary:

  • Include overtime which is guaranteed and that the worker is required to perform under his contract of employment (one can see how this could lead to disputes and ET decisions are in the pipeline).
  • Include bonuses, which are intrinsically linked to performance of the task that the worker is required to carry out under his contract of employment.
  • Include commission, which is intrinsically linked to the performance of the tasks that the worker is required to carry out under his contract of employment.
  • Include payments, which relate to a workers personal or professional status (for instance, the cost of my practising certificate).
  • Exclude payments, which are intended exclusively to cover occasional or ancillary costs arising at the time of performance of the task which the worker is required to carry out under his contract of employment.

It should be noted at this point that the principles set out above will only apply in respect of the four weeks’ required by the WTD as implemented by Regulation 13 of the WTR. They do not apply in respect of the additional 1.6 weeks additional holiday provided by Regulation 13a of the WTR which is over and above the WTD requirement.  Therefore, if a worker is considering going after his/her employer for holiday pay including commission etc, it would only be in relation to the four weeks of holiday pay that would fall within the WTD requirements.

Rather unhelpfully, there is no authorative decision as yet on how the four weeks are selected but in a recent case, Woods v Hershall, the Employment Tribunal decided that in the absence of any agreement, it was up to the worker to choose.

So what does this all mean for UK businesses? 

Not only would employers need to change their holiday pay calculations going forward, they may also be faced with claims from workers on payments for holiday already taken which should have, but did not, include commission etc.

payslip

What does this all mean for UK businesses?

As an alternative to an ET claim for unlawful deductions, which must be brought within three months of the most recent deduction  At the moment, it seems likely that such claims could go back as far as 1st October 1998 which was the date when the WTR came into force.   Unlike claims for contractual holiday pay, claims for statutory holiday pay cannot be brought in the Civil Courts because they are to enforce a statutory right for which the Employment Tribunals are the appropriate jurisdiction. As an alternative, workers can also bring a breach of contract claim in the civil courts which may only go back as far as 6 years (5 years in Scotland) and case law suggest that it may not be successful.

In any event, this could have serious ramifications for business. John Lewis recently paid out £40 million to their staff as they had not accounted for commission and overtime in their holiday pay.  In my view it will depend on the size of the claim. If it is a low value claim it may well be that workers would be deterred by employment tribunal fees where it would simply not be cost effective to pursue the claim. If for instance, the claim goes back as far as 1998 and/or the worker is a high earner it is unlikely that tribunal fees would make much difference.

So what about contractual holiday pay? The right to holiday pay under the WTR does not affect any contractual entitlement to holiday pay.  However, any holiday paid to a worker under his contract of employment will go towards discharging his employer’s liability to pay him holiday pay under the WTR and vice versa.  Any contractual entitlement to holiday must be included in an employers written Statement of Particulars.  The particulars must also be sufficient pellucid to calculate precisely what the entitlement to accrued holiday pay would be on termination of his employment.  In the absence of an express agreement, a term entitling an employee to pay in lieu of accrued unused contractual holiday on termination of employment would not generally be implied however it can in some circumstances become an implied term through custom and practice or business efficacy.  I would like to remind everyone that after two months continuous employment, an employer must give their employees a written Statement of Minimum Particulars of Employment (see my previous article on this here).

So what’s next?

holidayI am sure we are all curious to see how the UK Courts will interpret the ECJ decision in Lock. There have already been some prominent ECJ cases preceding Lock and in my view the main principle to take away from the ECJ is that it should never be a disincentive for a worker to take holiday. That is, you should never loose money if you chose to take holiday. With this in mind, for those of you who are going away for an autumn or winter break, do make sure that you are getting paid what you are supposed to. If you are working on a commission basis and think you are owed holiday pay, bring this up with your employer and seek to clarify the payments that may be due to you. It may also be advisable for employer to go through your workers’ payment structures and consider the potential liability. Employers should also ensure that they do follow the correct holiday pay calculations going forward. Needless to say that this can become rather costly and should be budgeted for.

As with all these matters, taking skilled professional advice is highly desirable before things get out of hand.

Work/Life Balance – Flexible Working

Work/Life Balance – Flexible Working

NOTE: When introducing the new right of employees to request flexible working (from 30 June 2014), the Department for Business, Innovation & Skills explained that there are many forms of flexible working. It can include homeworking, or part time working, flexi-time, job-sharing and shift work. At the end of this article there are some resources you can download. working on sofa

The change on 30 June 2014

The law seems to be catching up with the elusive work/life balance of employees. The latest law revision widens the statutory framework to request flexible working available to most employees with at least 26 weeks’ service. It took effect on 30 June 2014.

The new regulations replace the existing legislation with a very similar set of provisions except that the applicant no longer is required to have responsibility for the upbringing of a child or be a carer.

My own situation explains it quite well: My husband and I have lived apart in two countries for three and a half years. This means that we spend a significant amount of time travelling to see each other as much as we can. Therefore, we are at the mercy of Lufthansa’s flying times between London and Frankfurt. As it happens, the last flight out of London is at a time where I would not be able to get there on time on a Friday after work. This means that often, I am unable to keep up my end of the weekend commute without having to request holiday days. My husband, on the other hand, has an arrangement where he can work from home and also work flexible hours so that he can make the flight times.

We do not have any children and we are not carers. So, the changes that came into effect at the end of June are something that could potentially have an impact on my own work/life balance. At least, that is so in theory.

From the 30 June, I could make a request to change:

  • the hours that I am required to work;
  • the times when I am required to work;
  • where I am required to work.

Once a valid application has been submitted to my employer, my employer:

  • is obliged to deal with it in a “reasonable manner”;
  • is obliged to notify me of its decision on the application within a period called “decision period”;
  • is only entitled to refuse the application if it considers that one or more certain defined grounds for refusal apply.

The changes explained

working from homeDid you all get this? Let’s recap shall we?

Essentially the main changes to the statutory scheme are:

  • flexible working requests would no longer need to be made in order to care for certain children and can be made by all employees (but not agency workers) with at least 26 weeks’ continuous employment;
  • the procedure to be followed is meant to be less prescriptive than the procedure previously in force but the employer needs to deal with the application in a reasonable manner. What a reasonable manner is we shall return to later in this article.

There is now also a statutory ACAS Code of Practice on handling requests in a reasonable manner. This means that any Employment Tribunal has to take this code of practice into account in determining whether or not the flexible working application has been dealt with in a reasonable manner.

The employer will have a three-month decision period that can be extended by agreement to consider the request and discuss the request with the employee and notify of the outcome.

If my employer fails in those obligations in dealing with the request I may bring a claim to the Employment Tribunal. It would be possible to bring a complaint to the employment tribunal on the following grounds:

  • an employer’s failure to deal with the application in a reasonable manner;
  • failure to notify the employee of the decision of the application within the decision period;
  • failure to rely on the statutory grounds for refusing the application (see below);
  • the employer bases his decision on incorrect facts or treats the application as withdrawn when the grounds entitling the employer to do so do not apply.

Grounds for refusal of an employee’s request

So, what are the grounds on which an employer can refuse a request for flexible working?

The grounds on which an employer can refuse a flexible working request remain the same under the new legislation, as applied previously. These are as follows:

  • rejectedburden of additional costs;
  • detrimental effect on the ability to meet customer demands;
  • inability to re-organise work among existing staff;
  • inability to recruit staff;
  • detrimental impact on quality;
  • detrimental impact on performance;
  • insufficiency of work during the period the employee proposes to work;
  • planned structural changes.

It is important to note that an employer can offer a compromise or a trial period if this is appropriate. An employer must also ensure that its dealing with the flexible working request is not discriminatory in any way. (Please see my previous blog article on discrimination in the workplace)

What are the benefits?

There many are benefits of properly managed flexible working arrangements.

It could lead to increased productivity and a better working relationship between the employer and the employee.

The key issue here is that any decisions regarding a request for flexible working has to be handled objectively and fairly and that employees will not be treated badly because they have asked for a flexible working arrangement. As with most issues in the workplace, it is important that you update your policies so that you have a flexible working policy that will ensure that all requests are dealt with in a fair and objective manner.

The penalty for getting it wrong

As with all legislative changes, there will be a time before you will see some significant change in how this is handled. It would be surprising if there were some significant impact on the number and/or types of flexible working requests based on these changes.

However, I think that it is important that you do inform your employees that they have this right and that you have policies and procedures to deal with any requests. If an employee succeeds in bringing such a claim on one or more of the grounds, an employment tribunal may make either or both of the following:

  • an order for consideration of the request;
  • an award of compensation which is considered just unequitable by an employment tribunal up to the statutory maximum which is eight weeks’ pay at a statutory cap.

