Practical tips for an effective BYOD policy (Bring Your Own Device)

Practical tips for an effective BYOD policy (Bring Your Own Device)

In this article we highlight the potential risks and benefits for businesses of allowing employees to use their own personal mobile devices (tablets, smartphones, laptops or notebook computers) for business purposes. We talk through the important issues to consider when putting together an effective Bring Your Own Device(BYOD) policy, to maximise the upsides whilst limiting the risks.

Fuelled by the surging use of smartphones, high speed internet services and 4G as well as the growth in remote and flexible working, staff today have come to expect to use their own devices to conduct business. Employers of every size have been quick to adopt a BYOD approach.

Although the following figures are from the USA, the BYOD statistics below show impact of BYOD in the workplace and its widespread adoption.

  • The BYOD market is on target to reach nearly $367 billion by 2022, up from just $30 billion in 2014 (Research report by Global Markets Insights Inc 2016).
  • 59% of organisations allow employees to use their own devices for work purposes. Another 13% had planned to allow use within a year (From Tech Pro Research published in 2016).
  • 87% of companies rely on their employees using personal devices to access business apps (Research by Syntonic) conducted on a survey of 409 respondents among CEOs, CFOs and CIOs who work for companies with >100 employees,  published in 2016).
  • As of 2016, six out of 10 companies had a BYOD-friendly policy in place (from the same Research by Syntonic).

BYOD benefits

BYOD can bring a number of benefits to businesses, including:

  •  Increased flexibility and efficiency in working practices.
  •  Improved employee morale and job satisfaction.
  •  A reduction in business costs as employees invest in their own devices.

BYOD risks

The boom in BYOD has been matched with an upsurge in activity by criminals trying to exploit the data and intellectual property stored on personal mobile devices. The use of personal mobile devices for business purposes increases the risk of damage to a business’s:

  • IT resources and communications systems.
  • Confidential and proprietary information.
  • Corporate reputation
  • Customer and employee data

    The General Data Protection Regulation (“GDPR”) which became law on 25th May 2018, has increased the risks of BYOD through:

    enhancing the rights of individuals with regards to their data (e.g right of access, correction, deletion),
    increasing the legal responsibility on businesses (the data controller in this context) to keep data secure, and
    allowing the ICO to fine organisations for breaches and non compliance.

Obviously allowing employees to use their own devices to conduct business comes with an increased risk of data breaches, both physical (such as leaving a device on the train) or electronic (such as hacking or malware).

The research cited above showed that even before GDPR came into force, companies and CIOs were well aware of the security implications of a BYOD approach: 61% of respondents in the Syntonic survey viewed mobile devices as less secure than fixed devices such as desktop personal computers, but said that security measures aren’t always consistent.

Ownership of the device

Personal mobile devices are owned, maintained and supported by the user, rather than the business. This means that a business will have significantly less control over the device than it would normally have over a corporately-owned and provided device. But the business remains responsible for protecting company data stored on those personal mobile devices.

Issues to consider in a Bring Your Own Device (BYOD) policy

A BYOD policy brings with it unique challenges which employers must address, such as:

  • How will the business record and keep track of the devices used to access company data?
  • What security measures will be installed on employees’ devices?
  • What are the steps required if a device is lost or stolen?
  • Will an employee be required to a return a device to the company for wiping on termination of employment?
  • Are company emails stored on the employee’s device? If so particular care should be taken when an employee leaves the business, as company emails and data will remain on their device.

The tone of the BYOD policy should be varied depending on whether the BYOD policy is voluntary (and the employer offers an alternative company-owned device) or whether using their own device is the only option available to the employee. If the policy is purely voluntary, then the employer may impose stricter limitations on usage and more stringent monitoring requirements. If employees are required to use their own device for business purposes, then there is likely to be less scope to impose limitations, particularly if there is an associated cost for employees.

How to manage the risks associated with a BOYD scheme

To de-risk the business when adopting a BYOD scheme, employers should:

  • Audit and assess the risks, including assessing:
    where the data is held?
    what type of data is stored?
    how will the data be transferred?
    what is the potential for leakage ?
    how easily employees may blur personal and business use?
    and how cloud-based services will affect security?
  • Ensure that security measures impose controls on access to data, encryption and PIN numbers, and verify the device’s security features.
  • Keep pace with advances in the features of devices and maintain a list of approved models. Choose Your Own Device (CYOD), is becoming more popular, where employees choose from a list of models pre-approved by the business.
  • Insert safe and secure deletion methods on the device.
    Note that the ICO guidance recommends that portable devices used to store and transmit personal data should be encrypted. A failure to protect data using encryption software may lead to the ICO taking enforcement action against an employer.
  • Consider how the use of company data on the device can be monitored. The ICO guidance recommends using technology to monitor the device to assess data leakage and loss, but reminds employers to consider employee privacy; a careful balancing act must be maintained and employees should be informed of the monitoring.
  • Have a well-publicised BYOD policy.

Before implementing a BYOD policy, an organisation should look at the strategic and business case for it, and conduct a privacy impact assessment. In particular, employers should consider:

  • Compliance with relevant laws – the GDPR 2018 we have already mentioned, and the Data Protection Act 2018. Privacy impact assessments are a legal requirement under the GDPR in some circumstances. Implementing a BYOD policy will almost certainly require employers to carry out a privacy impact assessment.
  • Whether consultation with any staff forums, employee bodies or trade unions are required before implementation of a new BYOD policy.
  • Whether BYOD will save the company enough money, taking into account the potential hidden costs such as employee reimbursement, licensing, infrastructure and support to justify a potential reduction in control over the processing of company data (particularly if employees are using a variety of makes and ages of device which may have varying degrees of security sophistication).
  • Whether there are any technical limitations to implementing a BYOD policy. An example of this might be capacity restrictions on the internal Wi-Fi network, or a lack of sophistication in the IT team with respect to technical security measures.

Securing data stored on a device

  •  A business is responsible for protecting company data stored on personal mobile devices. Businesses should consider implementing security measures to prevent unauthorised or unlawful access to the business’s systems or company data, for example:
    • Requiring the use of a strong password to secure the device.
    • Using encryption to store data on the device securely.
    • Ensuring that access to the device is locked or data automatically deleted if an incorrect password is inputted too many times.
  •  The business should ensure that its employees understand what type of data can be stored on a personal device and which type of data cannot.

Mobile Device Management for BYOD

Mobile Device Management software allows a business to remotely manage and configure many aspects of personal mobile devices. Typical features include:

  • Automatically locking the device after a period of inactivity.
  • Executing a remote wipe of the device (make sure employees are aware which data might be automatically or remotely deleted and in which circumstances).
  • Preventing the installation of unapproved apps.

Monitoring use of a device

Employers should also consider how, and to what extent, they will have access to and monitor company and personal data contained on employees’ personal devices. Employees have a reasonable expectation of privacy under Article 8 ECHR. Steps should be taken to ensure that company and personal data are segregated on personal devices, and access to personal data by the employer is minimised.

Loss or theft of a device

  • The biggest cause of data loss is still the physical loss of a personal mobile device (for example, through theft or by being left on public transport).
  • Loss or theft of the device could lead to unauthorised or unlawful access to the business’s systems or company data. The business must ensure a process is in place for quickly and effectively revoking access to a device in the event that it is reported lost or stolen.
  • Businesses should consider registering devices with a remote locate and wipe facility to maintain confidentiality of the data in the event of a loss or theft.

Transferring data

  • BYOD arrangements generally involve the transfer of data between the personal mobile device and the business’ systems. This process can present risks, especially where it involves a large volume of sensitive information. Transferring the data via an encrypted channel offers the maximum protection.
  • Employees should be encouraged to avoid using public cloud-based sharing which have not been fully assessed. Businesses should provide guidance to employees on how to assess the security of wi-fi networks (such as those in hotels or cafes).

Departing employees

A business needs to think about how it will manage data held on an employee’s personal mobile device should the employee leave the business.

BYOD and the ‘Always on’ culture

There is increased commentary around the potential negative consequences of remote working and mobile device usage and its impact on employees’ wellbeing as a result of the ‘always on’ culture. Particularly where use of personal devices is voluntary, employers may wish to consider including the optional ‘work-life balance’ sub-clause in any BYOD policy, to help evidence a commitment to their duty of care towards employees and counter claims in connection with, for example, stress-related illnesses from employees.

BYOD and registering employees’ devices

A key aspect of an effective BYOD policy is ensuring that the employer is aware of the data processing activities that are being conducted in respect of company data. To mitigate against the risks of unlawful processing and undisclosed data breaches, employers should require all employees to register their devices with the employer before using it for business purposes. Employers should also take this opportunity to set up the device with appropriate security software, and register it with remote locate and wipe technology in the event a device is lost or stolen.

