Payday date change implications

danlightbulb

Hi all,

So my employer is looking to change the date of payday. Currently we get paid mid-month, 2 weeks in arrears and 2 weeks in advance. It has been this way for decades.

They are proposing to move everyone to an end of month payday.

They have announced this now with around a 3 month notice period.

The change will happen between paydays so we will be paid mid-month as normal, and then the next payday will be six weeks later, at the end of the next month.

Now on the face of it, most people would initially think the impact is small. Over the year, you still get paid the same amount as before. The company have advised changing direct debits dates etc.

But what is missed is the time value of money. That extra two weeks delay in pay means that many bills will come out twice in the period between paydays. If each month you get paid, pay your bills and end up close to zero in your bank account, this extra time lag to the next payday will mean some bills will come out again and put you into the red. Even if you can push back the dates of the direct debits by two weeks to compensate, essentially this builds up debt which has a financial impact. A mortgage is a good direct example of this because they will let you delay payment by two weeks, but of course charge you extra two weeks interest for the privilege - a time value of money impact.

My company have offered a two week advance, to bridge this gap, which then gets clawed back over the following three months. However whilst this fixes the issue for month 1, what it also does is reduces your salary for the next three months, which again creates a shortfall and puts you into the red. Essentially it just delays the time value of money impact. You can never get rid of the time value of money impact because that two weeks pay lag is built in in-perpetuity.

It seems to me that an actual compensation value is required rather than just an offer of an advance, to compensate for the timing impact of changing the pay date on cashflow.

Does anyone have any knowledge on the legal implications of this? Company is consulting on it now and I have fed back my views but I would like to back it up with any precedent data if I can.

Peter999_2

A change to your pay date is a change to the terms in your contract of employment. Therefore, consultation is required with employee representatives (i.e a union) or with all the employees directly about the change and how it will be introduced, considering any hardships to employees. The change will have to be agreed, if it is made without agreement, this is a breach of contract.

Where there is a breach of contract, employees may resign and claim constructive dismissal ( if you have the qualifying period of employment).

If after consultation some employees still disagree, your employer may terminate their current contract and offer them re-employment on a new contract with the new date of pay. If your employer does this and you accept the contract, you may still have a claim for unfair dismissal. Of course, you need the qualifying period of employment to make a claim.

I found the above from here - Change of wage payment dates | UK Business Forums

Have you no savings at all?    What if you lost your job, what would you do then?   Maybe now is the time to start putting money away for a rainy day such as this.

LinLui

Where there is a breach of contract, employees may resign and claim constructive dismissal ( if you have the qualifying period of employment).

But just to be clear, you would be foolish to even think about this because I'd be 99.9%* sure that you would lose! I would be very dubious that the copied and pasted advice above was remotely blanaced. Constructive dismissal is, at best, almost impossible to win. In the scenario you are describing the employer is providing a transition arrangement (you may not like it, but they are doing so) and I can promise you that none of your colleagues would be daft enough to chuck over a job for a dubious legal challenge that will probably takes months and then you lose. If all your colleagues take the agreement, then that will count against you in any such claim you make. 

If after consultation some employees still disagree, your employer may terminate their current contract and offer them re-employment on a new contract with the new date of pay. If your employer does this and you accept the contract, you may still have a claim for unfair dismissal. Of course, you need the qualifying period of employment to make a claim.

Ditto, except that this time you would be painting a target on your back for the employer (and possibly some of your colleagues , because they are also in the boat you are rocking) - legal action against your employer whilst still employed by them??? You have to have seriously thick skin (and savings, for when they find a perfectly legal reason to dispose of you).

You could ask your employer for additional  compensation, but I wouldn't hold my breath on them agreeing. But no harm done in asking.


*Actually, I am 100% sure you would lose, but there is a vague 0.1% chance that you could get an insane tribunal judge with no knowledge of the law.

danlightbulb

Thanks for the replies.

The point Im making is that there is a financial hit to the employee as a result of this.

Take the point about savings. If a person is left short as a result of the pay date change, and has to pull £1000 out of savings, then that is lost interest on that amount of savings, forever. The employee has had to take a personal financial hit as a result of the terms and conditions change. It is equivalent to changing pay directly, or amending holiday entitlement or any number of other benefits.

So the point is not whether someone can or can't cover the shortfall from savings, it is that the change results in a direct financial impact.

To my knowledge the union has been involved, but this impact has not been communicated in any way. I wonder if it has been missed.

EnPointe

danlightbulb said:

Thanks for the replies.

The point Im making is that there is a financial hit to the employee as a result of this.

Take the point about savings. If a person is left short as a result of the pay date change, and has to pull £1000 out of savings, then that is lost interest on that amount of savings, forever. The employee has had to take a personal financial hit as a result of the terms and conditions change. It is equivalent to changing pay directly, or amending holiday entitlement or any number of other benefits.

So the point is not whether someone can or can't cover the shortfall from savings, it is that the change results in a direct financial impact.

To my knowledge the union has been involved, but this impact has not been communicated in any way. I wonder if it has been missed.

you are frankly, a fantasist... 

 the employer has  given notice
the employer is proposing  to offer an Advance of pay  to  be repaid over a period of  several months 

this  is entirely normal  when  pay dates are changed / move to monthly  from weekly, move to Monthly from Lunar  (4 weekly) 

 what is the actual loss  , in law, to be compensated for ?  what is the actual financial impact ? 

sounds like  you wnat something for nothing 

as others have pointed out, if you  refuse , refuse and refuse again you  will be forred fire and re-hire , hopefully on the same terms of  a trip to dept P45 to explore your options there 

Sarahspangles

danlightbulb said:

So the point is not whether someone can or can't cover the shortfall from savings, it is that the change results in a direct financial impact.

