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JERSEY HR HAND BOOK 2021


© 2021 First Actuary Limited, Jersey. The author retains sole copyright to his or her contributions to this book. Nothing stated in this book should be treated as an authoritative statement of the law and no specific action should be taken relying solely on the contents of this book. Information, dates, contact information and other details may be subject to change and are not under the control of the author.


JE R S E Y H R H AN D B OO K 2021 ADDRESS

TELEPHONE

De Carteret House 7 Castle Street St Helier Jersey JE2 3BT

01534 888 816 EMAIL

contact@firstactuary.co.uk WEBSITE

www.firstactuary.co.uk


CONTENTS Introduction

1

Covid and Organisational Change

2

Employment law

4

Discrimination Law

6

Leadership Challenges 2021

7

Health and safety

10

Social Security contributions

11

Social Security benefits

13

Long-term care scheme

15

Minimum wage

16

Pension law

18

Pension limits

19

State pension age

20

Pensions – helping to enhance work-life balance

21

Pay and benefits data

23

Secondary pensions

26

Options in retirement

28

Group risk insurance

31

Inflations statistics

34

Useful contacts

35

Contributors

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INTRODUCTION The closing paragraph of my introduction to the 2020 HR Handbook read “Best wishes for 2020 and the challenges that lie ahead”. As it turns out we really had no idea of what those challenges would look like or what a tumultuous year 2020 would turn out to be both in professional and personal spheres. For the record I’m writing this introduction from home, despite having been back in the office for most of the Summer and Autumn, due to a household isolation resulting from a positive Covid test in one of my children’s school classes – all part of the “new normal”. I feel fortunate that the thought of the coming spring currently inspires in me a feeling that there may just about be light at the end of the tunnel. Of course we also need to recognise that we are coming out of a very dark time for many people, more than in any recent winter period. With many avenues of stress relief such as leisure, retail and sport activities unavailable through those times and the difficulty of achieving face-to-face connection for HR teams it may take some time to return to equilibrium even if the pandemic does begin to ebb. We will in time, if not already, look back on some positive aspects coming out of the pandemic. It has shown the resilience of individuals and businesses to solve problems which were not anticipated. For some businesses this may have a profound impact on the number of staff continuing to work from home and their need for and use of physical premises. Even for those returning to the workplace this may not mean a return to old practices as the efficiency of the IT systems in place during the pandemic may have had a positive impact on processes and productivity. Will we ever see a return to the same level of work travel as there was pre-pandemic? Has the slow march towards paperless offices and videoconferencing of the last two decades finally had the impetus to become the norm? The rate of change elsewhere has been held back somewhat by the need to deal with the problems at hand and with no major changes for 2021 this should buy some time to help get things back on an even keel and work out what the new normal is before inevitable change and the onward march of time consigns 2020 to an interesting footnote in history.

David Holmes First Actuary

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COVID AND ORGANISATIONAL CHANGE Matt Ebbrell, Chief Operating Officer at Fairway Group, takes a look at how the pandemic of 2020 has forced the hand of organizational change and where this might lead us next. No sector has been immune from the impact of the COVID pandemic – although some sectors have been hit harder than others, and at a personal level – some individuals have coped better than others. The phenomenon of the effective remote office has never been more important, but how can employers support their teams to deliver under new circumstances that were almost unthinkable just 18 months ago? When the situation settles, will we see a stampede back to the office? Unlikely. According to McKinsey research, 80% of people stated that they enjoy working from home. Over 40% stated that they are more productive than they had been before, and 28% stated that they are as productive. With managers continually pushing for productivity, employers need to accept that these (not quite) new ways of working will last longer than the pandemic. Should the office be considered a choice, not an obligation? Employers should accept that different people have different circumstances and preferences and to get the most out of their teams they need to grant them permission to consider the office as a choice of location rather than a mandatory ‘attendance space’. Of course – there still needs to be regular touch points and there might need to be some mandatory physical meetings (socially distanced of course!) but the point is that employers should allow flexibility to suit preference and circumstance wherever possible. Should organisations develop a culture that prioritises resilience over efficiency? Many organisations have been propped up by workarounds and tweaks to existing practices during the pandemic, but many are overdue an in-depth review as to how they operate. The success of any such review will ultimately lead back to a positive but challenging culture which questions how things get done and how well the organisation would respond (how resilient it is) to another crisis. While answers to improvements and efficiencies are often driven by a technology solution, do not underestimate the importance of human interactions and the need for people and technology to be aligned.

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COVID AND ORGANISATIONAL CHANGE (CONTINUED) Is the work-life balance shifting to work-life integration? Work-life balance seeks to achieve an ideal state where your work and life co-exist and thrive separately; work-life integration is about bringing work and life closer together. Arguably one is better than the other depending on circumstances, but organisations are generally more developed in promoting frameworks and strategies that support the former. Whilst it is not easy, organisations need to consider (1) What work-life integration could mean for their people. Perhaps less stress, more (or better quality) family time or more time to be creative. (2) Allow flexible routines – do people need to work 9-5? Do they need to work standard 7.5-hour blocks? Where do people need to be to work? Does it even matter? (3) Create a guilt free culture with respect to work-life integration. It is not something that teams should feel guilty about trying to achieve and it can positively impact physical and mental health whilst boosting engagement and productivity.