BYOD and unauthorised access and repairs

There is a risk of data breach if an employee arranges for a device to be repaired by an unknown third party who may be able to access company data. Requiring that all repairs are arranged through the company will allow for greater control over who has access to the device. If this approach is adopted, the company should also meet or contribute to the cost of repairs. Therefore, the company must balance the costs of contributing to repairs against the risks of a data breach.

ICO guidance on BYOD

The Information Commissioner’s Office has published guidance on bring your own device and the data protection issues for employers who adopt a BYOD approach. The guidance has not yet been updated to take into account GDPR but many of the practical points it makes are still valid and useful. It highlights:

the importance of  having a clear BYOD policy that is regularly audited and monitored for compliance

that staff connecting their devices to the company IT systems fully understand their responsibilities

that alongside a BYOD policy, employers create and maintain an Acceptable Use Policy (to provide guidance and accountability of behaviour) in order to minimise the risk of unauthorised or unlawful processing of data or the accidental loss or destruction of personal data.

NCSC guidance on BYOD

The National Cyber Security Centre, part of GCHQ, has published a useful infographic as part of its summary of the key security aspects for large and public sector organisations.

Choose Your Own Device (CYOD) is likely to offer employees an advantage to select one among several enterprise-approved systems and this is predicted to eliminate standardization and security challenges of BYOD system.

This article seeks to spotlight the key issues around BYOD and how adopting a BYOD approach may affect your business and HR practices.

Posted in: Employment law for HR Directors

Leave a Comment (0) →

Joint Ventures: 25 FAQs – a guide for CEOs and CFOs

Joint Ventures: 25 FAQs – a guide for CEOs and CFOs

Joint Ventures 25 FAQs – a guide for CEOs and CFOs

1  What is a Joint Venture? 
A “Joint Venture” is a structure where two (or more) businesses create a separate Joint Venture business to pursue a common goal. But any kind of collaboration with another company could be described as a  Joint Venture.
2  What types of Joint Ventures are there? 
There are many examples of collaborations between businesses – common ones are the following structures where two or more people share resources and risk:

  1. setting up a separate Joint Venture company where each party has a shareholding and can appoint directors to carry out a specific (and often finite) project such as development of a new product
  2. contractual arrangements such as entering into a distribution agreement
  3. forming a partnership
  4. merging two businesses.

The rest of this article covers the first structure above where each person in the Joint Venture has a shareholding and appoints directors
3  Who will be part of the Joint Venture?
The people contributing the assets to the Joint Venture, or JV, will all be parties to the Joint Venture Agreement.
4  Will the Joint Venture company or other vehicle itself be a party to the Joint Venture agreement?
Usually, Yes so that shareholders can enforce against the company.
5  What issues do I need to consider when looking for a Joint Venture partner?
Look for a JV partner with complementary strengths: eg a software product which you can distribute through the Joint Venture.
Take time to understand fully what your partner’s purpose and objectives will be from the JV.  You will need to be able to agree objectives that suit both of you.
You will also need to reach agreement on a whole range of other issues as well as the JV agreement.
Consider at the outset what happens when the JV comes to an end. This  can make it difficult to collaborate with a competitor or with a business that is likely to compete with you in the future.
6  How do I start negotiating a Joint Venture

  • •You can ask for a period of exclusive negotiation so you do not waste time and costs negotiating the JV if the other party pulls out?
  • •You can agree a Confidentiality Agreement (know as a Non-Disclosure Agreement or NDA in the US) to ensure all negotiations are kept confidential.
  • •You can undertake a feasibility study and/or valuation first.
  • •You can negotiate a Heads of Terms first.

7  How do I negotiate Heads of Terms? 
The Heads Terms document sets out the main principles for the Joint Venture and the steps and documents required to get it set up. Read more about negotiating Heads of Terms Agreements.
8  How do I protect myself while I am negotiating a Joint Venture? 
You should:

9  What is the Business of the Joint Venture ? 
You and your Joint Venture partner should agree answers to these questions:

  • What will be the nature of the activities carried on by the Joint Venture ?
  • Is the purpose of the Joint Venture to carry out a specific project or a continuing business?
  • What is the likely turnover or market share?
  • Where will the business be based?
  • Will there be geographical limitations placed on the  Joint Venture’s operations?
  • What are the parties’ objectives?
  • When do the parties want to exit and how?
  • What regulatory consents, approvals and licences will be required for the formation and business(es) of the Joint Venture ?

10  What is the best way to structure a joint venture?

  • Usually the JV parties form a separate limited company for the Joint Venture  so each has limited liability (up to amount of share capital invested) should the Joint Venture  not work and become insolvent.
  • However the tax position must be assessed to start with because transferring significant assets into the Joint Venture can have unwanted tax consequences. You should check with your tax advisers.
  • Sometimes a partnership or a limited liability partnership is used instead.
  • If you do not require management involvement in the  Joint Venture, it may be best to use contractual arrangements rather than to create a separate Joint Venture  entity. For example, a designer could simply license his or her intellectual property rights in the design to another business to exploit in return for royalty payments.
  • You should identify what other agreements are needed between the Joint Venture and the shareholders – eg licences to use software, brand names, premises, secondment of staff etc?

11  What about financing Joint Ventures
You and your Joint Venture partner will need to agree:

  • What proportion (if any) of the initial finance will the parties themselves provide and how much will be provided from external sources.
  • If third party funding is being sought, what security and/or recourse to the parties themselves will the lender(s) require.
  • Will the parties’ initial investment be in cash and/or by contributing assets.
  • If the funding will be through debt rather than equity, or vice versa.
  • What arrangements will there be for funding, on a continuing basis:
    •  the working capital requirements
    •  losses incurred by the joint venture; and/or
    •  development and expansion costs
  • Will each party be required (or entitled) to contribute to continuing calls for funding, pro-rata to its original investment or otherwise
  • What happens if one of the parties defaults.

12  What assets can be put into Joint Ventures?

  • Any asset can be put into a Joint Venture e.g. employees, intellectual property, offices, customers and suppliers and their related contracts.
  • Contributions can be by outright transfer, or by a lease or licence to the Joint Venture for a fixed or indefinite term. Separate documents will be required for the transfer of each asset to the Joint Venture .
  • The contributed assets will need to be valued and agreed with the Joint Venture partner.
  • You will need to agree if all contributions of assets can be made simultaneously, if you need any regulatory approvals or consents third parties (including lessors, licensors and lenders) or how required for any transfer. If not, the availability of all or any particular asset(s) can be a condition precedent to the establishment of the Joint Venture.

13  What due diligence is needed in Joint Ventures?
Due diligence will include checking:

  • your  Joint Venture partner’s legal status,
  • that they have the right to enter the Joint Venture,
  • that they own assets they will be putting into the Joint Venture
  • that they have enough funding to complete the Joint Venture
  • that they have the knowledge and experience you need for the market in which the Joint Venture will operate.

More broadly, due diligence aims to ensure that any agreements you enter into are valid, and to minimize risk of future legal problems. So,
14  What legal agreements are needed  to set up a Joint Venture?
If you are forming a new Joint Venture  company, a Joint Venture Agreement and the new company’s articles of association are crucial. Points that may be covered in these documents or in separate agreements include:

  • the financing arrangements for the Joint Venture
  • agreements not to compete with the Joint Venture
  • arrangements for licensing or transferring intellectual property in inventions, brands, designs or copyright works such as plans or manuals to the Joint Venture
  • agreements on any services or supplies you will provide to the Joint Venture
  • confidentiality agreements
  • how any disputes will be handled
  • how the partners can exit the Joint Venture
  • any agreements that will continue after the Joint Venture is terminated.

15  What is a Shareholders Agreement? 
A Shareholders Agreement can be another name for the Joint Venture Agreement. It sets out the agreement between the shareholders showing how they will operate the Joint Venture, how they will make decisions and vote as the shareholders and directors.
16  What are non-compete or non-competition or restrictions on Joint Venture parties?
These prevent the shareholder competing with the Joint Venture.  The shareholders will need to agree answers to these questions:

  • Will the parties be prohibited from competing with the Joint Venture ? If so, what geographical or other limitations should apply?
  • Will the parties be prevented from soliciting customers and employees from the Joint Venture ?
  • How will the business of the Joint Venture be defined for the purposes of such restrictions?
  • Will the parties have obligations to refer business to the Joint Venture?

Usually the parties agree in the Joint Venture Agreement what restrictions apply to each of them, to prevent the scenario where the Joint Venture is set up and then the parties immediately compete against it.
17  What is the Board of directors in a Joint Venture? 