Flexible working requests can also give rise to other statutory claims including constructive dismissal and/or discrimination claims. The compensatory award for constructive dismissal claims on its own will be capped at the statutory maximum, which is the lesser of 52 weeks’ actual gross pay or £76,574. However if the employee is successful in bringing a discrimination claim, the damages awarded are uncapped and in most cases, award injury to feelings, which can also be made under the top compensatory band as established by case law. For the most serious cases this is currently £19,800 to £33,000. Depending on the nature of the employer’s conduct, awards of aggravated or exemplary damages can also be made.

Action Plan

Whether you are thinking about making a flexible working request or just want to be prepared if you receive such a request, the Acas Code of Practice and the accompanying Acas Guidance is a very good starting point.  It is clear that the main principle of considering the request is that an employer should consider the request carefully looking at

a)    the benefits of the requested changes in working conditions for the employee and their business; and

b)    weighing these against any adverse business impact of implementing the changes.

As for myself, bringing a flexible working request in relation to my travel arrangements, given what I do, I think the main ground for rejecting a flexible working request in my situation could possibly be that the employer considers the change would have a detrimental effect on the business’s ability to meet customer demand. Given that I am here to serve my clients during the firm’s opening hours, it might be that they might not like the fact of me going off early on a Friday afternoon if matters needed to be handled urgently.

For example, if I were to work four longer days and freeing up Fridays to travel to Germany, my employer would no doubt be concerned that I would not be available to deal with pressing time-dependent issues concerning my cases on a Friday. The company or the firm would most likely fear losing billable hours and attracting complaints from clients because of my absence and would be inclined be to refuse the request on the grounds of an adverse impact on the customer demand. A compromise in this case could possibly be for my employer to consider a request under the “right to request” to trial the arrangement for a period of time to see whether or not the clients would in fact be negatively affected. Perhaps some clients would be happy that I would be able to deal with their matters after normal office hours four days a week. The office secretary could also perhaps handle routine matters in my absence… in any event, it is interesting and good to know that as an employee I now have the right to request flexible working which in the future may be something worth considering.

Downloads

– Code of Practice on handling in a reasonable manner requests to work flexibly
– The right to request flexible working: an Acas guide (from 30 June 2014)
– Making a statutory application
– Information about taking an employer to an employment tribunal

Making security add up

Making security add up

Guest Blog by Sonia Blizzard

Accountants are used to dealing with complex sets of data and recognise the sensitivity of the information they hold on behalf of clients. As with other professions, technology is presenting challenges which require careful consideration by accountancy firms.

In this guest blog, internet security expert and MD of Beaming, Sonia Blizzard, talks through a few of the ways you can make sure you can make your security add up.

Security vs Flexibility

datadataThe first of these is security versus flexibility.  Most accountants [and other professionals too] like to have the ability to access their systems from clients’ sites or working from home, as this is efficient for their company, and they want to achieve this safely.

Remote working solutions such as Terminal Services or Citrix and hosted software platforms achieve this, as long as the company knows the servers are based in a secure location in the UK and if in a shared data centre, that this data centre complies with the highest security standards.

Ultimately the accountancy firm is responsible for the data they hold on their client and it is their duty to know where it is held and that it is safe.  Under no circumstances, do they want to become the weakest link in the chain of their client’s defence against online criminal activity.

Added to this there is the more basic issue of connectivity.  In our experience, firms often look at the speed at the server location but forget about the experience at their office location, if different.  It is pointless investing in technology if you cannot access it.  A broadband connection aimed at the residential market is not going to deliver an efficient way of working and what happens to the office if there is a fault when it takes days, rather than hours, to fix?  What would happen if this was towards the end of January when last minute tax returns are being filed?  In the same way that accountants are highly familiar with the regular software upgrades which need to take place for accountancy software, partners should routinely review their systems and connectivity to ensure that they have the correct network in place.

Protecting against threats on each site

safeFor larger firms, with a number of locations, there may be a range of solutions to consider and when doing so, with the recent increase in cyber hacking in mind, security should be paramount. Each site should be protected against such threats and this can soon add up in terms of cost of hardware, but how about a private network where there is only one route in and out to the public internet?

This saves on the cost of equipment and it can also consolidate any historically different ways of working at each site to those under one arrangement, which will bring huge benefits when it comes to managing staff.

Changing attitudes towards data security

The second challenge is managing clients’ attitude to data security and technology. In our experience, accountants are, on one hand, dealing with clients who have suffered from online fraud or system failures, and on the other, those who are nervous about the security of their financial information but do not know what is best practice.  They turn to their trusted professional, their accountant, for advice.  Those accountancy firms who have invested in their own solution to this problem and who are confident about the advice they can give will have the advantage.  Imagine as well if a firm was to be compromised or to lose its systems for days.  What would happen to its client base?

Accountancy firms work alongside external parties, such as bookkeepers.  The trusted relationship between accountant and bookkeeper should also include an evaluation of how seriously each party takes security of the shared client’s data.monkey technology cartoon

Data storage and back up

Another challenge that faces accountants is data storage and backup.  By the very nature of what they do, accountants hold large amounts of historic paperwork, all safely under lock and key.  For those who have moved to a paperless solution, this still needs to be safe.  Data backup is then the solution.

Offsite backup is essential.  This is an easy piece of advice which accountants can also give to their clients.   It does not require them to become IT experts or have a forensic understanding of how the client runs their systems.  With the right kind of offsite backup, such as Beaming’s DataChest which holds seven copies at a time in an encrypted form, if the client is compromised by ransomware such as Cryptolocker or loses their key financial information due to a system problem, the backup files will not be overwritten and they will be able to restore the files and ultimately continue to trade.  That’s good for them and good for the accountant.


Sonia BlizzardGuest Author:

Sonia Blizzard is the MD of Beaming (www.beaming.biz)

Beaming is a company that provides secure internet connectivity and data back-up services to a number of businesses across the UK.

Disability – rights and obligations in the workplace

Disability – rights and obligations in the workplace

Saga NorenYou may be familiar with the rather eccentric and accidentally hilarious crime detective Saga Noren in the Scandinavian crime drama The Bridge.  As I grew up in the area where this gritty drama takes place, I recognise some of the cultural features of her behaviour. The actors themselves have admitted that Saga is actually a stereotype of what Danish people think about Swedish people and her sidekick Martin Rohde is conversely a stereotype of what Swedish people think about Danish people.

Sounds complicated?

The truth about Saga Noren

There’s been a lot of talk about Saga’s personality (or lack thereof) in the media.  It’s clear that the creators of this show were intending to show that Saga functions in a different way from that which one expects of neurotypical people, or “NT” (which I now know is jargon used to distinguish people on the autistic spectrum from “normal” people).  In a recent interview, the actress who plays Saga Noren, Sofia Helin describes her character as showing “another way of being intelligent”.  Her EQ (emotional intelligence) is very low but her IQ is very high.  While the media and the audience may have interpreted Saga Noren as having Asperger’s Syndrome (a form of autism) condition, the show’s creator says that they’ve actually never diagnosed her on the show. However, it is clear that Saga struggles to navigate the social rules of the workplace and according to one British psychiatrist, Eva Loth of the Institute of Psychiatry, King’s College London, she appears to fit somewhere on the autistic spectrum disorder scale.

In a recent BBC Health article, Robyn Steward, the National Autistic Society’s Ambassador, who actually has Asperger’s Syndrome herself, speaks sympathetically about Saga Noren’s character. According to Ms Steward, Saga is a good role model for women who are different and for women who are on the autistic spectrum.

The media’s flirtation with autistic spectrum disorder

The media’s flirtation with autistic spectrum disorder (ASD) does not end with Saga Noren.  Very recently, hidden disabilities of Asperger’s Syndrome and Bipolar Disorder have become a defining attribute of the main characters in some of our most popular series such as Sherlock, Homeland and as I’ve mentioned, The Bridge. The (anti-) heroes and heroines of these contemporary tales are all highly functional individuals in full-time employment with conditions that are classified as a disability under the Equality Act 2010 (EqA) and therefore enjoy protection under the same act.

Sherlock is self-employed but given that he performs his serviced personally he is likely to be protected by discrimination legislation. Saga, as an employee of the Swedish police, would have the same rights under the domestic legislation. Again, I digress, but these fictional characters are still good examples of working with a disability. If anything, it hopefully increases the general awareness of autism and other disabilities which may not be obvious to most people.

