· 3 min read · Features

The legalities of preferential benefits


While employers who provide benefits to certain groups of employees may have the best of intentions, there are legal implications to consider

There are some scenarios where offering certain segments of the employee population certain benefits that will particularly help them, seems a good idea. Some employers may want to encourage diversity by generous policies that particularly attract women for example, or benefit those of a certain age who are perhaps more likely to encounter health issues.

But while employers who do this may have the very best intentions, they should consider the potential legal implications of these benefits – particularly when they benefit a specific group of employees.

Service-related benefits

Employers might seek to reward commitment and loyalty by providing service-related benefits. However, there is a risk that benefits which depend on a qualifying period of employment are potentially discriminatory on the grounds of age.

Under section 10 of the Equality Act 2010, a benefit based on length of service up to five years is permitted. For example, offering one additional day's holiday for every year of service up to a maximum of four years. Where a benefit is based on length of service over five years, an employer must justify the benefit by showing that it reasonably appears that the award of the benefit fulfils a business need, such as encouraging loyalty or motivation or rewarding the experience of some of the employer's workers.

Enhanced redundancy pay

Enhanced redundancy pay calculations are often potentially discriminatory on the grounds of age as they frequently depend on age and/or length of service. However, the Equality Act 2010 contains a specific exemption for enhanced redundancy schemes that are similar to the statutory redundancy pay scheme contained in the Employment Rights Act 1996. For example, an employer can remove or raise the cap on a week's pay or increase the amount allowed for each year of employment by multiplying it by a figure of more than one.

Even if the scheme is not exempt, employers could objectively justify it if the scheme is a 'proportionate means of achieving a legitimate aim'. A potentially legitimate aim includes enhancing payments to older workers who may be at a disadvantage in the labour market.

Enhanced maternity pay and enhanced paternity pay

Many employers offer enhanced maternity pay in order to attract and reward high-calibre female employees. However, since the introduction of shared parental leave and shared parental pay, should employers also be offering enhanced shared parental pay and if they don't, will male employees claim sex discrimination?

In Shuter v Ford Motor Company Ltd ET/3203504/13 the Employment Tribunal rejected a male employee's claim that his employer's failure to pay enhanced additional paternity pay amounted to direct and indirect sex discrimination. In considering indirect discrimination, the Employment Tribunal found that the policy of paying women full basic pay when on maternity leave was a proportionate means of achieving the legitimate aim of recruiting and retaining women in a male-dominated workforce, where the employer had detailed statistical evidence of the issue and steps taken to resolve it.

Employers may therefore want to consider whether they can justify paying enhanced maternity pay, but not enhanced paternity/shared parental pay. However, in light of the fact that the take up for shared parental leave is currently so low, it might be best to wait until the system has been in place for a few years before making any decisions.

Health benefits

Many employers offer health benefits, such as private health insurance. But what if an employer decided to offer health checks for employees over or under a certain age, or just for male or female employees?

If an employer had a policy providing for health checks for employees over a certain age, in order to avoid claims of age discrimination, the employer would need to demonstrate that its policy was a proportionate means of achieving a legitimate aim. For example, it could seek to rely on statistical evidence supporting an increased risk of certain medical conditions in individuals over or under a certain age.

Benefits provided just to men or just to women would potentially be more problematic, as it is not possible to justify direct sex discrimination. Therefore, it would be safer for employers to ensure that any health-related benefits are extended to both its male and female employees.

Lucy Leonard-Davies is an associate in the employment team at Blake Morgan