  • The board of directors includes representatives of each Joint Venture  partner. The Joint Venture Agreement will state:
  • What rights each party will have to appoint directors (and if the board or company in general meeting have rights to appoint any additional directors)
  • What quorum and notice requirements will apply for directors’ meetings
  • What particular matters will be reserved for decision by the board itself (and be incapable of delegation) or to the shareholders?
  • What particular voting arrangements will apply to matters specifically reserved to the board and/or to any other matters
  • What will be the specific requirements concerning the frequency and/or location of board meetings
  • How the appointment of the chairman will be determined and if the chairman has a casting vote or not, or other special powers or rights
  • Who will determine the appointment of any managing or other executive directors
  • If the directors will have the power to resolve conflict, or potential conflict situations of a director or should such power be reserved for the shareholders.

18  What are the shareholders rights in a Joint Venture?
The shareholders will need to agree:

  • How will ownership of the Joint Venture will be divided and what voting rights the parties will  have as shareholders
  • If there will be separate classes of shares – eg because each class of shares will have different ownership, dividends and or voting rights
  • If shares of the same class will be capable of being held by more than one person
  • If there will be any special voting rights attached to any or all shares
  • What quorum and notice requirements will apply for shareholder meetings
  • if there be any limitation on possible locations for shareholders’ meetings

19  What is minority shareholder protection in a Joint Venture?
If a shareholder owns less than say 50% of the Joint Venture it may want to protect itself in the following circumstances:

  • The majority shareholder forcing through voting on certain important issues at shareholder meetings ( e.g. changing the business, adding new shareholders, issuing new shares, buying new businesses or selling parts of the business)
  • Similar protections and any remedies can apply to board and/or director level voting as well.

20  What are restrictions on transfers of shares in the Joint Venture? 
The Joint Venture parties will need to agree:

  • Should shares be transferable or not
  • What happens if any one party wants to sell out
  • If transfers are permitted, should other parties have pre-emption rights (rights of first refusal) before any sale to a third party takes place
  • To what extent will the identity of any third party purchaser be relevant to arrangements for permitting transfers or the terms of any pre-emption rights?
  • Should any transfers (for example, intra-group transfers or transfers to family trusts) be permitted free of pre-emption rights
  • Are any special terms appropriate, for example:
    • “shotgun” or “Russian roulette” provisions, by which other parties can elect either to purchase from, or to put their own shares on, an intending transferor; or
    • “drag-along” or “piggy back” (“tag along”) provisions, by which the intending transferor must endeavour to require a potential third party purchaser to acquire the other parties’ shares in addition to its own
  • How will shares be valued for the purposes of the transfer provisions
  • Will any new shareholder be required to become a party to the Joint Venture agreement
  • Will the  Joint Venture’s name have to be changed if shareholdings are transferred
  • What will happen to any arrangements between a leaving shareholder and the Joint Venture (such as intra-group loans, intellectual property licences, supply agreements, management services, and so on)

It is common for shareholders to agree that shares may only be transferred in certain circumstances. If a shareholder wants to transfer shares it has to offer the shares first to the other shareholder(s) – this is called a pre-emption right. The shareholders will try and agree the price for the transfer of the shares. If they cannot agree on the price it is common for an independent valuer (accountant), experienced in valuing companies in their industry, to value the shares.
21  Can intellectual property be transferred to a Joint Venture? 
Yes. A separate licence or transfer agreement will be agreed. The agreement will need to answer the following questions:

  • Are any intellectual property rights to be given to the other Joint Venture party?
  • Who will own the intellectual property rights developed by the Joint Venture and (if any) by the Joint Venture parties?
  • Who will undertake exploitation of the intellectual property, including both production and distribution? Will there be any compensation for this?
  • To what extent will the parties have access to, or rights over, confidential information, know-how and other intellectual property rights concerning or accruing or belonging to the Joint Venture itself?
  • What will happen to the intellectual property rights on termination of the  Joint Venture?
  • Will any of the parties require a licence of any intellectual property from the other, following termination?
  • Will there be different methods of dealing with intellectual property rights depending on the exit route used?

22  Can Employees be transferred to a Joint Venture?
Employees can be transferred to a Joint Venture for a short term (secondment) or permanently. The parties will need to agree answers to the following questions:

  • Will the Joint Venture need employees and, if so, how will it get them?
  • Will the employees be seconded from any of the Joint Venture parties and, if so, will it be necessary to make any changes to the terms of their employment?
  • If the employees are to be transferred from any of the Joint Venture parties, will the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) apply ? If so, will it be necessary to make any changes to the terms of employment of the transferring employees? (It is only possible to make changes to the employees’ terms on a TUPE transfer in certain circumstances.) How will any liabilities relating to the employees be apportioned? Will there be any consultation obligations? For further information on when TUPE applies, read
  • If the employees are to be new recruits, are there particular individuals with key roles in the Joint Venture calling for special treatment?
  • Is any particular form of management structure envisaged?
  • What (if any) share option or incentive schemes are proposed?
  • What pension arrangements will apply?
  • Will any of the Joint Venture parties have to make redundancies as a result of the creation of the  Joint Venture? If so, how will the cost be borne by the parties?

23  Can the shareholders continue to provide assets or services to the Joint Venture?
Yes. The parties will agree the answers to these questions:

  • Will any of the parties second staff to the Joint Venture and, if so, on what terms? (Read over Can Employees be transferred to the Joint Venture? above)
  • Will any of the parties be responsible for providing the Joint Venture with office or other accommodation, support services or facilities, or training for staff?
  • Will there be continuing trading arrangements between any of the parties and the Joint Venture (for example, distributorship agreements or agreements for the supply of goods, materials or services)? If so, will these be independently audited?
  • How do continuing arrangements between the Joint Venture and any of the parties impact on:
    • the entitlement of each of the parties to the profits of the  Joint Venture, or responsibility for its losses?
    • the business risks and legal liabilities assumed by each of the parties in relation to the Joint Venture ?
    • the rights of the Joint Venture and/or the parties to assets or revenues over which any one party maintains direct control or ownership?
  • What will be the procedure for the flow of information and for reporting from the Joint Venture to the parties?

24  How do I terminate or end a Joint Venture?
The parties can agree to end the Joint Venture either by following the process they have agreed in the Joint Venture Agreement or by agreeing a new procedure. It is important to agree:

  • Is the Joint Venture for a fixed term or indefinite in duration?
  • Are there any circumstances in which the Joint Venture will automatically terminate, for example:
    • the loss of any regulatory approval;
    • the loss or destruction of a particular asset;
    • the insolvency of any party;
    • loss of software licence; or
    • the transfer of any party’s shares?
  • Are there any circumstances in which any party will be entitled to terminate the  Joint Venture, for example:
    • a change of control of any other party;
    • a material breach of the Joint Venture agreement by another party;
    • by notice of termination given after the expiry of a minimum fixed term?
  • What arrangements will apply on termination for:
    • the distribution of the assets, including intellectual property and know-how of the Joint Venture ;
    • the discharge of outstanding contracts of the  Joint Venture; and
    • the assumption or discharge of any other liabilities of the  Joint Venture?

Usually, one partner will buy out the other. The key is to plan for the termination of the Joint Venture from the outset. For example, the original agreement can include provisions that allow you to force your partner either to sell you their stake or to purchase your stake from you.
25  How do we take profits from the Joint Venture? 
Profits from Joint Venture companies are commonly distributed through dividends.
Of course, the ability of the Joint Venture  to pay dividends will depend on its cashflow position. Depending on the circumstances, there may also be other more tax-effective ways of realizing part of the value of your investment in the Joint Venture. Where a Joint Venture is structured as a partnership, profits are automatically shared between the partners as specified in the partnership agreement. The partnership agreement should also specify what cash payments partners can take from the partnership. If there is no separate joint venture entity, there will be no need to ‘take’ profits from the joint venture – the profits will in any case arise within your (or your Joint Venture partner’s) business.

Posted in: Corporate and Business law for CEOs & CFOs

Leave a Comment (0) →

When do you need a Heads of Terms Agreement?

When do you need a Heads of Terms Agreement?

You need a Heads of Terms Agreement when you have a complicated, detailed project to negotiate and you need to get the main points set down  in writing at the beginning of discussions, to ensure there is a deal to be done so to speak, and to avoid undue time wasting by delving too far into the detail in the early stages.

A Heads of Terms Agreement Document, also known as a Memorandum of Understanding (or MOU) is extremely useful to show that the main points are now “agreed” and cannot be renegotiated.