Recent developments

tie shoesThere have been quite a few recent developments as to what actually is classified as a disability.  One of the most noteworthy in the recent press is whether or not obesity is the new disability.  A test case is currently before the European Court of Justice which will determine whether EU law bans discrimination or grounds of obesity. Karsten Kaltoft was a child minder weighing more than 25 stone. He was employed by the local authority in Billund for 15 years. Eventually, he was sacked because his employer felt that he could no longer fulfil his duties. One of the examples of this was that he needed a colleague’s help to tie a child’s shoelace. Now, the EU court will have to consider whether obesity would fall within the legal definition of disability and whether the local authority was guilty of discrimination when they dismissed Karsten.

As the UK has the highest percentage of obesity in Europe (The National Obesity Forum has estimated that by 2050 half of the UK’s population will be obese) this could be quite a significant decision for both employees and employers. Given the rapid development in medical advances it is also clear that attempting to compose an exhaustive list of things that would be classified as a disability for the purposes of discrimination legislation is futile, but where do you draw the line?

Who is disabled in the eyes of the law?

The Equality Act 2010 defines disability as: any physical and/or mental impairment which has a substantial and long term adverse effect on a person’s ability to carry out normal day to day activities.  This involves some sort of limitation outside the normal range of differences in the ability among people.  People who used to have a disability will also be protected.

The Office for Disability Issues has published useful guidance on matters to be taken into account in determining questions relating to the definition of disability. (www.odi.gov.uk/equalityact) A disability can involve a wide range of impairments which can include:

  • Sensory impairments, such as those affecting sight or hearing
  • Fluctuating or recurring effects such as rheumatoid arthritis, myalgic encephalitis/chronic fatigue
  • Progressive, such as motor neurone disease, forms of dementia or lupus
  • Organ-specific, including respiratory conditions such as asthma and cardiovascular diseases
  • Developmental, such as autistic spectrum disorders, dyslexia, learning difficulties,
  • Mental health conditions and mental illnesses, such as depression, schizophrenia, eating disorders, bipolar affective disorders
  • Injury to the brain

The exclusions apply where the items listed above are an impairment in themselves. The exclusions also apply where these tendencies arise as a consequence of, or a manifestation of, an impairment that constitutes a disability for the purposes of the EqA.

A person with an excluded condition may nevertheless be protected as a disabled person if he or she has an accompanying impairment that meets the requirements of the definition. It is clear that it’s not necessary to consider how an impairment is caused, even if the cause is a consequence of a condition which is excluded.  For example, liver disease as a result of alcohol dependency may still count as an impairment although an addiction to alcohol in itself is excluded from the scope of the definition of the EqA.  What is important to consider is the effect of an impairment, provided it is not an excluded condition.

People with HIV, cancer and multiple sclerosis are disabled for the purposes of the EqA. That means that the person is protected by the EqA effectively from the point of diagnosis. Similarly, people are deemed to be disabled, without having to show that they have an impairment that has (or is likely to have) a substantial, adverse, long-term effect on the ability to carry out normal day to day activities if they have, for example, been certified as blind, severely sight impaired and partially sight impaired. That means that the person is protected by the EqA effectively from the point of diagnosis.

There are some exclusions and certain conditions are not to be regarded as an impairment for the purposes of the EqA Act.  These are:

  • Addictions to dependency of alcohol or nicotine or any substance (other than in consequence of the substance being medically prescribed)
  • The condition commonly known as hay fever except where it aggravates the effect of another condition
  • Pyromania (the tendency to set things alight)
  • Tendencies to steal
  • Tendencies to physical or sexual abuse of other people
  • Exhibitionism
  • Voyeurism

Disfigurements which consist of tattoos (which have not been removed) or non-medical body piercings or something attached to such piercings, are to be treated as not having a substantial adverse effect on that person’s ability to carry out normal day-to-day activities.

The exclusions also apply where these tendencies arise as a consequence of, or a manifestation of, an impairment that constitutes a disability for the purposes of the EqA.  They would also apply where these acts constitute an impairment in themselves.  A person with an excluded condition may nevertheless be protected as a disabled person if he or she has an accompanying impairment which meets the requirement of the definitions.

As you can see, the legal test of disability is quite complicated. However, it should be noted that in the vast majority of cases there is unlikely to be any doubt whether or not a person has or has had a disability.

What if you or one of your employees are classified as disabled under the EqA?

distressThe EqA provides disabled people with protection from discrimination in the work place. (See previous blog article Discrimination in the Workplace).

In addition, employers must make reasonable adjustments to accommodate a worker with a disability.

It is unlawful to discriminate against workers because of a physical or mental disability or fail to make reasonable adjustments to accommodate a worker with a disability.

  • This means that employers must not directly discriminate against a person because of their actual or perceived disability, or because they associate with a disabled person.
  • An employer must not treat a disabled person less favourably for a reason related to his or her impairment, unless that treatment can be justified.
  • The employer must not have procedures, policies or practices which, although applicable to all workers, disproportionately disadvantage those who share a particular disability, unless these can be justified.
  • An employer must make reasonable adjustments in the recruitment and employment of disabled people.
  • An employer must also not treat an employee unfairly who has made or supported a complaint about discrimination because of disability.
  • Disabled employees are also protected from bullying and harassment. (see previous blog article – Bullying and Harassment at Work)
  • If an employee has a disability that is making it difficult to work, employers should consider what reasonable adjustments they can make in the workplace to help.

Best advice if there’s a problem

If you think you may be disabled yourself, you should bring the matter to your employer’s attention and consult with your physician or appropriate advisor as to your individual requirements regarding adjustments that are needed.

If one of your employees approaches you with a disability you should hold a meeting to discuss any reasonable adjustments that could be made to ensure that your employee is receiving the appropriate support and that you are complying with the discrimination legislation in force.

Equally, if you think you have been discriminated against, or harassed or victimised because of your disability or because you associate with a disabled person you should raise a grievance.  If you receive a grievance from one of your employees you must take this seriously and address it in accordance with your Grievance Procedure and/or the Acas Code of Practice. (www.acas.org.uk/index.aspx/index.aspx).

An opportunity for the Airbnb of Asia?

An opportunity for the Airbnb of Asia?

air bnb of chinaIn a week where taxi drivers around the world went on strike against Uber, and Airbnb announced an anticipated 120,000 visitor stays for the World Cup in Brazil, this post looks at the growing number of “collaborative consumption” startups in Asia and the legal and commercial challenges they will have to overcome to succeed in the region.

What is “collaborative consumption”?

Collaborative consumption (aka “the sharing economy” or “peer to peer”) is a broad term used to describe the shared creation, supply and consumption of goods and services. Typically it involves the use of technology platforms (usually the internet) to link supply and demand, enabling supply-side and demand-side to share resources and capacity in an efficient way.

That’s the concept but it is perhaps best explained by way of example, with reference to arguably the two most disruptive collaborative consumption companies today: Uber and Airbnb. As most readers will be aware, Uber connects passengers with drivers in most major global cities, whilst Airbnb links people with temporary accommodation. If you’ve used either of those services, or any like them, then you’re already part of a new generation of collaborative consumers…


Click here to read the full blog post at ConnectedAsia, and see what is driving collaborative consumption in Asia…
Casting light on the dark mysteries of self-employment

Casting light on the dark mysteries of self-employment

[Update – 31st March] On the 27th March, the Finance Bill 2014 was published. There is a seperate document that deals with salaried memebrs of LLPs and it is available here.


I am indebted to Sofie Persson for her contribution to this blog post, which has been most helpful.

Over recent years, HM Revenue & Customs (HMRC) have taken an increasing interest in the treatment of payments to self-employed persons who could otherwise be regarded as employees and therefore within the scope of the PAYE regulations. This is a very current issue for professional firms operating as limited liability partnerships (LLPs) facing new tax rules due to apply next month. These rules reaffirm HMRC’s intention to stop, what they see as a misuse of some LLP provisions, in treating members who are essentially salaries, as if they are self-employed.HMRC Cartoon

Access a  supplementary Briefing on this subject here from Guest Blogger Sofie Persson and another supplementary briefing from Martin Pollins here.

Employment regulations

Non-compliance with PAYE regulations can result in a series of penalties and impositions for the employer who fails to deduct PAYE and National Insurance Contributions (NIC) at source. You should therefore make sure that you are fully conversant with the differences between an employee and a self-employed person

The words “Employee”, “Employer” and “Self-Employed” have no exact meaning in law, and so it is difficult to be precise about a particular interpretation of a set of circumstances to determine whether a person is employed or self-employed. If an individual carrying out a service for a company is self-employed, the company does not have to apply the PAYE or NIC deduction rules. The difficulty is how to establish whether a person is employed or self-employed.

