Before making major changes to pension schemes, be aware they are likely to be subject to consultation under both existing and new laws, says Stephen Levinson
A new regime for consulting workers in the UK is just around the corner. Most businesses, whether they recognise trade unions or not, will have some difficult adjustments to make. Complications are bound to arise from the combination of the legal regime regulating union recognition and the new laws that have to be made to implement the European Directive on Information and Consultation.
The Employment Relations Act 1999, which came into effect in June 2000, put a statutory procedure in place. It enables an independent trade union to require employers to recognise it as a bargaining agent for a specific group, provided membership has reached specified levels. When statutory recognition is granted, the employer must negotiate with the trade union in respect of pay, hours and holidays.
The legal framework is complex, but recognition of trade unions is increasing and working in surprising ways. One example is that as a matter of general law, particularly in European context, pensions are regarded as a category of deferred pay.
Pay means pensions
Any doubts about the attitude that would be taken by the Central Arbitration Committee, which deals with disputed recognition cases, to the full meaning of pay, were resolved by one division of the CAC in the case of Unifi v Union Bank of Nigeria plc. Decided on 7 June 2001, this case concerned the issue of whether an employer was obliged to negotiate on a pension scheme (in this case a group personal pension scheme).
In its decision, the CAC reviewed the legal authorities, Hansard, and the dictionary definitions of the meaning of pay. It concluded that employer pension contributions (in a defined contribution scheme) and the benefits payable (in a defined benefit scheme) are now seen as an integral and important part of a worker's pay and in this case, the employer was obliged to negotiate with Unifi on levels and amounts of employers' pension contributions.
It seems clear that if such matters are the legitimate subject of compulsory consultation, so would any major change in the nature of the scheme. Given the number of businesses considering making changes to their pension arrangements, this is a development of great significance.
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