A Heads of Terms Agreement (MOU) is important when you need to:

1 Record what are the main critical points of the deal such as price, what is being bought / sold, timescales, conditions to be satisfied and shareholder approvals to be obtained; and/or

2 Get those main points signed by the other side so they are “morally” committed; and/or

3 Have evidence that those main points are “agreed” so the other side will find it difficult to renegotiate them later on.

Although, if the other side are well advised by their lawyers, it is unlikely that the Heads of Terms will be legally binding, they are extremely useful to show that the main points are now “agreed” and cannot be renegotiated.

If the other side will not negotiate and sign a Heads of Terms document then this it’s likely that they are not serious about your deal, it’s a signal to pull out, you will save time, legal fees and other costs by not proceeding until the agreement is signed.

You need a Heads of Terms Agreement when negotiating complex transitions such as  Joint Ventures, Shareholders Agreements, Business Acquisitions,  Mergers, Acquisitions and other major Business transactions.

Do you need Heads of Terms Agreement at all?

Yes, and for the following reasons:

  • To stop the back and forwards e-mail trail!
  • If the “deal” cannot be written in one simple agreed document, is there actually a “deal”?
  • Getting all parties to sign Heads of Terms Agreement shows from a negotiation point of view that progress is being made! Moral commitment.
  • Use it to sell the “deal” to a third party eg other shareholders, bank.
  • Tactical advantage for the Seller, because the Buyer is morally committed to proceed. It helps to answer the question in the Seller’s mind “does this person, party really want to buy? Are they serious?”

    Note, people use different terms for this type of document; ‘Heads of Terms’, ‘Heads of Agreement’, ‘Memorandum of Understanding’, ‘MOU’  and ‘Letter of Intent’: they all refer to the same document 

What to put in your Heads of Terms Agreement?

Think about your objective, e.g to get all the principle and major points agreed in one document.

  • State the principle and defer the detail.
  • Take professional advice before making significant concessions (such as on structure, (e.g. share or asset sale) tax or governing law) even where the concession is expressed to be non-legally binding.
  • Identify the key conditions to exchange and completion of the contract.
  • Road Map to completing Heads of Terms Agreement.
  • Allocate the main procedural and drafting responsibilities see – Table below
Document  Timescale Responsibility
1st Draft Share Purchase Agreement 5 days after signing the   Heads of Terms The Legal Partners
Financial Due Diligence to be finished 21 days after Heads of Terms signed Accountant
  • Acknowledge where appropriate that the heads are not exhaustive.
  • Use assumptions where necessary.
  • Use a worked example to clarify a formula.
  • Make it clear that the Heads of Terms Agreement are not intended to be legally binding (except as otherwise specified).
  • Do not let the negotiation of the Heads of Terms Agreement become a full dress rehearsal for the main document.
  • Are any provisions intended to be legally binding? Eg confidentiality, exclusivity.

Contents of your Heads of Terms Agreement

  • The agreed deal:
  • Who, What, How, How much?
  • key assumptions on which material issues (such as price) were agreed.
  • principal conditions to exchange of contracts
  • due diligence (list any specialist reports and investigations required -such as accountants’ long form- and which of the seller’s key employees will need to be informed)
  • updated financial information (audited and/or management accounts)
  • buyer’s financing
  • third party consents/agreements
  • regulatory approvals or tax clearances
  • board approval
  • no material adverse change
  • no material contracts terminated or adversely changed
  • new service contracts signed by the target’s key employees
  •  satisfactory restrictive covenants
  • agreed loan facilities and documentation (if necessary)
  • satisfactory final documentation
  • principal conditions to completion e.g board/shareholder approval
  • statement of any other material issues any party may want recorded and need more detail
  • procedures or timetable for period to exchange of contracts and responsibility for drafting main documents
  • exclusivity agreement (or refer to separate agreement)
  • allocation of costs in the event the deal does not proceed
  • confidentiality (or refer to separate agreement)
  • clearly distinguish those provisions in the heads which are intended to be binding (such as the confidentiality and exclusivity provisions, payment of “failure” costs/ governing law) 
  • governing law.

Posted in: Corporate and Business law for CEOs & CFOs

Leave a Comment (1) →

Avoid workplace claims with these golden rules

Avoid workplace claims with these golden rules

There has been a dramatic increase in the numbers of claims being brought to Employment Tribunals against Employers since fees were abolished in July 2017. In January to March 2019 single claims – defined as being claims made by a sole employee against their employer for a breach of their employment rights – were running at 10,000 per quarter, compared to an average of 4,250 claims per quarter throughout 2016.

This means that single claim receipts are running at approx 40,000 per year now, compared to around 18,000 per year prior to fees being abolished.

From years of experience working alongside HR Directors and solving thousands of HR problems, we have compiled these golden rules to help you de risk your business against claims, and to put you in the strongest position to defend a claim should it arise.

# Avoid workplace claims by having good employment contracts and keep them up to date

This is a legal requirement. The penalty is up to 4 weeks pay awarded by an Employment Tribunal. Tailor the employment contracts for different staff, for example CEOs and Senior Sales Directors need Restrictive Covenants so they do not poach customers once they leave.

# Tailor your staff handbook to your business

Include all the policies you need to show to staff what is good and bad behaviour. Include for example a Social Media Policy and Data Protection Policy (or Privacy Standard) in your handbook to show what is acceptable and unacceptable use of Social Media and personal data.  Set out examples of misconduct in your disciplinary policy. For more information on this, read our article on how to avoid social media misuse and protect from liability.

# Follow all UK Visa and Immigration rules

This is so important for the current Tier 2 visa programme to avoid fines of upto £20,000.

# Communicate the New Employment Laws fast and first

Communicate new employment laws to your team before they happen and before your team learn of them from other sources. It is of course easy for Staff to be right up to speed on their rights. So be pro-active, it demonstrates that your business is thinking about its people.  A typical example would be introducing and explaining the new employment laws or Flexible Working policies as they become available. Here is our slideshare which explains flexible working.
We keep track of the latest changes in Employment Law, here to help you

Take advantage of these changes to prepare policies, communicate and explain these changes to your Staff.
We can keep you and your teams abreast all the new laws on the horizon and what they mean for your business before they come into force. You can subscribe to our newsletter: just click here, or in the footer below.

# Follow your formal procedures (e.g disciplinary/ grievance/ redundancy),  Follow what the business states in the staff handbook and employment contracts

Employment Tribunals generally take a dim view of Employers who don’t follow their own policies. Policies are there to be used. Often an employer who simply starts without planning will get into difficulty. Most employees will obtain their own legal advice and will challenge the policy when possible. It’s critically important to get the process right. If you don’t start the process correctly from the beginning,  it is very difficult to go back and start it again.  Employers can and do earn respect from other staff who see them dealing with an issue properly and fairly in accordance with the policy in the handbook and with employment law.
If employers fail to follow a valid disciplinary or grievance process, an Employment Tribunal can increase the Award by upto 25%.

# Don’t be afraid to use Settlement Offers

At any time employers can make a settlement offer to an employee to leave and receive a reasonable settlement. The employee cannot refer to the settlement offer or any conversations regarding it at an Employment Tribunal. These “protected conversations” and are confidential. There is more know-how in this article which outlines the correct way to make and manage successful settlement offers.

# Avoid workplace claims by using Mediation to resolve staff problems and grievances early

Mediation is a voluntary and informal process where a trained mediator helps the employer and member of staff resolve a dispute.
Long established in family law and in commercial dispute resolution, employers are turning to Workplace Mediation as a cost effective and fast way to resolve issues between colleagues. If unresolved these dipsutes can seriously undermine their own and the employer’s performance and staff morale.
The benefits of Workplace Mediation The Legal Partners
Workplace Mediation can resolve:
– personality clashes and employees at loggerheads, including issues between Senior directors and at Board level
– communication breakdowns
– relationship breakdown within a team
– bullying and harassment
– cultural misunderstandings due to different nationalities working in the same workplace.

The HR Director is not involved so remains neutral.  Here is more detail explaining how Workplace Mediation can solve conflict at work and which UK companies already use it extensively.
We offer a fixed price Mediation service, at prices ranging from £950 plus VAT to £2,000 plus VAT depending upon the complexity of the situation. In our experience, effective resolution can usually be gained within a day, albeit an intensive day for those involved. Some follow up support is included and available if this becomes necessary. Mediation is much more cost effective when compared to the expense of an Employment Tribunal Case. The average legal fees of an ET case for the employer are between £15,000 and £20,000.

