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Published on 11 October 2019

Good Work Plan: one-sided flexibility – addressing unfair flexible working practices

The LITRG has responded to this consultation with some points for BEIS to consider, in terms of how the payment of compensation for cancelled shifts will work for national minimum wage (NMW), tax and benefit purposes. 

flexible working for low-paid workers, shift workers

We say that it needs to be made very clear to both employee and employers, that payments of compensation will reckon as taxable income. For employers, this means that they must be subject to Pay As You Earn (PAYE) through the payroll like ordinary taxable income. Employees need to understand that they are not getting anything ‘free’ or ‘extra’ – we wonder if they may think of it more as a ‘gift’ than taxable remuneration.

BEIS need to consider whether the payment might count as pay for minimum wage purposes. If so (and the cancelled hours do not), then this could be used by some employers to disguise an otherwise lower pay rate for the rest of the pay reference period, which would possibly be an unintended consequence. 

The benefits position also needs to be analysed. For example, will the hours that were initially planned and are not worked (but are paid for), be treated as ‘remunerative work’ for tax credits? For universal credit, will the hours be looked upon as meeting part (or all, depending on the circumstances) of the claimant’s work-related requirement in their claimant commitment? We recommend that work is done to ensure that all such interactions have been considered before making a decision on how best to move forward. 

The con doc can be found on GOV.UK.

Our response can be found here: Good Work Plan: one-sided flexibility – addressing unfair flexible working practices – LITRG response

Meredith McCammond

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