Is it legal to introduce a policy which denies pay rises based on the absenteeism rate over the previous year? Esther Smith, partner at Thomas Eggar, and Martin Brewer, partner and employment law specialist at Mills & Reeve, give their advice.

The question:
My company has implemented a new absence management procedure, which started in November 2006. It has not replaced an existing procedure. Within this, a member of staff whose sickness is over the company average of 2.6 percent or about six days, will be put on a capability based disciplinary process. To work out people’s percentages, the company have used the records for the past year and a fair percentage of the company have now been put on a verbal warning.

The salary review has just passed. All people who are on a verbal warning have been told that they will not receive a pay rise specifically due to their absence. I don’t think that they have acted very morally as they seem to have put in place a procedure purely to avoid pay rises, but wondered if you could comment as to the legal aspect of backdating the information to suit their own purposes.

Phil

Legal advice:

Esther Smith, partner, Thomas Eggar

It is quite common to see employers taking pretty drastic action to try to limit the impact and indeed the costs of excessive absence in the workplace and it appears that the company in this case is doing much the same thing. I do not have a problem in principle with a company using a particular level of absence as a threshold for considering taking disciplinary action, but an employer should not simply be issuing verbal warnings or any other disciplinary sanction without holding a full disciplinary investigation and hearing, before making their decision.

Of course employers who operate such a system have to be vary careful not to subject anyone who may be suffering from a disability to any less favourable treatment, or be subjecting them to a condition or requirement which they find harder to comply with due to their disability and which cannot be justified by the employer.

Moving on to the issue of the pay review, I can understand why you may feel the company are being slightly underhand. However, given that it is highly unlikely that any of the employees within the organisation have a contractual right to a pay rise, although they may have the right to a pay review, there is no need for the company to be underhand in withholding pay awards. If they do not want to give pay increases they have no obligation to do so, subject to any contractual provisions and of course not falling foul of the National Minimum Wage Act.

Again, linking sickness absence to salary reviews can give rise to disability discrimination issues, and if I were advising the company I would certainly be advising against using this system without being fully aware of the possible implications. In addition, irrespective of the legality of the approach, it is clearly going to give rise to staff morale issues, as demonstrated by your enquiry, and therefore the company needs to consider what they are trying to achieve and balance the affects of the means against the possible benefit of the end result.

Esther Smith is a partner in Thomas Eggar’s Employment Law Unit. For further information please visit Thomas Eggar

* * *

Martin Brewer, partner and employment law specialist, Mills and Reeve

I just can’t see that the employer has done anything wrong here. Every good employer should have an absence management policy. A good policy will make it clear that certain levels of absenteeism are unacceptable. It should also make it clear what the consequences of poor attendance will be. Your employer has done that.

I note that you don’t complain about the average 2.6 percent so presumably you agree that they have got the level about right. So the only complaint is what you refer to as ‘backdating’. I can see that, in this context, it’s very convenient for the employer to link current year pay rises to last years absenteeism. However, assuming that the employer doesn’t have to give you a pay rise anyway, and assuming therefore that they could have taken absenteeism into account in determining pay rises without actually telling you, all they seem to me to be doing is adding in a level of transparency to the process.

Martin can be contacted at: martin.brewer@mills-reeve.com

* * *