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Labor Relations News Update July 30, 2014

Today’s Labor Updates:

Eni Italian workers strike for a day over closure plans

United Kingdom: Freedom and choice in pensions: what the Government has decided

New flexible working regime in United Kingdom


Eni Italian workers strike for a day over closure plans

12:57am IST

ROME, July 29 (Reuters) – Ninety percent of oil and gas group Eni’s Italian workers adhered to a strike call on Tuesday to protest at the company’s plans to close or convert some of its unprofitable refineries, unions said.

Hundreds of refinery employees converged on Rome from far-flung regions of the country to berate the government which is Eni’s principal shareholder with a 30 percent stake. Italy’s three major unions called last month for 30,000 Italian Eni staff to stop work for a day, shutting down refineries, petrochemical and other activities, as well as commercial, administrative and other offices.

Plant closures, especially in southern regions where industry is weak, have become especially emotive in Italy with unemployment climbing to record levels as the country struggles to emerge from its worst post-war recession.  “This protest is not just about Eni and the refineries but Italy’s entire industrial future,” union leader Luigi Angeletti said.  Protesters in front of Rome’s chamber of deputies held banners carried slogans attacking Italy’s prime minister Matteo Renzi and Eni chief executive Claudio Descalzi, accusing the two of taking “food straight out of our mouths.”

Industry sources say Descalzi, who took over at the head of Italy’s biggest listed company this year, is preparing to cut Eni’s loss-making business, like its Italian refineries, and strengthen its push into more profitable oil and gas exploration.  Union bosses say Eni’s plans to restructure its domestic refining business, identified by Fitch earlier this month as a risk to the company’s credit rating, could lead to the loss of up to 6,000 jobs. (Reporting by Francesca Piscioneri, writing by Isla Binnie, editing by William Hardy)


United Kingdom: Freedom and choice in pensions: what the Government has decided

Martin Poore

July 28 2014

On 21 July 2014, the Government announced its response to its consultation Freedom and choice in pensions. The paper outlined how proposals announced in the 2014 Budget, to allow individuals with a defined contribution (DC) pension to access their entire pension flexibly from age 55, could work in practice. Following extensive consultation, the Government has decided how it intends to proceed.

Accessing pension flexibility

  • In deciding who pension flexibility should apply to, the Government has been guided by the principle that if individuals would previously have had to purchase an annuity or enter drawdown to access their pension savings, they should be able to access their pension under the new arrangements. So, those with a money purchase, cash balance or other arrangements which typically would have required the individual to purchase an annuity will be able to directly access their pension flexibly from April 2015. The Government adds that the proposals will also apply to individuals with Additional Voluntary Contributions (AVCs), subject to their pension scheme rules.
  • A new override will be introduced to ensure that DC schemes are able to offer individuals flexible access to their savings, if they wish to do so. This will allow schemes to ignore their scheme rules and follow the tax rules instead, in order to make payments flexibly or to provide a drawdown facility.
  • To ensure that individuals have access to flexibility where their existing scheme decides not to offer it, the cash equivalent transfer value requirements will be extended to allow individuals to transfer between DC schemes at any point up to their scheme’s normal retirement age.

Transfers from defined benefit schemes

  • The Government will continue to allow transfers from private sector defined benefit (DB) to DC schemes, excluding pensions already in payment, subject to additional safeguards.
  • There will be a statutory requirement to ensure that all individuals who are considering transferring out of DB schemes take advice, from a professional financial adviser who is independent from the DB scheme and authorised by the FCA, before transferring. As a result, DB schemes will be required to check that a member has taken such advice before allowing a transfer out of the scheme.
  • In most cases the member will need to pay for the financial advice but “if the transfer is from DB to DC schemes within the same scheme” (we assume that this refers to one scheme with a DB and DC section), or as a result of an employer-led incentive exercise, it is the employer who will have to meet the cost.
  • The Government will issue new guidance to trustees on how to use their existing powers to delay paying cash equivalent transfer values from the scheme if “the interests of the members or the scheme generally will be prejudiced by making the payments within the usual period” and on how to reduce transfer values to reflect the scheme’s current funding level. The Government will work with the Pensions Regulator, employers and trustees to develop the guidance.
  • The Government intends to consult on whether the requirement to transfer first to a DC scheme should be removed for those DB members who wish to take advantage of the new flexibilities.
  • Transfers from unfunded public service DB schemes will be prohibited, in order to protect the Exchequer and taxpayers. Transfers from funded public service DB schemes will be permitted, and safeguards similar to those in the private sector will be introduced where appropriate.

