The landmark legal ruling giving part-time firefighters the right to pensions and sick pay for the first time will have ramifications for all industries, but employers need not fear a landslide of claims, lawyers have said.
Last week’s ruling has set a precedent for employment tribunals to base future judgments for claims relating to pension rights and sick pay on the similarities as well as contractual differences between full- and part-time employees.
This led to suggestions that employers will be forced to pay out millions to improve the lot of part-time workers. But the House of Lords was careful to stipulate that tribunals must look at the whole job of any claimant, said Nick Chronias, employment partner at law firm Beachcroft Wansbroughs.
“The decision gives the green light for part-time employees to bring claims in future,” he said. “However, employers will welcome the guidance that tribunals must look at the whole job carried out by the part-time employee and their comparator. The House of Lords seems to have rejected the idea that tribunals only need to look at the core duty of the part-time employee and their comparator.”
This means a part-time worker probably still cannot say that they are engaged in the same or broadly similar work if the full-time worker has higher qualifications, skills and the ability to carry out further activities in doing their day-to-day work.
The ruling – in the first case brought under the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000 – will allow 18,000 retained firefighters to join the brigade’s pension scheme.
The Fire Brigades Union said it was a “momentous decision”, which followed a five-year legal battle.
All bets are off as key players lay pensions cards on the table
As befits high-stakes gambling, all the big pensions players gathered around one table last week to tell the government how to sort out the UK’s pensions crisis.
Organisations including the Association of British Insurers, the CBI and the National Association of Pension Funds all laid out their alternatives to the Pensions Commission’s plans for a National Pensions Savings Scheme (NPSS).
The stakes couldn’t be much higher – Lord Turner’s Pensions Commission estimates that around 10 million people are not saving enough for retirement. And the UK’s largest 100 companies alone could be facing a 150bn pensions shortfall – three times the previous estimate – according to the Pensions Board.
Stephen Timms, minister for pensions reform, said the meeting was “an important milestone” in preparing a new system of pensions that would encourage people to save. “The alternative proposals [to the NPSS] that we have heard about have differed, but they have much in common,” he said. “They offer a radically better deal for the saver and an extension in pensions coverage to those for whom saving in the past has not been realistic.”
The Pensions Commission is the original advocate of the NPSS. Under the scheme, employees who opted in would contribute 5% (1% being National Insurance tax relief), with employers compelled to add 3%. Contributions could be collected through the PAYE system. Turner maintains that it will cost only 0.3% of savings to administer, compared to the 1.3% it cost to administer an existing stakeholder pension.
The CBI’s deputy director-general, John Cridland, said compulsory employer contributions under the NPSS were “neither fair, nor equitable or sensible”, and could put some companies out of business. The CBI has suggested three alternatives, including the ‘Pensions Builder’, in which employers donate 3% and the individual 5%, but these amounts would be supplemented by a one-off transfer of part of an annual pay rise into the pension.
The National Association of Pension Funds has branded the NPSS “monolithic” and “Stalinist”, and has instead called for the creation of “super trusts” managed by expert, not-for-profit bodies. Employees would be able to pick the trust of their choice under guidance from their employer. Chief executive Christine Farnish said that about 20 trusts should “compete against each other, to drive up standards”.
Stephen Haddrill, director-general of the Association of British Insurers (ABI), which represents companies that handle 1,000bn worth of investments, called the NPSS “an unnecessary state-run monopoly”, and said it would cost about 500m. The ABI suggests creating portable “partnership pensions”, with auto-enrolment, that would build on existing stakeholder pension provisions through a new ‘Retirement Income Commission’.
The Investment Management Association, which represents fund managers, supports the creation of the NPSS. Chief executive Richard Saunders said Turner’s proposals were “perfectly workable… if properly implemented with an appropriate governance structure to safeguard the interests of members”. This meant the NPSS governing body would have to be independent, he said.