# Establish a transparent pay, promotion, bonus and share option structure to help avoid equal pay claims and to reward those employees who contribute

Once again, take the opportunity to outline and explain the benefits of these schemes to your teams. Explain the changes to your teams as they occur e.g in overtime and holiday pay, workplace pensions so employers can plan.

Establish enterprise management incentive (EMI) share schemes to share the value creation with key staff.

although the Gender Pay Gap laws only apply to employers with 250 or more staff this principle will influence any employer’s staff when they consider their future prospects.

# Bring an HR specialist onboard and ask us for legal advice

Hire or consult with an HR Director.  Experienced HR s
pecialists see it as their role to help run the business run more effectively.  Give your HR Director authority for all HR issues and make sure he/she is responsible for this area. He/she should update the CEO/CFO and Operational Directors on law changes and the action to take on HR problems so that the business acts consistently and knowledge is shared. We work closely all the time with our HR Directors to make their roles as efficient as possible and together solve HR disputes

# Make it a habit to communicate with Staff in order to avoid workplace claims

It may sound straightforward, but this practice is so often overlooked by employers. When you see a problem developing, talk with your employee(s) on an informal basis at the earliest opportunity.  This stops the dispute escalating into a situation which could result in complicated and time consuming grievance, worse still an Employment Tribunal claim. Remember to keep detailed notes of every conversation however informal.

Even more golden rules to avoid workplace claims

  • They may go in and out of fashion, but its good practice to have regular appraisals. Agree with the employer how regularly they take place. There are a number of elements to cover on appraisal forms and in appraisal meetings that will help protect your business from workplace claims. For more details, do get in touch; details below.
  • If an employee has raised a grievance, at the first grievance meeting take the opportunity to ask the employee what is the solution that he/she wants and listen.  The clue to a speedier, cleaner resolution is often revealed in the responses to this simple question.  You may not be able or willing to meet the solution an employee requires, but don’t let that stop you asking. This sets a solution orientated framework and can fast track to the underlying issue and ultimately resolving the problem better. It may be the employer can propose a modified solution back to the employee which solves the grievance.
  • In Stress Cases: offer confidential counselling with a trained expert.
  • Know when to use an Informal Meeting and when to use a Formal Meeting.


Posted in: Employment law for HR Directors

Leave a Comment (0) →

Employment law updates 2020: important changes for Employers

Employment law updates 2020: important changes for Employers
  • Latest update: 9th April 2020 please refresh your page
    These are the employment laws coming into force from the beginning of April, and later in 2020.

    Aside from furloughing and the CJRS, more on which immediately below, the important new laws to keep front of mind as we go through this COVID-19 period, are:

    – the additional information that Employers must give workers in their S1 statement of terms, and from day 1 in the role. This will mean Employers amending employment contracts in the coming weeks and months. Details below.

    – The changes in the way Employers will be calculating holiday pay. Read on below.

For our article, Q&A guidance on How to Furlough Workers and Template Letter to start the process, click here.

Following the introduction of the CJRS:

Statutory Sick Pay (SSP) now applies from day 1, not day 4, for those eligible workers who are self-isolating due to COVID-19.

SMEs with fewer than 250 employees will be able to reclaim up to 2 weeks’ SSP for any employee who has claimed SSP as a result of COVID-19. Employers should maintain records of staff absences and payments of SSP.

The government plans to work with employers to set up a repayment mechanism, via a portal, which is planned to go live on 20th April 2020.

SSP is currently £94.25 per week for 26 weeks.

Employees will not need to provide a GP fit note (sick note) as proof of their sickness.

COVID-19 additional support for Businesses in March Budget here.

CIPD has a very helpful and updated information hub with guidance for HRs and Employers on good practices and how best to respond to COVID-19 here.

  • Big changes coming for Employers – Good Work Plan
  • Big changes coming for contractors/consultants & large employers
    IR35 reform/off payroll rulesdelayed due to COVID-19
  • UK:EU Transition Period update – European Settlement Scheme
  • Immigration update – New ‘points based’ system coming in 2021

Employment Law updates – Good Work Plan

There are a number of significant changes in Employment law coming into force from 1st April 2020 as the government begins clamping down on employment practices, following its Good Work Plan published* last year. The Good Work Plan has been called ‘the biggest package of workplace reforms for over 20 years’.

Here is what you need to know:

From 6th April 2020

  • Employers will need to issue all new workers and employees with a written Statement of Employment Particulars from day one. 
    Employers will have to include certain additional information in the Statement of Particulars, such as: length of time job is expected to last, the notice period, eligibility for sick leave and pay, other rights to leave, and probationary period, all pay and benefits and specific days and times of work.

    Review existing contracts of employment in the run up to 6th April to include the required changes.
  • Employers will need to change the way they calculate holiday pay for certain workers, taking into account average wages in the previous 12 months, and including bonuses, regular overtime and commission payments. Previously holiday pay was calculated as an average of the previous 12 weeks wages.

  • Agency workers will have the right to be paid the same as permanent staff, once the agency worker has been engaged by the same employer in the same role for 12 weeks. 

    By no later than 30th April 2020, temporary work agencies must provide agency workers whose contracts contain an opt-out of this right (called the Swedish Derogation) with a written statement advising that from 6th April, they have a right to pay parity.

  • Temporary work agencies must provide agency-work seekers with a Key Information Document (similar to a Statement of Particulars).  This must include information on the type of contract, the minimum expected rate of pay, how they will be paid and by whom.
  • The much-publicised changes to the off-payroll rules, commonly – and wrongly – called ‘IR35’ come into force. HMRC’s aim is to claw back tax from contractors , who work in a manner similar to an employee, but under the guise of a limited company; these folk pay lower tax.

    These apply to larger businesses only (T/O above £10.2m a year, more than 50 employees), who will now be responsible for determining the tax status of freelancers  and contractors. 

    These changes will affect your business even if its below the size threshold, if you are in a supply chain to a larger organisation and you use consultants or contractors operating through their personal services companies (PSCs), such as limited companies, partnerships, or LLPs.

  • From 1st April 2020, new hourly wage rates apply:
    The National Living Wage for ages 25 and over – up 6.2% to £8.72
    The National Minimum wage for 21-24 yr olds – up 6.5% to £8.20
    For 18-20 yr olds – up 4.9% to £6.40
    For under 18s – up 4.6% to £4.55
    For Apprentices – 6.4 % to £4.15 
    (workers under 19 or in first year of apprenticeship)

    More detail is available on the national minimum wage rates here
    The difference between National Living Wage and National Minimum Wage, explained.

  • Parental Bereavement Leave Regulations come into force, allowing Parents the right to 2 week paid time off work if they have a child under the age of 18 that dies. 

Employment Law Updates – IR 35 reform / off payroll working

HMRC is tightening the net around Off Payroll rules and IR35.

IR35 is a complicated piece of legislation designed to crack down on a tax loophole used by self-employed contractors working at a firm on a permanent basis but operating through their own company, (called a personal service company, PSC ) for example a limited company, a partnership or LLP.

By working via a PSC rather than being on the payroll, such folk were effectively working as full-time employees but paying lower rates of tax as a self-employed contractor; hence the term Off-payroll working.

Originally it was up to individuals to assess whether they fell under IR35.
Since April 2017, firms in the public sector have had to decide the status of their self-employed contractors. From 6th April 2020, this responsibility spreads to large companies in the private sector.

Many large companies, perhaps finding the burden of this complex legislation now falling on their shoulders a step too far, have not wanted to risk getting it wrong, and have drastically reduced their contractor base.

From April, many more self employed contractors will come under the IR35 umbrella, and will have to pay same level of tax that permanent members of staff pay, which will significantly reduce their pay. The tightening and complexity of these new rules, coupled with minimal information from HMRC, have caused a great deal of confusion and resentment with employers and contractors alike.

The government, bowing to pressure, did launch a review in January 2020 into the implementation of the changes. But as this review only looks into how they new rules are applied, not whether they should be, it’s anticipated that these reforms are going ahead in April 2020.

UK:EU Transition Period Update- European Settlement Scheme

On 31st January 2020 the UK left the European Union, which triggered the start of an 11 month ‘Transition’ or ‘Implementation’ Period,  during which the UK and the EU aim to agree a “deal” regarding the future relationship and critically, the basis on which we will trade. 

During this Transition Period, not much will change in terms of accessing European workers: EU nationals can continue to come to the UK and retain full movement rights. Frictionless trade continues, and the UK is still bound by EU laws, and its payments to the EU budget.

The Transition Period is due to end on 31st December 2020 though, and with it the free movement of goods, services and people. 

The immediate priority this year for UK employers in terms of workforce continuity & planning is to ensure all EU, EEA and Swiss nationals on your teams apply online for settled status in the UK, under the European Settlement Scheme.