The following list may help clarify the situation but each set of circumstances is different and you should take appropriate professional advice to determine the actual position in your own case (references to “his” include “her”):

  • Do they have to do the work themselves?
  • Can they hire someone to do the work or engage helpers at their own expense?
  • What control over the work does the “employer” impose: Can someone tell them at any time what to do, where to carry out the work or when and how to do it?
  • Can they work a set amount of hours?
  • Can someone move them from task to task?
  • Are they paid by the hour, week, or month?
  • Can they get overtime pay or bonus payment?
  • Is there an obligation on the business to provide work and for the person to accept it (often called the “mutuality of obligation” factor)?
  • Can the individual decide his own schedule and methods of work, and the place from which he works?
  • Who provides the materials and equipment necessary for the individual to carry out his work?
  • Does the person concerned operate a business bank account, use a business name and, if relevant, register for VAT?
  • Does the individual have several clients or customers?
  • Are invoices raised that indicate the individual is carrying out a proper business?
  • How is payment made?
  • Are there other people within the company performing similar tasks but who are treated as employees?
  • Has the person become integrated into the organisation where others are employees and it would be difficult to distinguish one category of worker from another?
  • Do they have to make good unsatisfactory work in their own time and at their own expense?
  • Delegation – can the individual send a nominated replacement to perform his contractual duties (an important feature in determining self-employed status)?
  • Is there an opportunity for the individual to profit from good management of the tasks to be undertaken?
  • Do they agree to do a job for a fixed price regardless of how long the job may take?

Features which may point towards or away from employee status are:

Whether the worker: Towards employee status Away from employee status
…provides services personally Yes – required  
…is subject to a sufficient level of control by the employer Yes – required  
…and the employer share mutuality of obligation Yes – required  
…is paid:    

– a regular wage or salary

Yes

– via profit sharing or the submission of invoices for set amounts of work done

Yes
…provides capital Yes
…assumes a degree of financial risk if work is not completed on schedule or to standard Yes
…receives any performance-related pay, such as a bonus Yes
…receives overtime pay Yes
…provides their own workspace, tools and equipment Yes
…is not tied to the employer, ie free to work for others (especially rival enterprises) Yes
…works variable hours or variable days of the week (or works only for certain fixed periods) Yes
…works on specific projects or not at all Yes
…works in a trade whether there is a ‘traditional structure’ of employment Yes
…has their attendance and hours of work monitored Yes
…is subject to the company disciplinary procedure and other procedures and policies Yes
…maintains indemnity insurance Yes
…maintains employer’s liability insurance, where they employ staff Yes
…receives paid holiday Yes (although note this is a worker’s entitlement)
…receives sick pay Yes
…receives other benefits (such as subsidised gym membership, medical expenses insurance) Yes
…is ‘part and parcel’ of the employer eg:

– participates in staff training

Yes

– participates in staff events eg Christmas parties

Yes

– has an employee (as opposed to a visitor or temporary ID) pass to the employer’s premises

Yes
…is responsible for the payment of income tax and national insurance contributions Yes
…can be dismissed Yes
…has a long engagement, or series of engagements Yes

Source: Sofie Persson from Engleharts Solicitors.

The Tax Implications

A self-employed person is responsible for paying his/her own Income Tax on the profit arising from the services offered. Such a person will not be included in an employer’s PAYE Scheme. They will be responsible for registering for VAT if the level of taxable supplies exceeds the necessary limits.

For guidance on employment status, HMRC Employment Status Manual is available on their website.

HMRC provides an Employment Status Indicator tool to help employers determine their workers’ employment status. This can be viewed at www.hmrc.gov.uk

New rules affecting “salaried” members of LLPs

MeetingHMRC has published a technical note on new rules due to come into effect on 6 April 2014, which affect limited liability partnerships (LLPs). Specific legislation exists to ensure that LLPs are treated as partnerships for tax purposes, rather than treated as companies.

Over the years, it has become evident that many LLPs have members who are engaged on terms that are similar to those of employees rather than traditional partners.

Legislation is being introduced in Finance Bill 2014 to ensure that LLP members who are, in effect, providing services on terms similar to employment are treated as “employees” for tax purposes. Associated changes to the NICs legislation are being made under the NICs Bill 2013.

Limited Liability Partnerships with ‘salaried’ members
New measures to combat alleged tax avoidance by limited liability partnerships (LLPs) come into force on 6 April 2014. The rules are intended to prevent the abuse of LLP status by payments to ‘disguised employees’. When applied, the increased NIC cost to the employee and the LLP will be considerable.

There will be a new test to determine when a member of an LLP is really a salaried member rather than a profit-sharing. LLPs will need to consider whether individual members fall within the conditions set out in these tests (see below). Meeting the tests means that:

  • the individual member concerned will be treated for UK income tax purposes as an employee of the LLP and, therefore, liable to the PAYE rules and will pay NIC at the Class 1 rate; and
  • the LLP, as the employer, will be liable to employer’s Class 1 NIC on remuneration paid.

As an employee, the salaried member (as an employee) will have to be included in the employee-related benefit in kind rules and the employment-related securities rules and Class 1A NIC will be payable by the LLP. Provisions have been introduced to allow the corresponding costs of ’employing’ salaried members to be deductible in the computation of the profits of an LLP for tax purposes.

An anti-avoidance provision is also going to be introduced so that any arrangement with a purpose of circumventing the rules will be disregarded.

The 3 Conditions

Condition A
Condition A, addresses ‘disguised salary’, and is dependent on the level of variable profit share. This will be assessed on 6 April 2014 or later when the individual becomes a member and is not reassessed again unless the member’s arrangement with the LLP changes.The test is that there is an agreement in place under which the individual performs services for the LLP in his/her capacity as a member and it is reasonable to expect that the amounts paid will be, at least substantially (that is 80% or more), ‘disguised salary’. This term refers to fixed payments or, where the payments are variable, to payments whose variance has no reference to, or are not affected by, the overall profits or losses of the LLP.
Condition B
Condition B (significant influence), is assessed at 6 April 2014 or later when the individual becomes a member and is not reassessed again unless the member’s arrangement with the LLP changes.The test is that the individual does not have ‘significant influence’ over the affairs of the LLP.
Condition C
Condition C (sufficient capital contribution to the LLP) – HMRC’s guidance includes some examples of when they would consider that the arrangements put in place to avoid a member being treated as an employee as a result of this condition to be tax avoidance and will therefore be disregarded.The test is that the individual’s capital contribution to the LLP is less than 25% of the disguised salary which the LLP is reasonably expected to pay to him/her in a relevant tax year. This test requires further consideration where there are changes in the individual’s capital contribution during the year or there is another change in circumstances.

Action Plan

If your business is structured as an LLP and the new provisions mean that some members are to be treated as employees in future, it will be necessary to see whether a new contract of employment of employment should be issued to them. Sofie Persson, a specialist employment lawyer at Engleharts, is happy to advise you on what documentation is required and what action needs to be taken. You can contact her on 01273 204411 or by email to sofie@engleharts.co.uk

You can access a  supplementary Briefing on this subject here from Sofie Persson. It explains the significance of the distinction between employees, workers, self-employed contractors and it also highlights the legal status of volunteers and consultants. There is also another supplementary briefing from Martin Pollins here.

I am indebted to Sofie Persson for her contribution to this blog post, which has been most helpful.

Get out. Buy house.  Collect golden visa. Do not pass go.

Get out. Buy house. Collect golden visa. Do not pass go.

monopoly goReeling Eurozone economies and recovering giants are all banking on China’s next move. In the wake of George Osborne’s visit to Beijing last year, a Treasury press release noted that Chinese students make up the largest group of foreign nationals in UK schools and universities. The UK is also the number one destination for Chinese investment in Europe, attracting nearly £2 billion in the last year alone and more than 600 Chinese businesses who now have a presence in the UK.

According to the Chinese language property portal juwai.com, 63 million Chinese people have sufficient wealth and income to purchase international property.  Along with other Chinese language property portals such as soufun.com, juwai.com is saturated with prime property listings in first tier UK cities and in other Eurozone locations.  According to the international property portal, Propertywire.com , improved trade relations between the UK and China along with an increasing number of Chinese children being educated in top schools here are among the key factors driving Chinese investment in prime central London property.

ChineseThe company behind Soufun.com organises overseas purchasing tours for Chinese seeking to buy properties and a chance to live in the EU. Juwai.com also hosts extensive information on whether buying a house will lead to permanent residence in the respective jurisdictions.  Conversely, the English language version of the same site is cleverly marketed to overseas property agents eager to break into the Chinese market. Is this a win: win situation for everyone?

Martin Chavez is a real estate professional who has lived and worked in Beijing for over 8 years. We were colleagues in Beijing and I called him up as I was very keen to hear his thoughts on this matter.

To my surprise, Martin’s first thought was: “Sofie, this topic isn’t very fresh.”

Unbeknown to many people in the UK, outbound property investment has already been talked about in China for two or three years.