The guidance guarantee

  • The guidance guarantee promised in the Budget will be provided by independent organisations, with no actual or potential conflict of interest, in order to ensure complete impartiality. Delivery partners will include the Pensions Advisory Service (TPAS) and the Money Advice Service (MAS).
  • The FCA will coordinate the development of standards for the guidance service and a framework for monitoring compliance with these standards. The FCA is consulting separately on proposed high-level standards.
  • Individuals will be able to access and use the service in a range of ways, including face-to-face, online and over the phone, according to their needs and preferences.
  • The Government will legislate to require pension providers and schemes to signpost individuals to the guidance service as they approach retirement.
  • A levy on regulated financial services firms will fund the cost of the guidance service.

Other changes

  • Changes will be made to the tax rules to allow providers to provide consumers with new retirement income products which suit their specific needs and circumstances, for example, to allow decreasing lifetime annuities and to allow lump sums to be taken from lifetime annuities.
  • New tax rules will be put in place to ensure that individuals do not use the new flexibilities to avoid tax on their current earnings by diverting their salary into their pension with tax relief, and then immediately withdrawing 25% tax-free.
  • The age at which individuals can access their private pension savings will rise under the tax rules from 55 to 57 in 2028 and will remain ten years below state pension age thereafter.
  • The age at which an individual can commute benefits under the trivial commutation rules and the “small pot” rules will be lowered from 60 to 55.
  • The Government states that the 55% tax charge on pension savings in a drawdown account at death will be too high when the new system is established in 2015 and intends to announce changes to this at the Autumn Statement.

A progress report has been promised in the autumn.


New flexible working regime in United Kingdom

Publication Date: 26 June 2014 | Author(s): Laura Farnsworth

Member Firm(s): Lewis Silkin LLP Country: United Kingdom

The legal right to request a flexible working arrangement in the UK is being extended to all employees with 26 weeks’ service, with effect from 30 June 2014.  Until then, it has been restricted to those with caring responsibilities for young children or dependent adults.

This means that from 30 June any employee with 26 weeks’ continuous service has the right to ask for a change to the hours or times they work or where they work – for any reason.

Alongside this, the existing “right to request” procedure – with its meetings, appeals and strict time limits – is being repealed and replaced with a general requirement for employers to deal with applications “in a reasonable manner” and to notify the employee of their decision within a three-month time period.  (This is extendable by agreement.)

Employment tribunals must have regard to a new code of practice issued by the UK’s conciliation service ACAS when determining whether an employer has behaved reasonably.  This recommends holding a meeting to consider whether to approve a request, at which the employee should be allowed the right to be accompanied (although this is no longer mandatory).  It also recommends allowing an appeal if the request is turned down (but notably does not specifically mention an appeal meeting).  The Code is supported by a new ACAS guide, including practical examples.

What is not changing

Employees still have to submit a written request in the same format as before (although they will no longer have to show they meet the eligibility requirements).  They remain limited to one request within each 12-month period.

The eight permitted grounds on which an employer may turn down a flexible working request also remain unchanged:

  • the burden of additional costs
  • an inability to reorganise work amongst existing staff
  • an inability to recruit additional staff
  • a detrimental impact on quality
  • a detrimental impact on performance
  • detrimental effect on ability to meet customer demand
  • insufficient work for the periods the employee proposes to work
  • a planned structural change to the employer’s business.

The penalty for failing to consider a request in the manner prescribed by legislation is still what the tribunal determines is just and equitable, up to a maximum of eight weeks’ pay (subject to the statutory limit on a week’s pay, currently £464).

Implications for employers

One advantage for employers is the removal of “red tape”, such as the requirements to hold meetings within strict time periods (normally 14 days).  Employers might also decide they will no longer offer an automatic right of appeal against a decision to turn down a request (or, at any rate, not guarantee an appeal meeting).  However, because the prescriptive statutory procedure for dealing with requests is being replaced with a duty to deal with requests in a “reasonable” manner, it is crucial for employers to ensure they are familiar with the new code of practice and guidance from ACAS and assess how the changes affect their approach.

Employers should review and amend their existing policies on flexible working and home working and consider how they are going to prioritise requests and document any agreed changes.  Managers should also be trained so that they are fully equipped to deal with requests under the new regime.

In particular, one likely outcome is that employers may start receiving multiple requests from different employees asking to change their working patterns for diverse reasons.  In many cases, employers will not be able to agree to all requests.  The risk of discrimination claims is likely to increase because of the potential for many more employees with protected characteristics to make a request.

ACAS recommends that employers should set out a policy framework for deciding between competing requests.  Even if that step is not taken, it is important for managers and HR to become attuned to the need to be more sensitive to requests from (for example) older employees, or those with disabilities, given the increased risk of discrimination claims from these groups.

It is also worth remembering that the risk of refusing flexible working leading to indirect sex discrimination claims from employees with caring responsibilities remains the same as under the previous rules.

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