The European Settlement Scheme is available to any EU, EEA and Swiss nationals who enter the UK before the end of 2020.

Applications are taking on average 15-20 minutes to complete online. They need to be submitted by the end of 2020 in the event of a ‘no deal’ and by the end of June 2021 if the UK and EU agree a deal by the end of this year.

Where an applicant to the European Settlement Scheme has been resident in the UK for 5 years, they will qualify for settled status, and the right to stay permanently. Refusals are only in the case of criminal history.

Where an applicant to the scheme has been resident in the UK for less than 5 years, they are likely to get pre-settled status, meaning they can stay in the UK to gain full settled status after the 5 year mark.

Immigration Update – new ‘points based’ system for 2021

The government has recently announced the biggest overhaul of UK Immigration for decades. Announcements are being made daily on these plans, on UK youth mobility schemes and special categories. We will be with you on these with advice on what Employers need to do this year in preparation soon.

Posted in: Corporate and Business law for CEOs & CFOs, Employment law for HR Directors

Leave a Comment (0) →

How to use Incoterms to de-risk your exports

How to use Incoterms to de-risk your exports

How to use Incoterms to minimize the risk of exporting

International Commercial Terms (Incoterms) are internationally recognised standard trade terms used in export contracts or international sales contracts.

They are used to make sure the buyer and seller know:

  • who is responsible for the cost of transporting the goods, including insurance, taxes and duties.
  • where the goods should be picked up from and transported to.
  • who is responsible for the goods at each step during transportation

The current set of Incoterms is Incoterms 2010.

A copy of the full terms is available from the International Chamber of Commerce

What do the Incoterms mean?

Incoterms are used in contracts in a 3-letter format followed by the place specified in the contract (eg the port or where the goods are to be picked up).

The export contract or international sales agreement includes the 3 – letter format below usually in the delivery section of the contract.

There are different terms for sea and inland waterways (eg rivers and canals) compared to all other modes of transport.

The common terms cover any mode of transport (air, sea etc) and are explained below.

Each term has different implications for the UK exporter and the Asian importer for the cost of transport and risk if the goods get damaged and the need for insurance to cover these damages

In the examples below the UK exporter is the seller and the buyer is the Asian importer.

EXW (‘Ex Works’) eg EXW London

The seller makes the goods available to be collected at their premises and the buyer is responsible for all other risks, transportation costs, taxes and duties from that point onwards. This term is commonly used when quoting a price. This puts the most obligations on the buyer.

Goods are being picked up by the buyer from the seller’s warehouse in London. The term used in the contract is ‘EXW London”.

FCA (‘Free Carrier’)

The seller gives the goods, cleared for export, to the buyer’s carrier at a specified place. The seller is responsible for getting them to the specified place of delivery. This term is commonly used for containers travelling by more than one mode of transport. E.g. the UK exporter delivers the container by road to the rail distribution centre at London Gateway and the Asian importer is responsible from that point to transport the container to Asia.

CPT (‘Carriage Paid To’)

The seller pays to transport the goods to the specified destination. Responsibility for the goods transfers to the buyer when the seller passes them to the first carrier. E.g. UK exporter ships the goods from London Gateway to Singapore. Asian importer connects goods from Singapore port and distributes them to the Kuala Lumpur distribution centre in Malaysia. Asian importer insures the goods during shipping.

CIP (‘Carriage and Insurance Paid’)

The seller pays for insurance as well as transport to the specified destination. Responsibility for the goods transfers to the buyer when the seller passes them to the first carrier.

CIP (‘Carriage and Insurance Paid’) is commonly used for goods being transported by container by more than one mode of transport. If transporting only by sea, CIF is often used (see below).

DAT (‘Delivered at Terminal’)

The seller pays for transport to a specified terminal at the agreed destination. The buyer is responsible for the cost of importing the goods. The buyer takes responsibility until the goods are unloaded at the terminal.

DAP (‘Delivered at Place’)

The seller pays for transport to the specified destination, but the buyer pays the cost of importing the goods. The seller takes responsibility for the goods until they are ready to be unloaded by the buyer.

DDP (‘Delivered Duty Paid’)

The seller is responsible for delivering the goods to the named destination in the buyer’s country, including all costs involved.

This is the most onerous requirement for the UK exporter and the UK exporter will need to know all costs when it quotes to the Asian importer on the DDP basis.

If the UK exporter is uncertain which of the Incoterms to choose or if any of the relevant Incoterms does not correctly describe what has been agreed with the Asian importer, then the detail for delivery including who pays for transport, insurance and any export and/or import licences should be written into the export contract.

For more information please contact Richard Mullett on 0208 334 8049.

For more information about exporting, check The UK Government’s Department for International Trade resources for exporters, Exporting is Great,  E-Exporting Programme and  Open to Export.

The Legal Partners are a Member of the Trade Advisory Network

Posted in: Import Export Law for UK & Asia business

Leave a Comment (0) →

Explaining National Living Wage, National Minimum Wage 2020

Explaining National Living Wage, National Minimum Wage 2020

Employers and workers alike find these terms confusing to say the least. This article explains the difference between the National Living Wage and the National Minimum Wage and shows the new increased rates for this year.

From 1st April 2020, all workers aged 25 and over are legally entitled to be paid at least £8.72 per hour. This is an increase of 6.2%, up from £8.21 per hour in 2019.
This is the National Living Wage (NLW).


The April 2020 increases in hourly wage rates top 6% or more, across all (bar one) of the age categories, four times the rate of inflation.

What is the National Minimum Wage? (NMW)

The National Minimum wage (NMW) is the minimum pay per hour that workers are entitled to by law. This includes all employees and workers, including part-time, flexible, agency workers, those on zero hours contracts and those working under apprenticeship schemes; everyone in fact 
everyone except the genuinely self-employed.

There are different rates for each age group, from school leavers (16yrs) upwards. The government sets these rates and reviews them yearly. The rates change in April each year and are advised by the independent body Low Pay Commission.

All employers are legally obliged to pay the National Minimum Wage, irrespective of their size.

What is the National Living Wage? (NLW)

The National Living wage is the highest band of the National Minimum Wage which staff should be paid if they are aged 25 or over.

In April 2016, The Government introduced The National Living Wage for workers aged 25 and over. The National Living Wage was part of the government’s aim to raise the wages of workers aged 25 and over to £9 per hour by this year, 2020.

Despite adopting the term “Living Wage”, The National Living wage has nothing to do with The Living Wage: The Living Wage is set by the Living Wage Foundation, see details below.
Basically, the Government’s National Living Wage was actually just a new minimum wage for workers aged 25+, but rebranded as The National Living Wage.   This is extremely confusing  given that The Living Wage already existed, still does, and is completely different, see below.
The first increase to The Government’s National Living Wage (NLW) for workers of 25yrs + came in April 2016. Yearly increases to the NLW (and the NMW across all age brackets) followed.

The National Living Wage rate per hour (for 25+ yr olds) increases to £8.72
The National Minimum wage rates increase:
for 21-24 yr olds  to £8.20
for 18-20 yr olds  to £6.45
for 16-17 yr olds by  £4.45.
Apprentice rates change according to age and time spent in Apprenticeship also, more details on these can be found here.

The National Minimum Wage increases each April.
There are penalties on employers for failure to pay the correct amount, these are outlined below. But first, lets consider the Living Wage.

So, what is the Living Wage?

The Living Wage is a voluntary hourly rate, independently calculated each year by  Living Wage Foundation to meet the real cost of living. It’s voluntarily paid by nearly 6,000 UK employers. Don’t confuse the Government’s National Living Wage with this voluntary Living Wage. The Living Wage is a benchmark and a recommendation of what it will take to improve living standards now, not in 2, 3 or 5 years time.
The Government’s National Living Wage (and National Minimum Wage of course) is enforcable by law. The Living Wage Foundation’s Living wage is voluntary. Oliver Bonas became the first high street retailer to pay staff the accredited living wage in September in 2015.
The current living wage is £9.30 per hour and £10.75 per hour in London.
In order to become an accredited Living Wage Employer you need to pay all of your employees a living wage, and have a plan to extend this wage to regular on-site subcontracted staff as well.

A few important points to remember about the National Living Wage and The National Minimum Wage.

National Living Wage, National Minimum Wage, penalties for non compliance:

Currently non payment is enforced by HMRC who can issue a notice of underpayment. This will calculate the arrears of pay to be paid and the penalty set at 100% of the total underpayment of the NMW, with a minimum penalty of £100 and a maximum penalty of £20,000. If an employer does not comply with the notice of underpayment, the enforcement officer can:

  • issue civil proceedings in the civil courts or in the employment tribunal to recover the sums that should have been paid. If, following the judgment, the debt remains unpaid, HMRC will take steps to enforce the debt.
  • prosecute the employer to seek a criminal conviction.