In return, there’s a direct financial benefit for the employer, as they keep the payroll money in their account for longer.  Presumably that’s why they’re doing it, it improves cash flow?

You’d take the same hit if you moved jobs to an employer that pays in arrears. Which I think is the more common arrangement. I can’t see any point fighting the change.

Hoenir

danlightbulb said:

But what is missed is the time value of money. 

From the employers perspective they are having to fund the payroll 2 weeks in advance. With the rise in interest rates this may well now incurring considerable extra expense. As in all likelihood they are drawing on an overdraft to meet the cost of the payroll.  May well be other factors behind their decision all related to the cashflow position of the company. They've offered an arrangement to help employees bridge the transition. In cases of real hardship they'd probably assist further. While employees make the neccessary individual adjustments. 

danlightbulb

EnPointe said:

danlightbulb said:

Thanks for the replies.

The point Im making is that there is a financial hit to the employee as a result of this.

Take the point about savings. If a person is left short as a result of the pay date change, and has to pull £1000 out of savings, then that is lost interest on that amount of savings, forever. The employee has had to take a personal financial hit as a result of the terms and conditions change. It is equivalent to changing pay directly, or amending holiday entitlement or any number of other benefits.

So the point is not whether someone can or can't cover the shortfall from savings, it is that the change results in a direct financial impact.

To my knowledge the union has been involved, but this impact has not been communicated in any way. I wonder if it has been missed.

you are frankly, a fantasist... 

 the employer has  given notice
the employer is proposing  to offer an Advance of pay  to  be repaid over a period of  several months 

this  is entirely normal  when  pay dates are changed / move to monthly  from weekly, move to Monthly from Lunar  (4 weekly) 

 what is the actual loss  , in law, to be compensated for ?  what is the actual financial impact ? 

sounds like  you wnat something for nothing 

as others have pointed out, if you  refuse , refuse and refuse again you  will be forred fire and re-hire , hopefully on the same terms of  a trip to dept P45 to explore your options there 

Hi, can I ask do you understand the point I am making? You ask what the direct financial impact is, there is a direct financial impact.

The delay in pay by two weeks means the employee has to fund that two weeks pay gap from somewhere else. Either savings or debt. That incurs a cost. If you use savings, you are forgoing interest to cover that two week gap in pay. If you use debt, obviously you will be paying interest ultimately.

So the loss is the impact of that delay in pay, creating a short term cashflow issue which costs the employee. Changing the pay date sounds neutral, sounds fairly minor, but it is not.

Even though the salary you have received over the year is the same, the delay in timing of cash means that you would be out of pocket, considerably. A two week delay means that you'll be out of pocket by 2/52nd or 1/26th of your annual salary. And you will never get this back. For it to be neutral you would also have to be able to delay your expenses, which mostly cannot be done, or at least not for free (delaying paying mortgage for example, would come at increased interest cost. And you can't delay paying for food or fuel, so that comes from where?).

Even with the offer of an advance, this does not resolve the issue. The advance gives you a bit more money up front so you can pay the bills due for the delayed pay date, but it then claws back this amount over the next 3 months, leaving you short for the next 3 months. You end up in the same position, in the red by the same amount, but its just delayed later.

So i certainly don't want something for nothing, if the impact was neutral I wouldn't care, but the impact isn't neutral. 

danlightbulb

Hoenir said:

danlightbulb said:

But what is missed is the time value of money. 

From the employers perspective they are having to fund the payroll 2 weeks in advance. With the rise in interest rates this may well now incurring considerable extra expense. As in all likelihood they are drawing on an overdraft to meet the cost of the payroll.  May well be other factors behind their decision all related to the cashflow position of the company. They've offered an arrangement to help employees bridge the transition. In cases of real hardship they'd probably assist further. While employees make the neccessary individual adjustments. 

Yes I agree, this pay date has been in place for decades at this company. The company will have a cashflow benefit from this change (hence, there also has to be a cashflow disbenefit for the employee - if the company benefits someone else must disbenefit).

But if that is then a 'benefit' enshrined in t&c's, surely a compensatory negotiation must take place if the company wants to remove it?

Sarahspangles

danlightbulb said:

Yes I agree, this pay date has been in place for decades at this company. The company will have a cashflow benefit from this change (hence, there also has to be a cashflow disbenefit for the employee - if the company benefits someone else must disbenefit).

But if that is then a 'benefit' enshrined in t&c's, surely a compensatory negotiation must take place if the company wants to remove it?

You’re definitely losing out. But unless they reverse the decision, any compensation is just deferring the point at which you take the hit.

EnPointe

Sarahspangles said:

danlightbulb said:

Yes I agree, this pay date has been in place for decades at this company. The company will have a cashflow benefit from this change (hence, there also has to be a cashflow disbenefit for the employee - if the company benefits someone else must disbenefit).

But if that is then a 'benefit' enshrined in t&c's, surely a compensatory negotiation must take place if the company wants to remove it?

You’re definitely losing out. But unless they reverse the decision, any compensation is just deferring the point at which you take the hit.

they are not losing out 

the actions the employer is taking are standard when  there is a change of  pay date  or  when an organisation moves from Lunar to Calendar monthly pay