Expert guidance on farm pay negotiations as AWB ends

Abolition of the Agricultural Wages Board (AWB) in England on Monday this week (30 September) changed the picture on farm pay. Strutt and Parker’s George Chichester highlights key issues for farm employers and employees on pay and conditions.

Negotiating pay and conditions

This will be a new area for most farm employers and their staff. The first step will be to check what the current contract of employment states on how changes to pay and conditions are to be handled.

For the bulk of those who have relied upon AWB rates in the past, review dates will generally be 1 October but some older contracts may provide for a 1 May review.

Staff taken on before 1 October 2013 will continue their employment under the same terms as the 2012 Agricultural Wages Order unless both parties agree to amend the terms by mutual consent.

Any changes to their terms must be approached in a fair and reasonable way – employers who seek to unilaterally amend terms of employment for existing employees after AWB abolition will be at risk of claims for breach of contract, discrimination, unfair dismissal and constructive dismissal.

Employers can however pay a financial incentive to staff in return for their consent to a removal of employment benefits, but consideration must be given as to the likely effect of the request on the workforce.

Reviewing pay

Times are tough – 2012 and 2013 have both been very challenging years and there is not a lot spare. However, good employers want to be fair and to motivate their employees so many are contemplating an increase of between 1% and 2% on 2012 AWB rates.

This is against a background of a zero increase for many private sector firms, 1% for state sector employees, a 1.9% increase in NMW rates from 1 October, consumer price inflation (CPI) of 2.7% and retail price inflation (RPI) of 3.2%.

Employers will need to ensure that employees are treated fairly when it comes to wage reviews. All staff should receive the same percentage increase unless there is a good and justifiable reason for applying different rates. If there is not, then those employers introducing varying rates of increase will be at risk of a claim for discrimination.

However, it will not only be a question of arriving at appropriate levels of pay under the new regime but also of how to manage any differences in pay and benefits between workers employed before and after 1 October 2013.

New employee conditions

When employing new staff from 1 October 2013, unless another agreement is made between employer and employee, their minimum wages will be determined by the National Minimum Wage (NMW), which rose to £6.31/hour on 1 October 2013 for those over 21 years old.

Overtime pay, sick pay and annual leave (see table 1) were much more generous under the AWB than those offered by NMW.

Some employers may decide to continue to offer the previous AWB terms to new employees in order to avoid creating a two-tier system in what will usually be a small team.

Others will seek to put new staff on less favourable terms but this will need managing in order to avoid a divided or disgruntled workforce.

Most AWB rates were considerably higher than the NMW, with AWB increases linked to NMW rises by standard ratios (table 2).

Percentage increases in AWB rates have also historically tended to be higher than the percentage increase in NMW, with the exception of Grade 1 workers which has tended to track the NMW rate.

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