Martin said: “I first came to China in 2005 and have since noted that things change at a faster pace, especially economical change which, unavoidably in first instance, affects the lighter areas of society, such as fashion, pop art and overseas travel. Every 3 years, there seems to be a change in the population’s taste and buying patterns.”

The growth in outbound property investment

According to Martin, this change has been gradual and largely driven by foreign travel becoming more and more widespread. Most urban Chinese with decent salaries have now had holidays abroad in for instance Europe, the United States, South East Asia and even in exotic destinations such as the Maldives, United Arab Emirates and South America. Despite controls, travel to Japan and Taiwan is also on the rise.  As Chinese people become well-travelled they also become increasingly influenced by global trends (this was definitely not the case when I left China in 2008). Similarly, Chinese private investment tastes have changed in recent years.

“The bubble has already burst on the numerous touzi gong si (or investment companies) that popped up all over town. They would rent a top floor in the best buildings in Beijing or Shanghai. Within a year they would already be gone. People are now are now looking for more stable investments overseas and I have made quite  few outbound investment referrals to the US and Europe. Chinese investors could easily get higher yields in Chinese second  and even third tier cities, such as Ningbo or Wuhan, than they could ever dream of in the US or in Europe. So the outbound property investments are not driven by rate of return alone.” Martin said.

Without state-backed pensions, health care or education, the Chinese save almost half their income as a hedge against personal misfortune. Risk averse investing is then the preferred method of capital growth. They also feel that security overseas is higher and is not turning a blind eye to lingering corruption, political and financial instability in mainland China. If anything would happen in the mainland, money could diminish or even evaporate and many wealthy Chinese worry about how to get their money out of China if China ever returns to times of political turmoil.

Economic crimes, such as bribery and embezzlement, and crimes against national symbols and treasures, i.e. theft of cultural relics, are all capital offences in China. Investing overseas is a good way to not lose your head.  Corrupt government officials and other crooks aside, changing lifestyle choices, emigration and education are commonly cited as the main driving forces behind the increase in Chinese investment in foreign property. Perhaps they are planning to send their sons or daughters to be educated abroad. 85% of China’s wealthy now want to educate their children abroad and over 60% of China’s wealthy are engaged in overseas investment or immigration.

“Not to mention gaining mianzi (or face), the mere fact that you can boast to your friends about owning prime real estate in London or the US something that is highly sought after” says Martin.

The sociological concept of losing or gaining face is a fundamental characteristic of Chinese society and culture.  It is an abstract concept which can best be described as a combination of social standing, reputation, influence, dignity and honour. In Chinese culture, you can liu mianzi (or grant face) which means that you give someone a chance to regain lost honour. You can also shi mian zi (or lose face) or zheng mianzi (or fight for face) which is similar to the western concept of “keeping up with the Joneses”.  You can also gei mianzi (or give face) that is, show respect for someone’s feelings. Causing someone to “lose face” means that they have been lowered in the eyes of their surroundings. Conversely, “gaining face” raises their self-worth. When I first arrived in China I was oblivious to these subtle (and sometimes not so subtle) codes of conduct. Over time I began to understand and appreciate how the concept of face dictates social interactions. It naturally follows that this concept would also greatly influence the Chinese’s investment patterns.

London is seen as the Centre of Europe

Portobelloe RoadTop that off with top to toe brand wear, a kid in a private high school overseas and a golden visa to boot and you are at the very least keeping up with the Wang’s. It is clearly not the UK’s financial (or meteorological) climate that has led to a 500% increase in Chinese inward property investors to the UK in the past three years. Many Chinese property investors have been coming to London because they see it as the centre of Europe. Others already hold US properties and want to diversify their investment portfolio. In UK prime locations, the land in itself is so valuable that it is a safe investment in turbulent times. Coupling that with the pound staying low which in turn has made London properties fantastic value for foreign currency buyers.  Overseas property investments not only ensure a (relatively) good nights’ sleep but also adds a great deal of mianzi (or face).

Fast Track Permits

Greece and Cyprus currently offer fast-track permit processes for purchases of at last 250,000 euros and 300,000 euros respectively. Portugal’s programme has a minimum of 500,000 euros. This is significantly less than the UK, which requires an investment of at least £1 million for Tier 1 (Investor) visas.

Governments in Cyprus, Greece, Portugal and Spain are courting wealthy Chinese homebuyers. Depressed housing prices and a chance to obtain a golden visa is being sold to Chinese investors.  In Portugal, half a million euros will give a Chinese investor a good return on their investment as well as enjoying EU benefits they don’t have in China. For instance, the visa will allow for their children being educated in Europe.

Some visas also allow buyers to live and travel freely within Europe’s borderless Schengen Area.  As with the UK, the Euro has steadily decreased since 2010, making it more affordable for foreign buyers.

EU passport

Cashing in on EU Passports

Malta has recently been at loggerheads with Brussels as they offer a full EU passport to investors. Malta has decided to sell passports (and European Citizenship) for 650,000 euros to non-EU residents. This is without any prerequisite whatsoever, not even residence in Malta. Unsurprisingly this has angered MEPs who debated the issue on Wednesday on 15th January 2014.

Conclusions

Regardless of what their motivations or ulterior motives are, Chinese property investors will continue to flock to Europe. So far it appears to be focused on London and other first tier cities. Chinese buyers have tended to focus on the prime residential areas, such as Kensington and Chelsea and along the River Thames, in upper price bands and in new build high-rise flats, rather more than on the resale markets. However, this is likely to change over time as the first tier markets become more saturated and Chinese investors become more familiar with second tier cities. I have lived in Brighton for two years and it is incredible how often I overhear conversations in Mandarin when I am out and about.

We should definitely watch this space.

The icy winds of employment uncertainty across Europe

The icy winds of employment uncertainty across Europe

snowy bikesAfter years of economic recession, double dips, financial cliffs, bankrupt member states and other woes, employees across Europe are still worrying about their employment situation. That is if they haven’t already been sacked. Regardless of which sector their employer is operating in, many employees are victims of the fallout of the financial crisis. Restructuring, downsizing and hire freezes have been on everyone’s minds and few are unaffected by the icy winds of employment uncertainty. We have all seen bailout after bailout, government stimulus packages and changes in employment policies.

In the centre stage are executives, HR professionals and lawyers still scrambling to reduce Europe’s relatively expensive and inefficient bulging organisations.

The European Employment Law Checkpoint is an excellent resource from Wragge & Co.  It covers a wide spectrum including the commencement and content of the employment relationship, general rules for terminations, individual and collective redundancy, employee’s rights in case of termination and discrimination.

Country Termination Notice Period.  Note: Employment contracts may provide for more notice.

UK

  • Up to 2 years’ service: 1 week.
  • 2 to 12 years’ service: 1 week per completed year (maximum of 12 weeks).

France

  • Up to 6 month’s service: No statutory minimum notice period.
  • From 6 months to 2 years’ service: 1 months’ notice.
  • Over 2 years’ service: 2 months’ notice.

With very few exceptions, the Labour Code does not provide for a notice period in the case of a resignation.

Belgium

Under Belgian law, the duration of the notice period is different for blue-collar and white-collar employees. Also different provisions apply to employment contacts that started before 1 January 2012. Details are available here.

Portugal

 

An employee cannot be dismissed without justification. For dismissals with fair ground, no prior notice is required, but formal disciplinary proceedings are required. For a redundancy dismissal or unsuitability dismissal, the employee is entitled to a prior notice which varies from 15 to 75 days, depending on his/her seniority.

Spain

 

Prior notice is not required if a dismissal is based on disciplinary reasons. However, if a dismissal is based on redundancy reasons, the employer must give minimum prior notice of 15 calendar days (or provide payment in lieu of notice).

Germany

 

  • Less than 2 years of service:  4 weeks’ notice.
  • Over 2 years’ service: 1 months’ notice increasing in line with the length of service to a maximum of 7 months after at least 20 years’ service.

The employee is entitled to remuneration during the notice period.

Ireland

 

The Minimum Notice and Terms of Employment Acts, 1973-2005 require notice:

  • From 13 weeks’ to 2 years’ service: one week’s prior notice
  • From 2 to 5 years’ service: 2 weeks’ prior notice
  • From 5 to 10 years’ service: 4 weeks’ prior notice
  • From 10 to 15 years’ service: 6 weeks’ prior notice
  • Over 15 years’ service: 8 weeks’ prior notice

Italy

 

Notice periods are established by National Collective Labour Agreements and vary based on the employee’s level/qualification and length of service. In the absence of such an agreement, the relevant period is established by Labour Courts. Employees are entitled to terminate their employment agreement either:

  • by giving notice to the employer (which is established under the National Collective Labour Agreements and is usually shorter than the notice due to them in case of termination); or
  • without giving any notice, if a just cause (“giusta causa”) for termination exists.