Employees concerned they are not being paid the NLW or NMW are advised to check with Acas then speak to their employer in the first instance and raise a grievance if necessary. They can report an employer to HMRC and take their employer to a tribunal (following early conciliation through Acas) if the situation remains unresolved.
Back in 2016 the government started to name and shame companies who fail to pay the National Minimum Wage.
A package of measures intended to improve compliance with the NMW and the NLW  include:

  • Doubling the penalties for non-payment. From April 2016, penalties increased from 100% of arrears to 200% of arrears (halved if employers pay within 14 days). The maximum penalty of £20,000 per worker remains unchanged.
  • Increasing the budget for enforcement of the NMW and NLW in 2016.
    a new HMRC team was created in 2016, dedicated to pursuing the most serious cases of employers deliberately not paying the NMW and NLW. They have powers including the imposition of penalties, referring cases for criminal prosecution and naming and shaming the worst-offending employers. HMRC’s current approach is to target the high-risk areas for non-payment of the NMW, which are currently the social care, hairdressing and retail sectors.
  • The introduction of a new penalty of disqualification from being a Company Director for up to 15 years for the non-payment of the NMW and the NLW.
  • The creation of a new position called the Director of Labour Market Enforcement and Exploitation, which will oversee enforcement of the NMW and NLW, the Employment Agency Standards Inspectorate and the Gangmasters Licensing Authority.
    Find current NMW rates here.

Posted in: Employment law for HR Directors

Leave a Comment (0) →

Workplace pensions: 2019 contributions & ongoing duties

Workplace pensions: 2019 contributions & ongoing duties

All deadlines and staging dates for auto enrolment have now passed.  This means that under the Pensions Act 2008, every employer in the UK must put their qualifying employees in a workplace pension scheme (called auto enrolment) and, where appropriate, pay contributions.  If you employ just one person, you are classified as an employer and have certain legal duties. This article from the pensions regulator web site explains more about ongoing pensions duties for employers.
If you are employing staff for the first time (or haven’t caught up with auto enrolment) act now and click on this link to the pensions regulator web site, to find out what to do and by when.

Auto enrolment, Employer contributions increasing in 2019.

The minimum amounts that employers and their staff have to pay into their workplace pension scheme increased in April 2018,  and increase again in April 2019.

As the employer, you must by law make a minimum contribution towards this increased amount. You can decide to pay contributions at a rate that suits your business objectives, so long as you meet at least the Total minimum contribution figure, on the far right in the table below. If, for example, you decide to pay the minimum contribution (i.e 3% from April 2019 onwards) your employees must make up the difference (contributing 5%) to reach the total of 8 % minimum contribution. 

Date  Employer pays minimum
contribution of

Employee pays
contribution of

Total minimum
contribution of
6th April 2018
– 5th April 2019


3% 5%
6th April 2019 onwards



5% 8%


Contributions are set on “qualifying” earnings of over £112 per week to an upper limit of £827 per week.


2. Remember to keep assessing your workforce, as someone not yet old enough or not yet earning the minimum salary required may in time fit the criteria and need to be auto enrolled. The link below explains what salary levels qualify for pension auto enrolment Pension Regulator Know Your Workforce site –

3. Review your pension arrangements – there is paperwork to complete if you want an existing pension scheme to be approved. The pension scheme you use for auto enrolment must pass a ‘Quality Test’ in order to comply with new legislation. There is to be consultation on simplifying this too.

4. Communicate the changes to all your workers – The Pensions Regulator requires employees to be provided with specific information about auto enrolment, including what it means for them and their right to opt-out.

5. Automatically enrol your ‘eligible jobholders’ –  and remember that in three years you will need to re-enrol any who decide to opt out

6. Register with The Pensions Regulator and keep records – You will need to register your scheme with The Pensions Regulator.  Registering the scheme will include providing a range of evidence to the regulator as listed below:

  • Overview of the organisation
  • Details of the pensions scheme
  • The number of jobholders that have been auto enrolled

You will also have to provide evidence to the Pensions Regulator on an ongoing basis demonstrating that you have met your auto enrolment responsibilities. This evidence will include:

  • Name and Date of Birth of employees
  • Employees salary
  • Contributions made in each payment period
  • Dates of contribution
  • Auto enrolment dates
  • Details of employees who opt-out of the scheme

Failure to provide sufficient evidence will incur penalties and fines.
Be aware too that employers who fail to heed a 28 day warning notice from The Pensions Regulator risk a fine which increases each day. The fine for small employers with 1 to 4 staff who fail to comply with an “escalating penalty notice” is £50 per day and £500 per day for those with 5 to 49 staff.

7. Contribute to your workers’ pensions  – The legislation sets out minimum contribution levels at which eligible employees must be automatically enrolled. As in the diagram above, employer contributions will start at 1% of an employee’s salary. This will increase to 2 % by April 2019, then rising to 3%; dates are subject to approval by Parliament and may change.  For more details and planning advice visit

Employer and Employee Contributions for pension auto enrolment

Employees must also contribute to the pension to receive the employer’s benefits. Employee contributions will start at 0.8%. This will increase to 2.4% by 2019, then rising to 4%. The Pensionable Salary for every worker between £5,668 and £41,450 per annum includes:

  • Salary
  •  Wages
  • Commission
  • Bonuses
  • Overtime
  •  Statutory sick pay
  • Statutory maternity, paternity and adoption pay. 



What to do next.

What is the impact on employers’ cashflow of Pension auto enrolment?

It is important that all businesses start planning for auto enrolment and consider how this will affect cash flow and how you will deal with it in terms of your employees eg will this be a form of pay increase?

Which employees qualify for Workplace Pension Schemes?

Eligible jobholders have to be automatically enrolled. This is a jobholder who:

  • is aged at least 22 but has not yet reached state pension age, and
  • earns above the earnings trigger for automatic enrolment, currently £833 per month: (£192 per week)These figures change year on year so do che
    ck The Pensions Regulator website here.

Also check The Pension Regulator Know Your Workforce web site  here

Non-eligible jobholders are not eligible for automatic enrolment but they must be offered the opportunity ‘opt in’ to an automatic enrolment scheme. This is a jobholder who:

  •  is aged at least 16 and under 75, and
  • is earning between £486 – £833 monthly ( £112 – £192 weekly)
  •  is aged at least 16 and under 22, or between state pension age and under 75, and earns above £9,440.

Employees earning less than £5,668 have the right to join a pension scheme but there is no obligation on employer to contribute.

What are the age limits for pension auto enrolment?

The age band for eligibility is between 22 and the state pension age, 67. Retaining the state pension age as the upper age limit gives people access to pension saving during their normal working lives and avoids automatically enrolling people for whom saving is no longer the right option. Assess your workforce to see how many are likely to opt-in to the new workplace pension scheme.

What changes do employers need to make to Employment Contracts and staff Handbooks for workplace pensions?

You will need to inform and consult with staff as every employment contract will need the clause about pensions changed according to what type of workplace pension scheme you put in place. The staff handbook will also need to refer to the pension auto-enrolment scheme you have put in place.

What payroll changes need to be made for workplace pensions?

You will need to contact your payroll provider to ensure the correct changes are made by way of salary deductions and reporting in pay slips. You should also decide if your business is going to offer salary exchange arrangements. If salary exchange is used as well that can add additional complications. Salary exchange is a mechanism to enable staff to exchange part of their gross salary in return for a non cash benefit such as employer contributions into a pension scheme. This means they get 100% of the salary exchanged going into their pension scheme because no PAYE or NICs are deducted.


Posted in: Employment law for HR Directors

Leave a Comment (0) →

Workplace Mediation, resolving conflict at work

Workplace Mediation, resolving conflict at work

Workplace Mediation has long been gathering momentum, becoming increasingly popular amongst UK companies who now use it as an effective way to resolve disputes at work. Mediation can provide solutions which meet the needs of all parties; its cost effective, fast (90% are resolved within one day), avoids disruption, removes the debilitating effects of unresolved conflict and can pave the way for restored workplace relationships.

So what is Workplace Mediation and how can it solve conflict at work?

What is workplace mediation?

In a workplace mediation the mediator, who is an impartial third party, helps 2 or more staff in dispute to attempt to reach an agreement. Any agreement comes from those in dispute, not from the mediator. The mediator is not there to judge the issue e.g. to say one member of staff is right and the other is wrong, or to tell those involved in the mediation what they should do. The mediator is in charge of the process of seeking to resolve the problem but not the outcome. It is for the staff members in dispute to agree the outcome to resolve the dispute. An agreement settling the dispute is then signed by the members of staff. Workplace mediation is often a voluntary process and all discussions are confidential.

