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What are the special considerations for DB schemes?

  • Before any agreed reduction in wages, actual changes to earning patterns (loss of overtime, for example) may impact the pensionable salary as defined under the scheme rules, with knock-on effects to a number of benefit calculations, such as death in service benefits.
  • Contractual changes to member salaries may adversely impact accrued benefits as the final salary figure may be reduced to a greater or lesser extent depending on the duration of furlough and the severity of any reductions in wage, and hence reductions may be difficult to agree with staff.
  • Reducing employer contributions will be subject to a number of the same considerations applicable to a DC scheme listed above. There will also be a need to change the rules and interact with the trustees, although it may be possible to override the rules with a direct contractual agreement with members.
  • Reducing employee contributions will also depend on the scheme rules, particularly as to whether there are any discretionary powers to suspend contributions, or pensionable service.
  • The rules will need to be considered for any unexpected consequences of furlough: depending on the wording of the rules, furlough may or may not be considered a leave of absence and may or may not have the effect of terminating pensionable service. This could have far-reaching consequences.
  • In particular, if the workforce’s pensionable service is inadvertently terminated as opposed to suspended in accordance with any relevant rule, this could trigger a statutory employer debt on an employer participating in a multi-employer scheme, if pensionable service continues for employees of other employers. This sort of issue is unlikely to be spotted until after the event, and therefore difficult to untangle. However, an employer should be able to take advantage of the “period of grace” provisions by notifying the trustees of its intention to re-admit employees to pensionable service within the next 12 months.
  • Clearly the impact of the Coronavirus Job Retention Scheme on DB schemes is complex and legal advice should be sought before any changes are considered.

Related FAQs

Forcing annual leave

Employers have a statutory right to require employees to take annual leave at their direction, subject to providing staff with notice equal to at least double the length of the leave that you are directing them to take (e.g. 10 days’ notice for five days leave). However, this measure is not likely to achieve any urgent cost savings or alleviate immediate cash-flow pressure as holidays would need to be paid.

Clearly, annual leave can be taken on furlough so you could have staff on furlough and annual leave.

Last updated on 6th May, 2020

What is the guidance in relation to the Mental Capacity Act 2005 and Deprivation of Liberty Safeguards during the Covid-19 pandemic?

The Department of Health & Social Care has published guidance for hospitals, care homes and supervisory bodies on the Mental Capacity Act 2005 (MCA) and Deprivation of Liberty Safeguards (DoLS) during the coronavirus pandemic.

In many scenarios created or affected by the pandemic, decision makers in hospitals and care homes will need to decide:

  • if new arrangements constitute a ‘deprivation of liberty’ (most will not), and
  • if the new measures do amount to a deprivation of liberty, whether a new DoLS authorisation will be required (in most cases it will not be).

If a new authorisation is required, decision makers should follow their usual DoLS processes, including those for urgent authorisations.

A summary of the key points to be taken from the guidance is outlined below:

Use of the MCA and DoLS due to Covid-19

  • During the pandemic, the principles of the MCA and the safeguards provided by DoLS still apply.
  • It may be necessary to change the usual care and treatment arrangements, for example to provide treatment for people with Covid-19, to move them to a new hospital or care home to better utilise resources or to protect them from becoming infected.
  • All decision makers are responsible for implementing the emergency Government health advice  and any decision made under the MCA must be made in relation to a particular individual, it cannot be made in relation to groups of people.

Best interest decisions

  • In many cases, a best interests decision will be sufficient to provide the necessary care and treatment for a person who lacks the capacity to consent to the care and/or treatment arrangements during this emergency period.
  • If an individual has made a valid and applicable advance decision to refuse the treatment in question, then the relevant treatment, even for Covid-19, cannot be provided.

Delivering life-saving treatment

  • Where life-saving treatment is being provided in care homes or hospitals, including for the treatment of Covid-19, then the person will not be deprived of liberty as long as the treatment is the same as would normally be given to any person without a mental disorder.
  • The DoLS will therefore not apply to the vast majority of patients who need life-saving treatment who lack the mental capacity to consent to that treatment, including treatment to prevent the deterioration of a person with Covid-19.

The full guidance can be found here.

Last updated on 14th April, 2020

I am finding life at home very difficult and I want to separate from my spouse. Is this possible under the current pandemic?

The National Police Chiefs Council (NPCC) issued guidance mid-April confirming that you can move to a friend’s address for several days to “cool off” following an argument at home. You should strongly consider either yourself or your spouse moving elsewhere where children are involved as it prevents the children from witnessing conflict within the home, at what is already an emotionally charged time for them. Nevertheless, you should also consider and take legal advice on the financial implications of either of you or your partner moving out and how contact with the children is going to be promoted with both parents, if suitable. The Government Guidance has confirmed that children can be moved between households if they have separated parents.

It is still possible to issue Divorce proceedings and much of the process has now been taken online. The main divorce suit is dealt with separately to the separation of financial assets and children arrangements, which can often take much longer to review and discuss. While staff shortages may mean slower turn-around times there is no reason to suspect that a divorce will not otherwise go ahead as anticipated. Once coronavirus has passed, it is likely that divorce rates will spike and there will be an increased demand on the Court system, so your divorce process may take longer if you delay filing your divorce.

It is also still possible to issue Court Applications regarding any financial settlements or children arrangements, however, the Court system was already under significant pressure before coronavirus, so the pandemic will only add to that and we expect Court processes to significantly be slower in those areas.

Court Applications should in any event be used as a last resort and there are alternative dispute resolution processes available which you should consider, including Arbitration and Mediation. Family lawyers are continuing to advise and assist individuals, manage their separations and can provide information about the options available, using alternative methods of communication such as Teams, Skype or Zoom for clients. Understandably, speaking aloud may be difficult in circumstances where you are not able to get any private time away from your spouse due to you being in lockdown and so email correspondence may be the most appropriate method of communication.

Last updated on 28th April, 2020

Can an employee still do volunteer work when on Flexible Furlough?

An employee on Flexible Furlough can take part in volunteer work during hours which you record your employee as being on Flexible Furlough as long as it is for another employer or organisation.

To be clear, if on Flexible Furlough and you’re claiming the grant for them, then they cannot work for you.

As people work part-time and ease back into the business, this is likely going to be a key risk area. You need very clear lines as to working time and non-working time. No replying to emails on days off.

Last updated on 16th June, 2020

Can I be fined for failing to take steps to try to ensure that my staff comply with the requirements to self-isolate?

Yes.

An employer which is aware that a worker or agency worker is or ought to be self-isolating, should not knowingly allow that worker or agency worker to leave the place that they are self-isolating in (“the designated place”).  To do so without reasonable excuse would amount to an offence which could result in the employer being issued with a fixed penalty notice.

The value of the fixed penalty varies depending on if it is the first or subsequent fixed penalty notice to be issued:

First fixed penalty notice £1,000
Second fixed penalty notice £2,000
Third fixed penalty notice £4,000
Fourth, and any subsequent fixed penalty notice £10,000

Last updated on 29th September, 2020