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EMPLOYMENT LAW Employment law in Jersey is significantly governed by the Employment (Jersey) Law 2003 which came into force on 1 July 2005. There are a number of key elements to the law which are set out in a series of Guidance Notes for Employers (GNs) provided by the Social Security Department. • • • • • • • • •

Written terms of employment (GN1) Minimum rest periods and annual leave (GN2) Payment of wages and minimum wage (GN3 & GN4) Termination and Redundancy (GN5 & GN11) Disputes, discipline & dismissal (GN6 & GN7) Fixed term contracts and contractors (GN8 & GN9) Flexible working rights (GN12)* Parental Leave and Breastfeeding (GN13 & GN13A)* Armed Forces reservists (GN14)*

*These Guidance Notes have been renumbered during the course of 2020. In addition a Code of Practice on Disciplinary and Grievance Procedures has also been approved under the Employment (Jersey) Law 2003. Also relevant is the Employment Relations (Jersey) Law 2007 along with its associated codes of practice which cover the status of trade unions and other associations as well as legal dispute resolution. There is also a Guidance Note relating to this law. • • • •

Employment relations and trade unions The recognition of Trade Unions Balloting and conduct in employment disputes Resolving collective disputes

(GN10) (Code 1) (Code 2) (Code 3)

Changes during the year In June of 2020 the Parental Leave and other Rights Law came into force bringing about changes in relation the rights of breastfeeding mothers and parental leave. These changes can be summarized as:Breastfeeding (effective 28 June 2020) • A breastfeeding mother has the right to request a temporary variation to her terms and conditions. • Employers must take reasonable steps to provide facilities in the workplace • Right to paid absence where a risk assessment prevents a pregnant or breastfeeding woman from carrying out her normal job and she cannot be allocated to other duties.

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EMPLOYMENT LAW (CONTINUED) Parental Leave (effective 5 July 2020) • All parents can take up to 52 weeks of leave in up to three blocks over a two year period of which six weeks would be paid. • Parental leave is also available to adoptive and intended surrogate parents. • Partners, surrogate and adoptive parents are entitled to unlimited attendance at ante natal appointments of which up to 10 hours would be paid (all attendance is paid for the mother). Employers need to ensure that their staff handbooks and policies are updated to reflect the changes. Employers also need to make sure that managers are trained in knowing how to handle temporary changes to terms and conditions and consider what ‘reasonable steps’ can be made regarding the provision of suitable facilities for breastfeeding and/or expressing. Guidance Notes GN13 and GN13A provide further guidance on these rights.

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DISCRIMINATION LAW The Discrimination (Jersey) Law has been in force since 2014. The law provides legal protection against certain forms of discrimination. The initial law provided protection against discrimination on the grounds of race (including colour, nationality or ethnicity). Discrimination legislation includes both direct and indirect discrimination (in indirect discrimination the less favourable treatment may not be as a direct result of an individual’s race but the individual may be more likely to fall into a group which is treated less favourably as a result of their race). In addition harassment and victimization are prohibited. Since the initial 2014 law additional characteristics of sex (including sexual orientation, gender reassignment, pregnancy and maternity), age and disability have been added to the list of characteristics which may not be discriminated against. In practice a well run business in Jersey should not be affected by the addition of new elements of discrimination. Employers should, however, consider whether policies and procedures need to be revised to include explicit references to outlawed discrimination and whether any specific staff training is required to avoid discrimination arising. Employers and business owners should remember that the duty created by the Discrimination (Disability) Jersey Regulations 2018 to take reasonable steps to avoid substantial disadvantage caused by the physical features of the premises came into force on 1st September 2020. It is important to appreciate the sheer variety of reasonable adjustments that might be made by an employer or service provider in ensuring that disabled people are not disadvantaged. It is of course the case that a reasonable adjustment might involve making premises more accessible to wheelchair users – but there is much more to the duty than that. Nor will it always be the case that an adjustment will involve significant expense. What is needed is a problem-solving approach that identifies the barriers that are being placed in the way of disabled people and seeks creative ways to remove them. A recommended first step is to carry out an audit to identify where changes need to be made.

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LEADERSHIP CHALLENGES 2021 Becky Hill, owner and director of HR Now, shares her key lessons from the unusual year that was 2020. Leaders need to get comfortable with being uncomfortable: People management remains at the forefront of a business’s success and Covid has only emphasised the importance of getting it right. HR Now remain busy supporting business leaders to face these challenges, guiding them to identify and adapt their strategies to increase their employee commitment. Here are my top four messages Leading high performing teams: • Understand and articulate the vision and strategy of the business • Be clear about roles, responsibilities and expectations • Have a clear action plan that is realistic and achievable where everyone understands their part in achieving the strategy • Provide regular and development focused feedback • Put yourself in the shoes of the person that won’t speak up and ask for help, ask yourself “what do they want and need from me?” • Learn from mistakes Challenges of managing virtual teams: • The single biggest challenge is communication, especially making forced scenarios with comms technology feel natural • Encourage independent decision making and accountability • Facilitate employee face-to-face work and social encounters with each other and with you (innovative ideas and productivity went up by 20% in a US study) * • Give real time feedback, little and often • Provide the right tools and tech to do the job • Avoid micro-management • ‘Resilience’ is billed as the new wellbeing must, but take care not to over promote it as the alternative to good open and honest leadership