The Netherlands

 

Except for instant dismissal or dismissal during a probationary period, notice periods to be given by an employer are:

  • Less than 5 years’ service: 1 month;
  • Service from 5 to 10 years: 2 months
  • Service from 10 ti 15 years: 3 months
  • Service over 15 years: 4 months

The statutory notice period to be observed by the employee is one month. Parties may deviate from the statutory notice period in writing. However, the notice period to be observed by the employer must then be twice as long as the notice period to be observed by the employee. No notice period has to be observed in the case of a resignation.

Poland

 

The length of a statutory termination notice period depends on the type of employment contract and seniority.  Termination notice periods for a probationary-term are:

  • 3 days – for a probationary period of up to two-weeks;
  • 1 week – for a probationary period longer than two weeks but less than three months; and
  • 2 weeks – for a three-month probationary period.

Generally a fixed-term employment contract and an employment contract for a specific task will terminate at the end of the fixed term period or on completion of the specific task and cannot be terminated earlier upon notice. Termination of employment for a fixed period is possible if an employment contract is for more than six months and the contract provides for termination with at least 2 weeks’ notice. The length of notice for an indefinite period contract is:

  • 2 weeks – for less than 6 months of employment;
  • 1 month – for 6 months or more of employment and less than 3 years of employment; and
  • 3 months – for 3 years or more of employment.

For further information, go here.

Czech Republic

 

The minimum notice period set by the Czech Labour Code is two months but the parties may agree upon a longer notice period, which must be adequate for the term of employment and type of work. The notice period must be the same for both the employer and the employee.

Source: Wragge & Co _meeting

An interesting study on international dismissal costs was published in 2013 by the accounting giant Deloitte.  This report used four scenarios to which the legal framework of the different Member States were applied so that the overall costs of dismissal could be calculated.

  • Case 1 was an employee of the age of 35, a legal advisor in an IT company with 7 year’s seniority and a gross annual base salary of €60,000.  The gross variable salary per year was €5,000 and benefits in kind per year in gross figures were €8,000.
  • Case 2 was an employee aged 49, a legal advisor in an IT company, 11 year’s seniority, gross annual base salary of €120,000 euros and gross variable salary per year of €10,000 euros and benefits in kind per year of €16,000.

The study analysed the overall costs involved where the dismissal was due to individual reasons (i.e. the employee’s behaviour and ability) or where the dismissal was for economic reasons (i.e. shortage of work.)  The results were rather interesting. Apart from Italy, Belgium was the most expensive country for dismissing employees.

The Table below shows the 5 most expensive countries for dismissal costs for each case.

Case 1, individual/economic reason
1. Italy
2. Belgium
3. Norway
4. Spain Europe
5. Sweden Case

2, individual reasons
1. Italy
2. Belgium
3. The Netherlands
4. Spain
5. Sweden Case

2, Economic reasons
1. Italy
2. Belgium
3. Spain
4. The Netherlands
5. Sweden

The second, and much less surprising, finding of this study was that western European countries face substantially higher dismissal costs compared to central European countries. On average a dismissal in a western European country is expected to be at least two times more expensive than in central European countries.

Facing the sack

Employee rights are constantly changing and are also very susceptible to changes in the domestic political landscape. For instance, the employment legislation in the UK is much more employer-friendly than for instance, Sweden or the Netherlands.  This in turn means that the labour market in the UK is much more dynamic than elsewhere.  On the other hand, employees do not really have a lot of protection against being unfairly dismissed until they have reached to two years’ continuous service.  Employees are still protected from for instance, being discriminated against or suffering a detriment because they are a whistle-blower. Such dismissals are automatically unfair.  However, looking through the window from the UK towards Europe, it may be the proverbial case of “the grass always being greener”.

Looking at other countries

Click here for a brief look at a few EU countries. It is an overview only and it is suggested that you take appropriate professional advice on any particular situation.

Further information

Flexicurity
Another perspective is provided in an article on the flexicurity model that was launched by the European Commission in the mid-2000s. It claimed that there existed such a thing as a ‘golden triangle of flexicurity’. The European Commission urged Member States and trade unions to give up on job protection in exchange for adequate unemployment benefits and active labour market policies. The inspiration for this was Denmark – a country hailed as the perfect illustration of how a flexible labour market with low restrictions on employers to dismiss workers could still offer high security of employment. Read the article, by Ronald Janssen. It says that, contrary to expectation when everything is considered, Denmark does not have a labour market that is particularly flexible at all.

OECD indicators of employment protection
The OECD indicators of employment protection legislation measure the procedures and costs involved in dismissing individuals or groups of workers and the procedures involved in hiring workers on fixed-term or temporary work agency contracts. Details are here.

The European Court of Human Rights found in November 2012 that UK law does not provide an adequate level of protection for people that are dismissed as a result of their political leanings. This protection will be extended to members of all political parties including the BNP and while it does not necessarily mean that employees cannot be sacked for their political beliefs, it does mean that they will be afforded the opportunity for a tribunal.

For a brief look at a few EU countries view this publication. It is an overview only and it is suggested that you take appropriate professional advice on any particular situation. It is derived from the 2013 study by Deloitte.

How to Ace the Consulting Case and Land the Job

How to Ace the Consulting Case and Land the Job

During-the-Interview (2)The management consulting recruitment process is known for being highly competitive in nature. Applicants prepare months in advance, especially for the case interview.

A recent article released by CNN suggests that management consulting firms are prioritising recruitment in 2014. To be more specific, Deloitte stated in the article that they are looking to fill roughly 12,000 vacant positions, whilst PricewaterhouseCoopers are also on the lookout for new hires (4,449).

These figures indicate that the consulting industry is still rapidly expanding and shows no signs of slowing down. Despite the need for new consultants, top consulting firms are making it clear that their standards for new recruits are not being compromised.

One of the ways that consulting recruiters ensure that they are hiring the best from each batch of applicants is through something called “the case interview” – a job interview in which the applicant is given a question, situation, problem or challenge and asked to resolve the issues.

Covering the Basics

Before reaching the case interview, a candidate has to be shortlisted. This takes years of preparation, obtaining the right credentials, joining the right clubs, and building a solid consulting network. Assuming all those are covered, the focus can rest entirely on the consulting case interview.

The most common scenarios that applicants encounter during the case interview are the following: organisation, start-ups and the release of a new product (risk and strategy). Applicants are recommended to familiarise themselves with these basic issues. Should you pass the interview process, it is highly unlikely that you will be immediately assigned high profile, complex projects.

Where to Find Sample Cases

One of the most asked questions that we receive from prospective consulting applicants is where to find relevant sample cases that they can practice on. There are a number of reliable sources that one can learn from. The first is your target firm’s website. McKinsey, Bain & Company and BCG have a set of samples on their respective website that are made up of real cases that they have encountered. Each website has their own way of guiding the applicant in going through the sample cases. McKinsey uses guide questions throughout the sample to provide hints for the reviewer, while Bain & Company includes a range of tools such as videos and multiple-choice questions.

Another great source for consulting cases is books. Case In Point, by Marc P. Cosentino, provides a selection of consulting sample cases, as well as informative tips on how to overcome and breakdown complex questions. This book is regarded as one of the best books for case interview preparation. Top MBA programs are known to purchase and recommend the latest editions of Case In Point for their students, members and staff.

Case Interview Frameworks

images (2)Once you have a set of sample cases, it’s time to apply the right case interview frameworks. It is nearly impossible to solve a case in the manner that the recruiter wants without using a consulting framework. Remember, what the recruiter is looking for is more than the right solution. He or she is more interested in how you came up with the correct set of options, including your thought process.

Case interview frameworks are designed to organise your method in solving the case through the use of categories and revealing questions. Each consulting firm has their own preferred frameworks that they find to be useful and superior. It is best to take note of your target firm’s set of frameworks that they rely on. This can give you insight on the type of cases that you might encounter.

Basic consulting frameworks such as SWOT Analysis and Seven S are a great way to start the case, as it can help identify problem areas. It is important to understand that it is not recommended to forcefully apply a framework to a case. This can be extremely misleading. Instead, adapt and use only part of the framework that is relevant to the type of case being presented.

Case Interview Skills

Apart from testing your analytic skills, case interviews test one’s ability to compute figures and data under pressure. Some interviewers even go off topic and ask more direct math questions such as, how many golf balls can fit in a standard freight container? Lastly, don’t forget to sharpen your communication skills. Confident message delivery can show the recruiter that you deserve the consulting position that you’re in the running for. Good luck!


daniel_stefanacAbout the author:
ConsultingFact
is a website that provides an online course and a selection of guides for consulting applicants. The online hub is owned by Daniel Stefanac, a former McKinsey consultant.