Who can use workplace mediation?

Any employer can use workplace mediation. It is regularly used for resolving conflict involving:

  • colleagues of a similar job or grade
  • unresolved issues between a line manager and his/her staff

It’s difficult for an HR Director, any Senior Manager or indeed the business owner to be seen as neutral in a mediation.  He or she will know the personalities involved and will not be seen as impartial. An external mediator will help show that HR is looking to resolve this dispute without taking sides. The HR Director or Manager also may be involved later in a grievance or disciplinary dispute.

Workplace mediation is not suitable for some situations , for example where a discrimination or whistle–blowing grievance has been raised and it must be investigated. Note that mediation may also not be appropriate for situations that involve sexual harassment which is a serious issue requiring particular handling. For more on this, see our Employer’s guide to handling sexual harassment at work.

When is workplace mediation used?

Common examples of situations where workplace mediation works are:

  • personality clashes
  • communication breakdowns
  • relationship breakdown within a team
  • bullying and harassment
  • cultural misunderstandings due to different nationalities working in the same workplace

Workplace Mediation can be used before a formal grievance has been identified or after a formal dispute has been resolved to rebuild relationships

In 2011 CIPD undertook a Conflict Management Survey in which 57% of respondents reported using workplace mediation successfully.

The Legal Partners mediation team has used workplace mediation successfully in the care, IT and professional services sectors and it is very suitable to workplaces where there are communication difficulties within the business and within teams.

What are the benefits of workplace mediation within the business?

Taking a dispute to an Employment Tribunal is now very costly for both employers and employees, and rarely actually resolves the underlying issues that may have caused the initial problem to occur. The Employment Tribunal will give judgement on the employment dispute at the time but will not resolve any underlying workplace situation problems.

Cost savings of using Workplace Mediation

Workplace Mediation can save many organizational costs.

  • it avoids formal grievance and appeal proceedings which can consume a lot of HR Directors’ and Senior Management time and resources. It’s  important to note that workplace mediation could form part of the Step 1 Informal Action to resolve a grievance. For further details on resolving grievances, see our related article Handling and employee grievance, five key actions 
  • workers take sickness absence while there is a conflict situation at work which leads to expensive temporary workers needing to be hired
  • it can avoid staff turnover and re-recruitment and retraining costs
  • it can avoid low staff morale and lower productivity
  • it can repair working relationships within teams so they focus on the team and corporate goals
  • What are the benefits of workplace mediation undertaken outside of the business?
  • Any unnecessary conflict can be bad for PR outside of the business and bad for the morale of the workers who are no longer ambassadors for the business but instead can spread negative PR.

Which organisations already use workplace mediation?

Workplace Mediation is good for the employer and employee, and many major businesses use it:

  • Marks & Spencer has been using mediation since 2011 and employees find resolving grievances informally less stressful, more effective and a quicker solution than raising a formal grievance.
  • Arcadia Group which has more than 2500 outlets and owns a number of worlds-known high street brands including Topshop and Topman. Arcadia group calculated that in particular grievances between managers and their team members were taking at least 3 weeks to resolve. By using workplace mediation since 2009 Arcadia Group has significantly these types of grievances by 50%.
  • The US Postal Service has over 600,000 workers. It uses a REDRESS (Resolve Employment Disputes Reach Equitable Solutions Swiftly) internal mediation service. This workplace mediation service provides a fast, fair, neutral and informal alternative to traditional counselling and grievance procedures.  Employees know that they will be making the decisions, are expected to try to understand the other party’s concerns and to look at options for addressing those concerns. Outcomes include settlement, withdrawal of the complaint, or where no agreement is reached, rarely, continuation to formal processes.

How can our business start using workplace mediation?

The Legal Partners provide a workplace mediation service to settle workplace disputes to help the busy HR Director.

Our mediation Partner Shân Veillard-Thomas will arrange the confidential mediation process for you and co-ordinate the successful workplace mediation meeting either at your offices or at a neutral venue. To find out more on Workplace Mediation can resolve the workplace conflict your business is facing, make contact on 0203 755 5288.

Posted in: Employment law for HR Directors

Leave a Comment (0) →

Directors' guide to the new Register for Persons with Significant Control (PSCs)

Directors' guide to the new Register for Persons with Significant Control (PSCs)

From the 6th April 2016, all UK non-listed companies and LLPs will be required to identify and register all persons with Significant Control over the company. These are also called registers of Beneficial Ownership.
This register will need to be included in all UK Company Annual returns from April 2016 onwards.
The government has published guidance for companies and LLPs on the register of people with significant control requirements.

It is a criminal offence for Directors to fail to comply with the new disclosure laws or to register Persons with Significant Control (PSCs) in the annual return.

The new requirement is set out in the Small Business, Enterprise and Employment Act 2015.
Control is broadly defined and includes:
• individuals who directly or indirectly hold more than 25% of the shares or voting rights in the company,
• are able to appoint or remove a majority of the board; or
• otherwise have the right to or actually exercise significant influence of control over the company.
The aim of this new disclosure law is to increase transparency over who are the beneficial owners and controllers of UK companies. Why the need for such transparency?  Apart from helping to inform investors, the new registers will help law enforcement agencies, HMRC, SFO, and the Police to find information quicker, and in their efforts to weed out money laundering and tax evasion.  The Panama Papers leak is a timely example this practice of hiding income by using shell companies whose ultimate beneficiaries are unclear.
This new law was introduced as a result of a commitment made at a G8 summit hosted by the UK Government in 2014. The remainder of the G8 will follow soon. There will be similar rules forcing companies across the rest of the EU to disclose their registers of beneficial ownership/ Persons with Significant control by June 2017.
Person with Significant Control explainer infographic The Legal partners

I am a Company Owner: what do I need to do as a beneficial owner of shares?

An officer of the company will be required to do the following:

  • Identify and then record all people with significant control in a register. Such persons may be individuals or an immediate holding company if in a group.
  • Establish the register by 6th April which needs to be kept with the Company’s other statutory books at its head office. This register will be open for inspection. Contact us for a free register to use.
  • Provide this information to Companies House from June 2016 as part of the company’s Annual Confirmation Statement. Annual Returns are being renamed to include this statement.
  • Keep the register updated to the extent there are any changes to PSCs.No PSC register may be left blank so every UK Company will have to make a disclosure.

Establishing who has control should be fairly straightforward in a single company. It might however be less straightforward for companies in groups. Directors of each UK company are obliged under the new legislation to make reasonable enquires of parent companies to establish who to record in the register who controls the company.
Directors have to look through corporate structures and trust arrangements to find out who is the ultimate Person or People with Significant Control.
There will always be a disclosure of an individual name unless the ultimate holding company is listed on a stock exchange where there are already sufficient disclosure requirements or is another private UK limited company.

I am a Director/Company Secretary: what do I need to do about registering Persons with Significant Control?

  • Understand the rules and their application
  • Review the company structure and be able to identify all beneficial owners of shares. If the company is in a group ask the Directors of your
  • Holding Company who are the beneficial owners and who is a Person with Significant Control.
  • Create a new Person with Significant Control register for 6 April 2016. This must be open to inspection at your company registered offices for free. Contact us for a free register to use. Anyone can ask for a copy by paying the £12 fee.
  • File PSC details on your company’s next Annual Return when due after June 2016

What happens if a Director or PSC does not disclose the correct details?

It is a criminal offence if Directors fail to comply with the new disclosure laws. Directors can be imprisoned for up to 2 years. Both the Directors and the Person(s) with Significant Control have obligations to report the PSC’s shareholding and disclose it.
Sanctions can also be imposed on the shares of a Person with Significant Control and could stop the payment of dividends or sale of the shares.
Need more information on the new register for Persons with Significant Control?
The rules are complex and intricate and applying the rules can be confusing, time consuming and costly.
If you need more information or assistance on registering Persons of Significant Control or issues relating to Beneficial Ownership, or wish to:
1. Protect yourself as a company director and ask the right questions to find out who is the Person or People with Significant Control,
2. Complete the new PSC registers and file your next Annual Return,
please contact Nicholas Eldred or Richard Mullett at The Legal Partners.
Or call us on 0203 755 5288.
We are already advising global companies and their Boards about how to comply with the new regulations on registering Beneficial Ownership/Persons with Significant Control.

Posted in: Corporate and Business law for CEOs & CFOs

Leave a Comment (0) →
Page 2 of 5 12345