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LEADERSHIP CHALLENGES 2021 (CONTINUED) Delivering effective feedback: • Employees want to know four basic things … 1) what you want them to do; 2) how well you want them to do it; 3) how they did 4) how will they be rewarded? …. Answering these questions is a sound structure for a feedback session • Emphasise strengths, it has the greatest potential to positively impact performance • Focus on behaviour, not personality • Validate your perspective with tangible examples • Accompany critical feedback with suggestions for doing it better Competing in a Post Covid labour market: • The public, the workers and the emerging and future talent pools will judge employers by how they treated their workforce in 2020 and beyond, remember the importance of brand • Recognise that to be competitive in the talent markets they will need to become known for: • Prioritising the health and wellbeing of their workforce • Flexibility and sensitivity in terms of location and hours of work • Committed to job security (and/or recognised for fair and sensitive management of redundancies) My concluding thoughts…….RE-activate, RE-engage, RE-set Employers - Remember Retention is easier than Recruitment. The actions you take now will help you retain and reward your productive and committed talent. Employees - Compromise. The requests you make now will be rewarded if you consider your colleagues, clients and employer in equal proportion. Through all this turmoil, HR has come out with an elevated importance in organisations. I hope your business is getting ‘people management’ right during these challenging times.

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HEALTH AND SAFETY The Health and Safety at Work (Jersey) Law 1989 sets the framework used by the Government of Jersey, the Minister for Social Security and the Health and Safety Inspectorate, for dealing with health and safety issues at work. All working activities are covered by the Health and Safety at Work (Jersey) Law 1989 and depending on the type of work being carried out, may also be subject to Regulations and the Approved Codes of Practice (“ACoP”). • • • • • • • • •

Working with ionising radiation (ACoP 2) Safety of pressure systems and transportable gas containers (ACoP 3) Display screen equipment at work (ACoP 4) Safe use of forklift trucks (ACoP 6) Recreational diving projects (ACoP 7) Exposure to asbestos in the workplace (ACoP 8) Working safely with woodworking machinery (ACoP 9) Working safely with machinery (ACoP 10) The safe operation of skip and hook loaders (ACoP 12)

If you are an employer you must ensure that the health and safety of your employees and members of the public are not affected by your working activities. You are legally obliged to provide your employees with safe equipment and systems of work, sufficient information, instruction, training and supervision, a safe working environment and adequate facilities and arrangements. If you have five or more employees (including Directors), you must have a written health and safety policy which is brought to the attention of all employees. Your policy must be prepared in a language your employees understand and must include the identification and assessment of significant risks and how they are to be dealt with. Further details and updates from the Health and Safety Inspectorate can be found on the Government’s website at www.gov.je/hsi and it is good practice for employers to refer to these periodically to understand where the Inspectorate has identified deficiencies and/or has issued enforcement notices. COVID-19 issues At the current time it is particularly important to keep up to date with the latest guidance on COVID-19 which changes regularly. The HSI website current has a section “Coronavirus and workplace strategy” which has the links to the latest government guidance and articles such as “First aid during the coronavirus outbreak.

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SOCIAL SECURITY CONTRIBUTIONS The following limits apply up to 31 December 2021. Upper Earnings Limit (UEL) £21,300 per month Standard Earnings Limit (SEL) £4,610 per month Lower Earnings Limit (LEL) £980 per month Contribution rates Employee 6.0% Employer 6.5% up to SEL plus 2.5% between SEL and UEL

From 1 October 2020 up to 30 June 2021 employees will pay a reduced rate of 4%. †This is part of the fiscal stimulus package announced in July 2020 to help the local economy in the wake of the COVID-19 pandemic. Employee contributions are normally* deducted from all gross earnings up to the SEL for any employee aged between 16 and 65 working more than 8 hours per week. Employer contributions of 6.5% of gross earnings are payable for all employees working more than 8 hours per week up to the SEL. For any employee earning more than the SEL an additional 2.5% is payable on the amount of gross earnings above the SEL up to the UEL. The Social Security department has set out tables with examples of benefits which should be included and excluded from the calculation of an employee’s gross earnings – more information for employers can be found on the States’ website www.gov.je/working/contributions/employers *Except where an employee holds a registration card marked on the back as “XR1” which includes some widows or widowers, married women who elected not to pay contributions and employees over pension age.

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SOCIAL SECURITY BENEFITS The following benefit levels apply up to 30 September 2021. Short Term Incapacity Allowance (STIA) £224.98 per week Long Term Incapacity Allowance (LTIA) £224.98 per week Pensions: single £225.96 per week Pensions: married couple £375.13 per week Pensions: survivor £224.98 per week Parental Allowance £224.98 per week Parental Grant £674.94 per child Death Grant £899.92 In addition to a survivor’s pension, which is paid after a year, for the first 52 weeks after the death of a spouse a benefit of 120% of the survivor’s pension is paid to all spouses (not subject to the same qualifying requirements as the pension). Benefits are normally increased from 1 October each year in line with the Jersey Earnings Index for the latest 12 month period ending in June of the relevant year. The State Pension increase in a particular year can be higher or lower than the change in the Jersey Earnings Index because of a mechanism introduced in 2012 which is designed to protect pensioners in periods where price inflation exceeds earnings inflation. This mechanism means that pensions can increase ahead of earnings inflation in the short term with the additional increases reversed as earnings growth returns above the level of price growth. Long Term Incapacity Allowance awarded can range from 5% to 100% of the full benefit. The award depends on the illness or injury, unlike Short Term Incapacity Allowance which is paid because you are unable to work. Recipients of the LTIA can continue to receive a wage or salary in addition to the benefit. Changes for 2021 Parental Allowance and Parental Grant replace Maternity Allowance and Maternity Grant for children expected or adopted on or after 1 January 2021. In changing from Maternity Allowance to Parental Allowance the benefit claim period has been increased from 18 to 32 weeks which can be divided between the parents and taken over a two-year period.