Through his shared knowledge and expertise in the consulting industry, numerous applicants have successfully landed their dream job. The consulting guides offered on the website covers key concerns of today’s prospective candidates such as writing a cover letter and resume, and case interview frameworks.

The changing nature of work and the birth of the weekend

The changing nature of work and the birth of the weekend

SofieBlogJust over a century ago, horrific employment practices were prevalent across Europe. Men, women and young children worked in mines and sweatshops for 16 hours a day in squalid conditions. The working environment was dangerous and accidents not uncommon. Fires, malfunctioning equipment often maimed and killed the main breadwinners leaving families to starve.

A lot has changed since then – particularly with the introduction of the concept of the weekend. Today, Europeans working full-time spend roughly 30% of their life working. Incidentally, that is the same amount of time they spend sleeping.

So what does it mean to be an employee in Europe today?

Free movement of workers is a fundamental principle of the Treaty on the functioning of the European Union and has since been developed by EU secondary legislation and the Case law of the European Court of Justice. EU citizens are entitled to:

  • look for a job in another EU country
  • work there without needing a work permit
  • reside there for that purpose
  • stay there even after employment has finished
  • enjoy equal treatment with nationals in access to employment, working conditions and all other social and tax advantages

The above is generally uncontroversial and is practiced throughout the member states on a daily basis. For instance, I am Swedish, but went to university and law school in London. I pay my taxes and national insurance contributions in the United Kingdom and I am registered as “emigrated” with the relevant Swedish authorities. Broadly speaking this means, I enjoy the same rights as a British citizen, save for voting in national elections. My job market is in theory not confined to Sweden or the United Kingdom. I am effectively competing for jobs with the working population of the entire European Union. I say in theory because my line of work does come with some inherent restrictions on the ability to practice in different jurisdictions which has in turn generated further Directives and case law. However, there is at present nothing that stops me from applying for a job in Sweden and provided that someone is willing to hire me, go through the motions of three years of practice and then an aptitude test before applying to the Swedish bar. Similarly, here in the UK a Swedish lawyer can become a Registered European Lawyer or take the Qualified Lawyers Transfer Test.

Say what you like about the European Union but the principle of free movement of workers is something they actually got right.

We now have European citizens moving freely across member states and numerous efforts have already been made to streamline the employee rights of EU citizens. For instance, the respective Directives dealings with statements of particulars of employment, prohibition against discrimination or harassment in employment, working time, business transfers, and rules in relation to mass terminations or collective dismissals have largely been implemented across member states. The key word here is implemented as opposed to directly pasted into domestic legislation. This means that there is still scope for many quirks and differences.

However, the European Directive of 14th October 1991 (‘1991 Directive’) aims to ensure that the bare minimum for employment terms is reduced into writing.  For instance, in the UK within 2 months of employment an employer must provide the employee with their written statement of particulars of employment to include a set of information set out by statute.

If an employer fails to provide this statement, provides an inaccurate or incomplete statement or does not provide an employee with a statement of changes, an employee may make a complaint to an Employment Tribunal.

Where an employee has no other successful substantive claim, the only remedy will be a declaration from the Employment Tribunal either confirming the particulars as they stand, amending them or substituting others as it thinks appropriate.

Where the employee has a successful substantive claim, in addition to a declaration of particulars of employment, the employee may also be eligible for compensation if the Tribunal finds that at the employer was in breach of its duties. The additional compensation will, unless there are exceptional circumstances, be two or four weeks’ pay.

The requirement of a written statement of particulars outlining the terms of employment can be found in other member states as well.   These are all variations of implementation of the European 1991 Directive which requires employers to provide a written agreement with the essential terms of the contract, such as the names of the parties;  the place of the work;  the job position;  a brief characterisation or description of the job position;  the starting date;  for fixed term contracts, the term of the employment;  the duration or, if not possible the terms and conditions of annual leave;  the duration, or if possible, the terms and conditions of the notice period;  the amount and components of the compensation;  the daily or weekly working time;  and applicable collective bargaining agreements.

French Flag France has its own interpretation of this directive.  In France, a written employment contract is mandatory when an individual is hired as a temporary employee or is hired on a fixed term or part‑time contract.  Non-competition covenants are also required to be writing.  A written employment contract is not strictly required under French law in all of the cases, although it is recommended for evidentiary reasons.
German Flag In Germany, the statutory law requires only that employment contracts with temporary workers and those parts of contracts relating to fixed terms and post termination covenants not to compete be in writing.  Nevertheless, written employment contracts are best practice.  Like other jurisdictions having a written contract of employment is a way of ensuring that you are complying with the written summaries of essential terms of the employment relationship and in Germany this has to be done within one month of commencement.
Italian Flag In Italy, there is no requirement for written employment contracts.  As with other countries however to be valid certain conditions must be in writing, such as probationary period and any fixed term and non-competition clauses.  Interestingly enough on the other hand agency contracts must all be in writing.  The obligation in relation to what has to be reduced into the bare minimum, in Italy it only requires an employer to inform the employee within 30 days of starting a new employment of roughly the particulars that are set out in the directive above.
Netherlands Flag In the Netherlands, an employment contract can be agreed orally and does not have to be in writing.  Nevertheless, the Netherlands has also implemented a directive and an employer is obliged to provide the employee, within a month of the entry date of the employment, roughly the same information as discussed above, save for whether the employment contract is a secondment contract and whether social security legislation in the Netherlands was to be applicable for people working outside of the Netherlands.
Polish Flag In Poland an employment contract should be made in writing and should indicate at least the minimum particulars of employment.  If an employment contract has not been made in writing the employer should, not later than on the date when commenced, confirm to the employee in writing the details of the parties, the type of contract, terms and conditions of employment and remuneration.  In addition, the employer must inform the employee in writing about the basis terms and conditions of employment that apply to the employee not later than 7 days after the employment contract was entered into and about any changes in those conditions.  Although this appears to be slightly different than what’s been laid down by the directive, it is fairly similar.
Romanian Flag In Romania the individual employment agreement must be concluded in writing, based on the parties consent.  The written form represents a prerequisite for the validity of the agreement.  Prior to concluding the employment agreement, the employers are required to inform each employee of the general clauses to be included in the agreement.  The compulsory terms are fairly similar to the ones set out above.
Spanish Flag Spain is one of the exceptions. In Spanish employment law, the principle of oral contracts governs except as provided by fixed term agreements.
Swedish Flag In Sweden, an employment contract does not have to take any specific form.  However, as Sweden have implemented the Directive, employers are still under an obligation to inform employees of the conditions applicable to the contract or employer relationship.  The employer must also provide certain information in writing concerning the principal terms of the employment.  This information must be provided to the employee within one month from their commencement of the employment.  These particulars are roughly the same as set out in 1991 Directive.

Having considered how the 1991 Directive has been implemented across Europe it still amazes me how many employers still have no written framework whatsoever. There were 191,541 claims accepted by the Employment Tribunal Service in the financial year 2012/13. Many of these arose from inadequately documented employment contracts or a failure to follow proper employment procedures and laws.

Disgruntled employees could still put their employers through defending an Employment Tribunal claim (however weak, scandalous or vexatious) to the tune of an average of £9,000 in legal fees. I think that drawing up standard employment contracts will be a lot cheaper than that.

Guest blog: The battle for World Cup TV rights isn’t over yet

Guest blog: The battle for World Cup TV rights isn’t over yet

This first appeared in Matt Pollins’ blog on ConnectedAsia on 30 January 2014

In case it escaped your attention, the FIFA World Cup is a mere five months away.

FIFA postAs Ronaldo, Messi and the rest gear up for the world’s single most-viewed sporting event, the battle for broadcasting rights in South-East Asia isn’t over yet. Indeed, the international coaches are not the only ones who are fine-tuning their World Cup tactics: there is plenty for broadcasters in Singapore and Thailand to play for too.

Singapore: negotiations heading for extra time?

FIFA’s list of media rights licensees around the world reveals a notable omission: Singapore. Broadcasters in more than 200 territories worldwide have closed broadcasting rights deals with FIFA but Singapore is not on the list.

The reason is that the country’s two biggest telcos, StarHub and SingTel, have been engaged in negotiations with FIFA over the rights for a couple of years and there is no sign yet that a deal is going to be signed soon.

