Pension ruling could cost £17bn

first_img Comments are closed. Previous Article Next Article Pension ruling could cost £17bnOn 20 Feb 2001 in Personnel Today Related posts:No related photos. Grantingpart-timers the right to backdated pension payments is a breakthrough forworkplace equality. But will employers cope with the administrative burden andthe increased costs? Employersare facing a new administrative burden that could collectively cost them £17bnafter part-time workers were given the right to claim backdated pensioncontributions earlier this month. TheHouse of Lords confirmed the European Court of Justice’s landmark ruling of May2000 to grant part-time workers access to occupational pension rights. Thisruling gives about 60,000 part-time workers – mainly female – the right toclaim access to company pensions or compensation, which UK workers were deniedunder the Equal Pay Act. The court decided that the rule limiting backdatedclaims to only two years was against EU law, and allowed claims to be backdatedto April 1976 when the court first recognised the EU Treaty provisions on equalpay for men and women.Lastyear’s decision followed a 1994 ECJ ruling, which found that the treatment wasdiscriminatory as it did not allow part-time staff to sign up to companypensions in the same way as full-timers. TheCBI has criticised the decision. Director-general Digby Jones said, “The costwill be substantial, and business will be worried that this could be anadministrative nightmare because in many cases records no longer exist.” Thedecision follows the ECJ ruling on two test cases involving the HSBC bank andWolverhampton NHS Healthcare Trust. Itsimpact is likely to be felt by all employers, but those that employ largenumbers of women part-time will be particularly affected. These include sectorssuch as banking, retail, the NHS and local government.  AdrianPritchard, personnel officer at Suffolk County Council said, “The ruling is amajor issue for local government, as a significant number of staff could optin. Between 30 and 40 per cent of local government employees are part-time,which is hundreds of thousands of staff nationwide. The operation could run into millions of pounds for local government.“Idon’t think HR in local government has the funds nor the resources to implementthe ruling if a large percentage of employees take up the right.”Manyemployers could struggle to find sufficient records to process backdated claims.Currently, employers only have to keep payroll records for the previous sevenyears. Employmentlawyer Andrew Chamberlain of Addleshaw Booth & Co said, “Employers will beconcerned about the administrative burden and the fact that many of them may nothave records going back to 1976, which will obviously make it very hard tocalculate entitlements.”   Butsome employers and analysts believe that the Government’s estimates of the costto business are inaccurate. The figure could be less because of the House ofLords’ decision to uphold the 1994 ruling to limit part-time employees’ claimtime to within six months after they have left an employer.SimonCann, of HR consultancy Towers Perrin, said, “Due to the Lords confirming thesix-month rule they have saved business a great deal of money. I would estimatethat the cost of the decision will be in the region of several hundred millionpounds.” JohnAdsett, national secretary of the Association of Health Care and Human ResourceManagers,  said, “The amount ofpart-time workers in the NHS has consistently been about 30 per cent. So Ienvisage that the decision could cost us about £500,000 – but with out thesix-month time limit it could have been much more.” Thefact that employers also have the right to ask employees to pay their unpaidbackdated contributions could stop a lot of part-time staff taking up theextended pension options. Pritchard said, “The saving grace for employers isthat employees have to backdate their own contribution, which I suspect wouldbe too big a lump sum for most people.”Butpensions manager of Lloyds of London Christine Jackson warned, “Companies withnon-contributory schemes will be concerned since in that case the employee doesnot have to put in any of their own money.”Thereare also concerns voiced by personnel professionals, particularly in the publicsector, that HR does not have the resources to cope with the possible demand ofpart-time pension take-ups.  Adsettsaid, “Administrating and implementing the extra pension claims is anotherthing we have to do in the NHS, but with everything else I’m not sure we willhave the resources.”Althoughit is accepted that it will increase costs and the administrative burden, mostregard it as a positive step. Nigel Connolly, HR director of EasyJet, said,“The effect on business will be fundamental, but with the implementation offlexible working arrangements there is a grey area between full- and part-timeworkers, so it is time for equality.”Thebuild-up to the House of Lords’ decisionApril1976       Defrenne v Sabena: Equalpay for men and women required and enforceable under EU law, but no arrears ofpay before this dateMay1986       Bilka Kaufhaus: Exclusionof part-timers from pension scheme membership is indirectly discriminatory onthe basis that most part-timers are womenMay1990       Barber v GRE: Pensionbenefits must be equal for men and women, but no arrears required before May1990 Sept1994        Coloroll: Clarifies Barberand confirms that exclusion of part-timers is indirectly discriminatory. Claimsfor membership backdating is subject to each nation’s time limit or April 1976Dec1997        Magorrian: ECJ overrulesthe UK restriction of two years’ backdating of scheme membership, but extent ofruling is unclear Feb2000         Schroeder v DeutscheBundesport Telekom Vick, Conze v Deutsche Telekom, Deutche Post v Sievers andSchrage: The ECJ ruled that the restriction allowing claims no further backthan 1976 did not overrule German constitutional rights for part-timers to goback further. In practice, the judgement applied to German cases only May2000       Preston v Wolverhampton NHSTrust and other and Fletcher v Midlands Bank: The ECJ ruled no objection to thesix-month limit after leaving employment but that the two-year backdating ofclaims was not in accordance with EU lawByPaul Nelsonlast_img read more