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LONG-TERM CARE SCHEME The Government introduced the long-term care scheme in 2014 to provide benefits to support islanders who are expected to need long-term care for the rest of their lives. The scheme provides for islanders either living in a care home or who continue to live in their own home. The first actuarial review of the long-term care scheme was completed during 2018 showing that current contribution rates remain adequate in the short term, but at current rates it is estimated that the fund will fall short in 2027. The scheme is designed to be sustainable in the long term and the current estimate is that the rate will need to rise to just under 3% by 2044. The next review will be carried out with a valuation date of 31 December 2020 and should be presented to the States during 2021. The scheme is managed by the Social Security Department but, in order to simplify the collection of payments, contributions are collected by Revenue Jersey through the tax assessment or ITIS contributions. The current rate of contributions is 1.5% payable on earnings up to the Upper Earnings Limit (£21,300 per month in 2021). There is little impact on employers or payroll providers as the long-term care contributions are automatically included in employee ITIS rates provided by Revenue Jersey. Due to the effects of Long-term care contributions the default ITIS rate is currently 22% for all employees who have not provided a valid effective rate notice.

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MINIMUM WAGE The following rates apply from 1 April 2020 Minimum wage £8.32 per hour Trainee rate (first year) £6.24 per hour Trainee rate (second year) £7.28 per hour Maximum offset (per week) Standard rate Trainee rate

Accommodation £91.12 £68.34

Accommodation & Food £121.46 £91.10

Trainee rates Approved training has to be agreed in writing by both the employer and employee before the employee starts their new job. The training has to have structure and objectives that relate to the employee’s performance and training outcomes must be assessed and documented. You can find more information about trainee rates on the JACS (Jersey Advisory and Conciliation Service) website. Reviewing the minimum wage The minimum wage has historically been reviewed following a request by the Social Security Minister for the Employment Forum to review the rates and make a recommendation for the following year. This did not happen during 2020 and the following statement was issued “On 26th June 2020, the Social Security Minister wrote to the Chair of the Employment Forum (“the Forum”), indicating that she did not intend to refer the matter of the minimum wage rate to the Forum in the present economic conditions.” A separate proposition was brought before the States Chamber to increase the minimum wage to £8.66 per hour from April 2021 but this was rejected by States Members.

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PROBLEMS SOLVED First Actuary is Jersey’s first local Consulting Actuary. First Actuary solves problems relating to pensions and many other complex financial calculations or projections. For help or enquiries contact us or visit the website today. www.firstactuary.co.uk 01534 888 816 contact@firstactuary.co.uk

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PENSION LAW Pension rules are set out under the law in Jersey in Part 19 of the Income Tax (Jersey) Law 1961. A number of articles set out different pension arrangements which can be approved in order to obtain preferential tax treatment. The most important for local company pension arrangements is Article 131 which covers occupational pension schemes. In recent years the use of multi member Retirement Trust Schemes (or “RTS”) has become more common for workplace pension schemes, these are governed by Article 131B of the law. Changes in recent years have reduced most of the practical differences from the perspective of employers and employees between these types of scheme. In order to obtain the favourable tax treatment allowed for by the law all qualifying schemes must seek approval from the Comptroller of Taxes. From 2015 approval is no longer required for all changes, however trustees (or the administrator) must notify the Comptroller of the changes made and confirm that following the changes the scheme will continue to comply with Part 19 of the Income Tax Law. The Taxes Office provides guidance notes for administrators and trustees which can be found on its website at www.gov.je/taxesmoney. These set out the conditions required to obtain or continue approval. The guidance notes were completely rewritten in January 2015 to incorporate changes to the Income Tax Law and the latest updated version of these notes was published in March 2019 (version 3.2). A summary of the key limits is provided in the Pension limits section of this handbook (page 19). Regulation of pensions Over the last two years there have been two consultations from the Government of Jersey on the regulation of pensions. The first in November 2018 was on whether pensions should be regulated and the second in December 2019 seeking feedback on some more detailed proposals. The second consultation closed at the end of February 2020 and a working group has been discussing the way forward. In December 2020 the Government of Jersey announced a phased approach to regulating pensions with Phase 1 being direct regulation on investment providers to tackle “key consumer harms”, Phase 2 extending the remit of the Financial Service Ombudsman to cover all private pensions and Phase 3 introducing legislation to regulate all Jersey pension products and providers.

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PENSION LIMITS Contributions Total contributions to approved pension schemes are now unlimited. Tax relief, however, remains limited to the lower of 100% of earned income and £50,000. In addition for individuals with income in excess of £150,000 tax relief will only be given on contributions up to £50,000 less their “excess income” which is defined as income over £150,000. For example an individual with an income of £180,000 paying contributions of £25,000 will have an excess income of £30,000 and will therefore be given tax relief on only £20,000 of their contributions. This means that an individual with income over £200,000 in a year will not be able to get any income tax relief on pension contributions. Benefits Limits no longer apply to the total level of benefits which can be paid by a pension scheme. However, the Law and guidance notes continue to apply restrictions on benefits in terms of what is permitted in order for a pension scheme to gain approval. The restrictions below relate to approval under Article 131 (occupational pension schemes). • •

The scheme must provide for an income for life which commences between the ages of 50 and 75. There is no requirement for the member to retire or leave employment before income commences.