This isn’t the first time this has happened in Singapore. The 2010 broadcasting rights deal was closed just 35 days before the first ball was kicked. There are broadly two issues that would seem to explain the late-running of the negotiations in 2014:

  • Cost: This is the obvious one. FIFA reportedly secured only about 50% of its asking price for the rights in 2010 and may perhaps be seeking more in 2014. The negotiation on price will not be helped by timezones: the matches will be on in the middle of the night. No problem for the hardened football fans but it will undoubtedly hit viewing figures and, by association, the level of interest amongst broadcast sponsors.
  • The cross-carriage rules: The fact that an exclusive licensee is required to make exclusive content available to its rivals across other platforms. This issue came to the fore in 2013 when SingTel was required to allow StarHub to cross-carry the FA Premier League content, after it was determined that SingTel had done an exclusive rights deal for the content (which it disputes).

Thailand: free-to-air rights now in question

In Thailand, a debate is unfolding as to whether the matches should be available on free-to-air TV.

Back in 2012, Thailand’s “must have” rules came into effect. These would require all 64 matches from the 2014 World Cup to be aired on a free-to-air basis. But that is not the end of the story.

RS International Broadcasting & Sports Management Co. Ltd, listed by FIFA as the holder of radio, TV and internet rights, argues that  the whistle had already gone on its rights deal with FIFA when the “must-have” rules came into effect. RS closed its broadcast deal back in 2005, well before the “must-have” rules, and it therefore argues that the rules cannot apply to its broadcast rights and that ordinary copyright law principles should apply. In other words, RS believes that it has the exclusive right to show World Cup matches on its pay TV platform.

An administrative court judge in Thailand has now given a preliminary view in favour of RS, finding that the Thai National Broadcasting and Telecommunications Commission has no legal right to interfere with the 2005 FIFA rights deal. The case isn’t closed yet but if the preliminary view is followed (it usually is) then the Administrative Court looks set to rule that the rights are staying on RS’s pay-TV platform.

Guest Blog: The rise of the Chinese middle class

Guest Blog: The rise of the Chinese middle class

The other day I was talking to Sofie Persson, a solicitor with Engleharts Solicitors in Hove, East Sussex about an article she was writing on the rise of the Chinese middle class. Her article includes some personal observations rather than just focusing on market research and statistics. She is planning to write an article on Chinese real estate investment in the UK from a different perspective as most of the press so far seems to focus on commercial rather than residential deals. We look forward to seeing that article.

By way of background: Sofie spent a few years living and working in China before she decided to return to the UK to pursue a career in law.

Here is what Sofie wrote about the rise of the Chinese middle class:chinese middle class

“Improved trade relations between the UK and China along with an increasing number of Chinese children being educated in top schools are among the key factors driving Chinese investment in prime central London property. Chinese middle class buyers have tended to focus on the prime residential areas, such as Kensington and Chelsea and along the River Thames, in upper price bands and in new build high-rise flats, rather more than on the resale markets.

For example, a couple of my former colleagues bought flats in new developments in Greenwich and Surrey Keys a couple of years ago. It would also be interesting to hear what local professionals have to say about Chinese buyers.

Whilst the west has had several decades of sweeping economic change and social transformation, China’s middle class has only had the better part of two decades to establish themselves as an economic force to be reckoned with.  Businesses of all shapes and sizes are salivating at the thought of this vast and largely untapped customer base. Many have already adapted their marketing strategies according to widely accepted hypotheses about Chinese spending behaviour. Others are weary of how the rapid increase in Chinese purchasing power will affect their domestic economies.  Regardless of one’s personal attitudes we are beyond denying that China is the future, but the true nature of the Chinese consumer cannot and should not be confined to statistics colourful pie charts alone.  It is intriguing how many of the existing market research reports tend to overlook cultural motivations, on the other hand it is understandable that one would think twice before making wide generalisations about 1.3 billion people. It is still important to have a basic understanding of cultural differences.  I have been going to China since 1999 and spent a number of years living and working in Guangzhou and Beijing.

In light of the above I have made the following observations. It is widely accepted among themselves that the Chinese are a very status conscious people and would pay premium prices for products that they believe enhance their social standing. Like most foreigners I would be looking for bargains and brand name replicas which were readily available in the “fake markets”. My affluent middle class colleagues would make a point of buying similar items at full retail price in the “official stores”. A fellow expatriate once tried to organise company t-shirts for a corporate teambuilding event. Much to his dismay, he rapidly discovered that it was suddenly extremely important that the t-shirts were “real” mingpai (a famous brand) t-shirts bought from the “official store”. His team members wouldn’t have it any other way and would readily spend 150 reminbi (£15) per t-shirt rather than the 5 renminbi (50p) per t-shirt my friend had budgeted for.

By 2015, it is expected that one-third of the money spent around the world on high-end bags, shoes, watches, jewellery, and ready-to-wear clothing will come from Chinese consumers. However, for products and services that their neighbours and friends can’t see, they appear to be very price conscious. I have spent many hours in economy class travelling back and forth between Europe and China. I was always amazed by how many designer shopping bags my fellow Chinese economy class travellers were carrying. I was later told by a colleague that a Chinese woman who would gladly show off a £800 handbag to her friends but would never spend money on a first class ticket.

On the other hand, what westerners would consider budget establishments, such as McDonald’s or KFC, are not the bottom of the price range items in China. Incredible as it may seem, they are significantly more expensive and therefore enjoy a higher status than their Chinese equivalents. It was also not unusual to spot happy couples on first dates at the IKEA canteen in Beijing.  Conversely, most middle class Chinese own a car and Beijing ring roads become giant parking lots during rush hour. Meanwhile many urban western counterparts, like myself, choose not to have a car for environmental and practical reasons.

Statistics and development indicators can therefore be misleading and multinational corporations are beginning to respond by implementing state-of-the art marketing strategies to stay ahead of the curve. For instance, P&G has built small hutong neighbourhood – a set of narrow, traditional Chinese lanes formed by the walls of a siheyuan, or traditional courtyard homes, at their Beijing Innovation Centre. In this artificial neighbourhood, consumers are being observed as they brush their teeth or change diapers.

In the same research facility, P&G also stock simulated supermarket shelves with its own products and those of competitors to better understand how the Chinese consumers shop. For example, as incomes rise more and more Chinese people are turning to skin whitening products to clearly mark their social standing. I personally found that it was difficult to find basic hygiene products, such as soap, shower cream and moisturisers that did not have a faint smell of bleach.  It is important to note that this is not an attempt to look like glamorous western celebrities, the Chinese want to look like fair skinned Chinese people. It is also not a question of race. Bar some ethnic minorities the China’s population are predominately Han Chinese and consider themselves as one race. Instead of indicating race, skin colour is directly connected to class.  Traditionally people with darker skin were the ones that worked outside in the sun which in turn meant that they were poor. I think it is safe to say that in this day and age nobody in the Chinese middle class wants to think of themselves as a peasant.

Personal anecdotes aside, the rise of the Chinese middle class is still fascinating. As late as 2000, only 4% of urban households in China were middle class. By 2012, that figure had risen to 68%.  Research show that by 2022 more than 75% of China’s urban consumers will earn 60,000 to 229,000 renminbi (£6,000 to £23,000) a year. This may not seem very impressive but in purchasing-power-parity terms this is between the average income of Brazil and Italy. McKinsey & Co has been tracking consumption dynamics since 2005 and has seen a bifurcation between a still large (but less affluent) mass market and a new even larger group of upper middle class consumers.

This new “upper cut” is able and willing to pay a premium for quality and to consider discretionary goods and not just necessities. There are also two distinct generation groups, Generation 1 (G1) and Generation 2 (G2). The most prominent being the latter and are typically teenagers and people in their early 20s, born after the mid-1980s. Their G1 parents lived through years of shortage and hardship and therefore focused on building economic security.

The G2 consumers on the other hand, are considered to be the most westernised to date and can afford pretty much what they want. Born during a period where the one child policy was strictly enforced and many still living with their parents. In 2020 it is expected that 35% of all consumption in China will come from these young consumers who are also better educated and much more international in their outlook.  However, they still share some traditional values with previous generations, and as a whole, the Chinese middle class appears to have a bias for saving, an aversion to borrowing and are determined to work hard.

Some commentators have even compared the rise of the Chinese middle class to the American Dream. There are definitely similarities in the can-do spirit, optimism and determination to pursue a better life. However, it is important to remember that China is not a capitalist system, despite appearances and elements of its development having capitalist characteristics. Since, 2002 the Chinese Communist Party has welcomed the idea of expanding the middle class so that it becomes more than half the total population by 2050 in order to encourage consumption and to ensure social stability.

The common belief for the past 20 years outside China seems to have been that the more China opens up to the west, democracy will inevitably follow. China’s socio-political experience is not that of the western world, so even though what they buy is becoming more and more similar to western consumers, the middle class still remains an essential part of the state and ideology from which it has emerged… albeit, with a foreign degree and a designer handbag on their arm!

Follow

Get every new post delivered to your Inbox

Join other followers: