Audrey Williams: The legal perspective on financial wellbeing – care and caution needed by employers

The emphasis on employers addressing wellbeing in the workplace has increased in the last year or two, reflected in the CIPD’s report, Growing the health and wellbeing agenda: from first steps to full potential, for example.

Wellbeing initiatives and the ways in which they can be addressed present both a challenge and opportunities. Employers of all sizes can tailor plans to fit their business, budget and the makeup of the workforce.

The extent to which employers support employees on financial wellbeing including through raising awareness on personal financial management calls for debate; it is an important part of wellness and failings can lead to mental and other health issues.

With the increased focus on saving for pensions, auto-enrolment and most recently the suggestion that employees should be enrolled from the age of 16, this aspect is set to become part of the wellness initiative.

Taking reasonable care

The general principle is that there is an implied term to take reasonable care to inform employees of a valuable benefit (for example the ability to purchase enhanced rights), especially where the term(s) are not negotiated direct with the individual employee and/or where they may not be aware of it.

Some organisations are already hosting pension, retirement or financial advice workshops. This need increases as the range of benefits available to staff increase and with flexible benefits, life, health and private health insurances. The question is where to draw the line on guiding employees to make informed decisions.

The legal risks which need to be considered in this area have not changed significantly, although the expectations on employers have.

The key consideration is to ensure assurances are not given or information provided in a way which amounts to contractual promises (written or verbal). Also the accuracy of information is critical to avoid misrepresenting entitlements or any provision. Finally, although often derided, thought must be given to putting place clear disclaimers.

The Cherry case

The Pension Ombudsman decision last year of Cherry v The Police and Crime Commissioners of South Wales, is interesting. Mr Cherry (who retired in 2011, and was re-employed a month after) complained that he was not informed of the tax implications of being re-employed.

He claimed he was told his re-employment would not affect his pension and then discovered he would in fact have to pay tax on his pension from the age of 50 to 55.

Although the Ombudsman said there was no duty on the Force (or Capita – the scheme administrator) to advise on his personal tax situation, there was a duty to inform him about the tax impact of the re-employment, so he could make an informed decision.

His employer ended up having to pay for the extra tax liability to compensate Mr Cherry for his loss.

Contrast that however with the established legal principle that the employer is not more generally under any duty in respect of ensuring an employee’s economic wellbeing overall, established in Crossley v Faithfull and Gould Holdings Ltd – Court of Appeal.

These decisions emphasise the need for employers to take care and keep clear boundaries around what information or advice can be given as well as ensuring employees are at least informed of what aspects they personally need to consider in order to take an informed decision.

This article is written by Audrey Williams, Of Counsel, Employment, at Simmons & Simmons LLP