In addition the following limits apply to benefits: Maximum pension guarantee period 10 years Minimum retirement age 50 (except ill health) Trivial commutation limit (aggregate) £35,000 (from age 60) Commutation of small pension limit £19,000 (combined £50,000) Maximum tax free lump sum 30% Refund of member contributions <5 years’ service

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STATE PENSION AGE Jersey’s State Pension Age (SPA) was 65 for males and females. For individuals reaching age 65 after 2019 the SPA will increase by 2 months each year up to 2031 by which time it will have reached 67.

Date of Birth State Pension Age before 1955 65 years up to 31 October 1955 65 years and 2 months up to 31 August 1956 65 years and 4 months up to 30 June 1957 65 years and 6 months up to 30 April 1958 65 years and 8 months up to 28 February 1959 65 years and 10 months up to 31 December 1959 66 years up to 31 October 1960 66 years and 2 months up to 31 August 1961 66 years and 4 months up to 30 June 1962 66 years and 6 months up to 30 April 1963 66 years and 8 months up to 29 February 1964 66 years and 10 months after February 1964 67 years The State Pension may be taken up to 2 years before SPA subject to a reduction of 0.58% for each month early. Women who joined the Social Security scheme before January 1975 can take the State Pension on reaching 60. Feedback on Part 1 of the Social Security review ‘Living Longer: Thinking Ahead’ indicated that a majority of respondents disagreed that the option of further increasing the State Pension Age beyond 67 should be considered. A minimum of 4½ years contributions are required to qualify for a State Pension. To obtain the full rate (100%), contributions must have been paid or credited for a minimum of 45 years for those with a Pension Age of 65. The minimum contribution period is increasing and for those with a State Pension Age of 67 years a minimum of 47 years will be required.

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PENSIONS – HELPING TO ENHANCE WORK-LIFE BALANCE Mike Freer, of BWCI (Jersey) Limited, looks at the options for employers to ease employees into retirement The lines between working and retirement have become increasingly blurred in recent years. Legislative changes have encouraged employees to take advantage of the benefits of a more flexible working pattern on the journey towards retirement. Indeed, a gradual transition from full time working to “full time” retirement is often seen as the optimal solution to the work-life balance in the latter part of an individual’s career. Age is a protected characteristic under Jersey’s anti-discrimination legislation; the abolition of the concept of default retirement age back in 2018 means that it is now much easier for employees wanting to work beyond the traditional “pension age”. However, the loss of a default retirement age is not without its challenges for employers. For example, succession planning becomes more difficult if it is unclear when an employee is planning to retire. They may not even know themselves! That’s why it’s important to start the conversation early, ideally several years in advance of a likely retirement date. A key issue for many employees will be whether they can afford to retire, even if they might want to. Their old age pension will probably be paid later than they had originally anticipated; 2020 saw the beginning of the phasing in period increasing the age at which an individual is eligible to receive a full rate old age pension from 65 to 67. In addition, for many people the States old age pension alone may not provide enough income to support even a modest retirement lifestyle. Making retirement affordable sooner Providing a company pension provides staff with an additional source of income in retirement and also helps to soften the financial impact of the increase in the States pension age. Of course there is an employer cost, but it may not be as much as you think. This is because employer contributions to a pension arrangement are tax deductible and are generally not liable for social security contributions. Employees can also save towards retirement through the company pension, taking advantage of the tax relief on their pension contributions. An added benefit is that a company sponsored arrangement is often better value, in terms of expenses, for an individual compared to private provision. This is because employees benefit from the lower charges that come with economies of scale.

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PENSIONS – HELPING TO ENHANCE WORK-LIFE BALANCE (CONTINUED) What are the options? Most employer pension schemes are set up on a defined contribution (“DC”) basis. This is based around a known level of employer contributions, which are invested and the resultant “pot” is used to provide retirement benefits. There are two main types of DC scheme locally; an occupational scheme and a Retirement Trust Scheme (“RTS”). The type of scheme which is more suitable for a particular employer will depend on their circumstances. For example, an occupational scheme may be simpler for pan-island employers because they can use the same scheme for Jersey and Guernsey staff. Alternatively a Retirement Trust Scheme can generally offer more flexibility, allowing an individual to carry on contributing to it after leaving service.

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PAY AND BENEFITS DATA Verienne Belcher, the Managing Director of Polymetrix Limited, explains how having accurate pay and benefits data is an essential management tool for recruiting and retaining staff. The power of data Pay and benefits can often seem one of those daunting subjects that raises its head not only at pay review time, but throughout the year. Whether you’re dealing with disgruntled employees on a Monday morning, candidate interviews or those indepth queries from the board, current robust market data is a key factor in making informed decisions. It continues to be an ‘employees’ market’ out there, so having the knowledge of where your organisation sits in the marketplace is essential when it comes to negotiations on individual contracts not only for pay, but for the complete benefits package. Whether a potential new employee wants to ensure that they are working for an ethically sound organisation or whether they are more interested in a gym membership, data is available on what other employers in the island are offering in terms of the total reward package. Having that sort of intelligence at your fingertips will make the whole decision-making process more robust and may avoid you losing that ideal potential candidate to a competitor. Having data provided by a third party provides the transparency not only to employees that the data has not been ‘manipulated by HR to provide the answer management wants’ - which can often be a misconception - but also reassures management that competitor data has been analysed objectively so they can feel confident that they know where they sit in the market place. There are many remuneration data providers in the market, whether they be local or global, so it is important to ensure that the data is wholly relevant to your own organisation. It is essential that you ensure that the data can answer the questions you need and that equally you are fully aware of how the data is sourced and analysed. So for example… Who are you losing employees to or gaining employees from and are those organisations included in the data set? How old is the data? Could you be drawing conclusions on a marketplace based on intelligence from some years ago? Are you being provided averages and pay brackets for roles or specific data analyses for that actual job level?

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We believe that a deeper and more meaningful analysis and interpretation of data enables insight for organisations to evolve.

Remuneration Surveys Surveys that focus on pay and benefits, reporting on actual current market data for employees from entry level through to top CEOs.

Benchmarking Reports For organisations requiring an analysis of their individual employees against specific market data.

Bespoke Surveys Commissioned surveys that focus on particular sections of the employment market or parts of the remuneration package where an employer requires more information from a pool of direct competitors.

Jersey | Guernsey | Isle of Man | Malta Polymetrix Limited www.polymetrix.co 24


PAY AND BENEFITS DATA (CONTINUED) In this current world of evidencing processes, it is imperative that the data you are using as part of your organisation’s decision-making process is robust, transparent and reliable. At Polymetrix we believe that a deeper and more meaningful analysis and interpretation of data creates insight for organisations to evolve. We therefore ensure our data analysis and reporting delivers a true reflection of the local employment market: • • • • • • • •

Total package analysis including base pay, bonuses and non-cash benefits Detailed commentary, providing valuable insight into the local market Provision of over 60 job families with levelling that is consistent across them all Comprehensive benefit analysis New data tables published every six months Year-on-year comparisons One-to-one feedback from all participants enabling us to enhance the survey year on year In 2020, more than 16,000 jobs were analysed from over 160 companies in the Crown Dependencies and Malta.

Fundamentally, data-driven decision making means you can work towards achieving your key business goals by leveraging verified, analysed data rather than merely shooting in the dark.

0111000010001 0000001001110 1001110001100 1100110000000 0010001111100 0000011101001 0101010101000 1000100010000 1000000111000 1100111001

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SECONDARY PENSIONS In 2016 the States of Guernsey first agreed in principle to a proposal to implement a new pension arrangement known as the “Secondary Pension Scheme” which included a requirement for automatic enrolment of all Guernsey workers. Some further information on how the new arrangements would work were published in December 2017 at which time the aim was to implement in January 2020. In December 2019 the Committee for Employment and Social Security released the first detailed proposition for the Secondary Pension Scheme which went before the States for consideration and these were accepted in full and without amendment in February of 2020. It still remains for the relevant law(s) to be agreed and/or amended to implement the requirements agreed for the Secondary Pension Scheme to take effect. The target commencement date for the new arrangements to take effect was January 2022 though it currently seems that January 2023 will be a more likely earliest start date. The Secondary Pension Scheme in Guernsey will be called “Your Island Pension” or “YIP” and will be managed by Smart Pension Limited, a UK based provider. The arrangement is broadly similar to the UK’s “NEST” workplace pension arrangements and provides an alternative to private and company pension arrangements. YIP is a Defined Contribution scheme and pension contributions come from individuals (employees) companies (employers) and the government (in the form of tax relief). The key advantage of a single islandwide scheme is that it provides a large low-cost pension option allowing easy access for employers without having to design their own scheme or select their own provider. A key feature of the Guernsey arrangements, however, is the introduction of “auto enrolment” (this is also used in UK workplace pensions). In the current pension environment businesses are not required to provide any pension to their employees. In practice some private sector employers choose to do so but pension provision is less common, particularly amongst smaller employers. Under the new arrangement employers will be required to automatically enrol most employees into either YIP or a suitable alternative company pension scheme. Any scheme other than YIP must meet the requirements set out to be a “qualifying scheme”. The minimum level of contributions to be paid will be increased over the initial years following implementation resulting in a gradual increase over time as shown in the following table. Contributions for the Applicable Year

Category

Launch year

+1

+2

+3

+4

+5

+6

+7

Employee Employer Total

1% 1% 2%

1.5% 1% 2.5%

2% 2% 4%

3% 2% 5%

4% 3% 7%

5% 3% 8%

6% 3% 9%

6.5% 3.5% 10% 26


SECONDARY PENSIONS (CONTINUED) Contributions are only required to be paid on earnings up to the Social Security Upper Earnings Limit (£153,660pa in 2021). Important features of YIP and qualifying schemes are summarised below. • All employees aged 16 or older (but below State Pension age) and earning in excess of Guernsey’s Social Security Lower Earnings Limit (£7,696pa) will be eligible for auto-enrolment. • Employees may opt-out of the scheme, though they will be automatically enrolled again at a fixed point in time (broadly every three years). • Employees can make their own investment choices and choose how to use the pension fund at retirement (subject to the relevant restrictions in place at that time), but a qualifying scheme must provide a default investment strategy. • The scheme must be approved under an appropriate section of the Income Tax (Guernsey) Law, 1975 and must be regulated by the appropriate financial services regulator (this may impact some existing pension schemes which are not regulated as a result of having unregulated trustees and administrators). Under the current proposal there is no assessment of qualifying schemes in terms of their charges but it is anticipated that further rules could be included at a later stage, which may affect either the level or the structure of member charges. The purpose of the auto enrolment arrangement is to increase the rate of savings without full compulsion on individuals. Experience to date in the UK has shown that the number of employees saving under the new arrangement is considerably higher, with low numbers of individuals choosing to opt-out. Some of the issues for any company currently employing staff in Guernsey include: • Is there an existing scheme and if so will your existing scheme meet the qualifying requirements or could changes be required (this could include contribution levels, eligibility, vesting periods, investment default etc)? • Should you continue to use an existing plan or switch to YIP? • What will the administration requirements be for auto enrolment and deducting contributions from payroll? • What will be the cost to the company of meeting the minimum contribution requirements? Should the Government of Jersey decide to put forward proposals to introduce its own secondary pension scheme in future the issues are likely to be similar. Consideration will also need to be given to equal treatment of Jersey and Guernsey staff, and if using YIP for Guernsey employees whether it will be possible (or desirable) to use YIP for Jersey staff in future. When implemented the changes will impact all employers in Guernsey (including Jersey entities with Guernsey staff) and due to the number of organisations impacted it is advisable for any employer of Guernsey staff to consider taking advice early rather than leaving it until close to the implementation deadline. 27


OPTIONS IN RETIREMENT Peter Culnane, Director & Head of Pensions, Fairway Group provides insight into the added flexibility of Jersey’s pension rules. Rising life expectancy means there is a strong probability that we could be planning for a lengthy retirement and although we don’t have much control over how long we will live for, we can be prepared and make sure our pension pots are structured in a way to make them last. Jersey residents are able to enjoy flexibility in how and when they are able to make the most of their pension benefits. Whilst approved pension arrangements provide the most tax-efficient means of accumulating wealth for retirement, the rules now mean there are three methods of accessing those benefits in retirement. Regardless of which retirement option is chosen, all Jersey residents can enjoy up to 30% of their accumulated pension funds as a tax-free lump sum from the age of 50. This does not have to be taken as one amount, but can be taken in any number of tranches. However, it is worth noting that any pension funds that have originated from the UK cannot be accessed before the age of 55, in accordance with the UK’s pension law.

28


OPTIONS IN RETIREMENT (CONTINUED) The three methods of taking pension benefits or creating income in retirement, are as follows: 1.

Use the proceeds of a pension fund to purchase a traditional annuity from an insurance company. This will provide a guaranteed amount of annual income for the rest of the individual’s life, regardless of how long they live. Subject to any additional guarantees purchased, there will be no residual funds available to next-of-kin, on eventual demise.

2. Use a Retirement Trust Scheme (‘RTS’) to create income, subject to an annual statutory limit in order to protect the erosion of funds in the early years, with all remaining funds in the RTS available to next-of-kin, on eventual demise. The amount of income generated will be dependent upon the scale and performance of the pension funds held in the RTS and if maximum levels of income are drawn down in the early years of retirement, there may not be sufficient funds to maintain income levels in later life. 3. Use an Approved Drawdown Contract (‘ADC’) in a similar manner to an RTS above, but without being subject to the RTS statutory limits on the annual levels of income drawdown. Similar to an RTS, any funds remaining in the ADC on eventual demise will be available to next-of-kin. This is the most flexible option in retirement, but is not available to all Jersey residents and unlike methods 1 and 2 above, individuals have to ‘qualify’ for an ADC. The qualification criteria is based on an assessment of an individual’s income and capital at the time of election. These options are available regardless of an individual’s pension fund accumulation method, whether they save for retirement using any number of occupational pension schemes, any number of personal pension arrangements, or a combination of both. Each option has its own advantages and disadvantages, so professional advice should always be sought. Further details, together with the ADC qualification criteria, are published in the Jersey Pension Scheme Tax Guide which can be found under ‘Individual’s tax information’ at www.gov.je/taxesmoney/incometax

29


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30


GROUP RISK INSURANCE Steve Warner, of Rossborough Financial Services Limited, provides an introduction to group risk insurance for employers. Group risk is an umbrella term for three employer sponsored employee benefits provided under a policy of insurance arranged by the employer on behalf of its employees. • • •

Life insurance Income protection insurance Critical illness insurance

One of the principal benefits of arranging cover on a group basis is that insurers normally set an underwriting limit (referred to as the ‘free cover limit’) and for any employee whose benefit falls below this limit cover will be automatically provided without the need for medical evidence to be provided. Life insurance Group life insurance provides a capital sum in the event of the death of an employee. The benefit is normally paid to the beneficiaries as a lump sum benefit but may be used to provide a dependent’s pension. The amount of cover is usually expressed as a multiple of salary i.e. two times annual salary or four times annual salary but can be expressed as a flat rate per employee if preferred. It is a requirement of insurance providers that Group Life policies are written under trust before cover can commence. Employers can be their own trustees or appoint independent trustees either in a separate trust or as participants in a master trust arrangement to ease the responsibility in distributing benefits in the event of a claim. Income protection insurance Group income protection provides regular income payments in the event that an employee is absent from work for a long period of time due to serious accident or illness. The level of benefit paid is usually between 60% and 80% of the employee’s salary less the state incapacity benefit. Benefit payments commence once the employee has been absent for a minimum period, normally set at 13 or 26 weeks. The policy can also be structured to include payment to cover employer pension contributions and Social Security contributions. Once a claim is admitted, benefits are paid to the employer who passes these on to the employee via payroll, normal payroll deductions such as Social Security and ITIS still apply. In the event of a claim the benefit normally continues until the employee is able to return to work or reaches normal retirement age or dies. Claims in payment will be subject to ongoing medical review. It may be possible for the employer to limit the maximum benefit term in order to manage the cost of this insurance. Claim payments can increase each year either by a fixed percentage or by UK RPI.

31


Rossborough Financial The Pension and Employee Benefit Specialist Contact Email: enquiries@rfsl.co.uk Telephone: (01534) 502000 Website: www.rossboroughfinancial.co.uk

Rossborough Financial Services Limited is regulated by the Jersey Financial Services Commission under the Financial Services (Jersey) Law 1998 and licensed by the Guernsey Financial Services Commission 32


GROUP RISK INSURANCE (CONTINUED) Critical illness insurance Group critical illness cover provides payment of a single lump sum on diagnosis of a serious medical condition listed in the insurance policy wording. The amount of cover is normally expressed as a multiple of salary but due to the cost is usually less than the level of group life insurance cover. A typical sum assured for a critical illness benefit would be between one and two times annual salary. This is not a replacement for long term income protection but can help to ease the financial strain at a time when an employee is coping with a serious illness or has been permanently disabled due to an accident. Due to the nature of critical illness cover for a group policy accepted without medical underwriting of individual employees the insurer will normally exclude any claims arising from pre-existing or related conditions prior to the joining date. Where an employer provides group risk insurance benefits it should be offered on a discretionary basis and staff should be made aware that the benefit is provided through a policy of insurance and that claims and benefits are subject to the insurer’s terms and conditions. Terms and conditions of employment should be worded appropriately to allow for the policy terms and the possibility of exclusions or other underwriting requirements.

33


INFLATION STATISTICS The table below shows the published Jersey Retail Prices Index and the Jersey Earnings Index along with the year on year % increases at each period.

Dec 2012 Mar 2013 Jun 2013 Sep 2013 Dec 2013 Mar 2014 Jun 2014 Sep 2014 Dec 2014 Mar 2015 Jun 2015 Sep 2015 Dec 2015 Mar 2016 Jun 2016 Sep 2016 Dec 2016 Mar 2017 Jun 2017 Sep 2017 Dec 2017 Mar 2018 Jun 2018 Sep 2018 Dec 2018 Mar 2019 Jun 2019 Sep 2019 Dec 2019 Mar 2020 Jun 2020 Sep 2020 Dec 2020

Jersey RPI Index

12 months increase

153.5 155.2 155.6 156.4 156.4 157.9 158.1 159.3 158.5 158.9 159.6 159.5 160.0 161.2 162.0 162.7 163.0 165.9 166.1 167.8 168.8 171.2 173.5 175.0 175.4 177.3 178.4 179.7 179.8 182.1 179.3 181.4 181.4

2 .1 % 1.4% 1.5% 1.2% 1.9% 1.7% 1.6% 1.9% 1.3% 0.6% 0.9% 0.1% 0.9% 1.4% 1.5% 2.0% 1.9% 2.9% 2.5% 3.1% 3.6% 3.2% 4.5% 4.3% 3.9% 3.6% 2.8% 2.7% 2.5% 2.7% 0.5% 0.9% 0.9%

Jersey Earnings Index

12 months increase

277.4

2.2%

284.5

2.6%

289.7

1.8%

295.8

2.1%

303.4

2.6%

314.0

3.5%

322.3

2.6%

325.8

1.1%

34


USEFUL CONTACTS

35

CIPD Jersey Group

www.cipd.co.uk/branch/jersey

Data Protection

www.jerseyoic.org

716530

Health and Safety Inspectorate

www.gov.je/hsi

447300

Income Tax Office

www.gov.je/taxesmoney/incometax

440300

Jersey Advisory and Conciliation Service

www.jacs.org.je

730503

Jersey Chamber of Commerce

www.jerseychamber.com

724536

Jersey Employment Trust

www.jet.co.je

788900

Jersey Legal Information Board

www.jerseylaw.je

441361

Jersey Safety Council

www.jsc.je

Social Security Department

www.gov.je/socialsecurity

445505

Government Employment Relations

www.gov.je/working/ employmentrelations

440400


CONTRIBUTORS BWCI

www.bwcigroup.com

880112

Fairway Group

www.fairwaygroup.com

511700

HR Now

www.hrnow.je

747559

Polymetrix

www.polymetrix.co

750100

Rossborough Financial

www.rossboroughfinancial.co.uk

502000

First Actuary

www.firstactuary.co.uk

888816

36


NOTES

37


NOTES

38


The Pensions specialists For more information contact Mike Freer Tel : 880112 or mike.freer@bwcigroup.com

www.bwcigroup.com

A member of Abelica Global

Profile for First Actuary

First Actuary Brochure 2021  

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