25 February 2020

Plans for new discrimination legislation and secondary pension scheme to present challenges to Guernsey businesses

Guernsey employers need to ensure they are ready to face the challenges presented by proposals for new multi-ground anti-discrimination legislation and the introduction of an island-wide secondary pension scheme – both of which, according to employment law specialists at Carey Olsen, represent some of the biggest reforms to the local employment sector for many years.

Speaking at the firm's first Guernsey employment seminar of the year, Carey Olsen associate Lois Madden took an audience of more than 60 representatives from the island's business community through some of the areas in which discrimination law might have a significant impact on their recruitment processes. Lois referenced the current legal regime under which Guernsey employers already need to be mindful of their obligations in respect of potential sex discrimination so as to ensure that, for example, job adverts do not indicate an intention that an employer would prefer a male or female candidate.

Lois explained that Guernsey's anti-discrimination law regime is on the cusp of a fundamental change, as the Employment and Social Security Committee (ESS) is due to present its policy paper on the proposed expansion of the discrimination law to the States of Guernsey at the beginning of March. 

The final details of what the policy paper will cover have not yet been made public. However, from previous announcements it is likely to add more 'protected characteristics' to Guernsey's law, including disability – the exact definition of which has been the subject of varied opinions during the ESS consultation process. This policy paper will then be debated by the States, with draft legislation likely to come in 2021. 

"Many larger Guernsey employers may have policies and procedures which can be adapted to ensure compliance with the new law but, especially if the ESS chooses to depart from established models from Jersey or the UK, getting compliant will require considerable employers to invest a significant amount of time, resources and attention in advance of its implementation," said Lois.

"It is envisaged that the States may adopt a staggered approach, as has been done in Jersey. This would mean bringing in, for example, protections for disability initially, followed by other characteristics such as race and sexual orientation. Adopting a staggered timetable will be of great assistance to the island's business community and Carey Olsen will continue to keep its clients informed of the next steps in this process."

In relation to the introduction of a secondary pension scheme, Carey Olsen associate Steven Balmer said that the introduction of the secondary pension proposals and Your Island Pension (YIP) scheme from the beginning of 2022 was required to help the island deal with an ageing population and the unsustainability of the States of Guernsey pension in its current form.

The proposals will eventually require all employers in Guernsey to make workplace pension arrangements for their staff. If an employer already offers a scheme of their own they can continue to do so as long as it meets qualifying criteria under the proposed legislation. For those employers who do not have a pension scheme in place, the States facilitated YIP scheme, administered by Smart Pension Ltd, will be available for employers to automatically enroll any eligible employee.

Importantly, Steven said, the magnitude of the proposals and the responsibilities soon to be placed upon employers, particularly smaller businesses, were not being ignored by the States.

"The projected impact of the new scheme is greatest on the smallest employers, particularly those without a recognised human resources or finance department to deal with it, but the States are acutely aware of this and have planned for a phased approach of implementation, starting with businesses of 26 or more employees in January 2022. This allows smaller businesses more time to adjust and a chance to observe how it will work in practice before they need to follow suit in 2023."

Steven explained that the majority of businesses in Guernsey were 'micro employers' (69%), meaning that they employ up to just five employees. In addition, it understood that only 7% of all employers in Guernsey have their own occupational pension scheme in place at present.

In year one of YIP, employers and their employees – unless individuals choose to opt out – will each make contributions of 1% of annual salary. This will increase incrementally over a seven year period by which time minimum contributions will be 3.5% for employers and 6.5% for employees. Given the auto-enrolment obligation on employers, the only real impact on employees is the requirement to opt out if they do not wish to be enrolled. However, there will be an obligation on the employer to re-enroll the employee every three years.

"Without question, the proposals represent some of the biggest changes to be faced by local businesses in recent times but there is no need for employers to panic or be overly concerned. They are common sense, necessary and bring Guernsey into line with the UK. With the long lead in time there should be ample opportunity for businesses to plan and budget for these changes so as to mitigate the financial impact in complying with the new law" said Steven.

"We expect the States will also be issuing further detailed guidance between now and the start date in 2022. The ultimate aim is that a combination of YIP and workplace pension schemes will facilitate the desired outcome that retirees will experience a greater increase in their retirement income and lessen the burden on the taxpayer, while at the same time reduce the number claiming means-tested welfare benefits in later life."

Lois and Steven were two of four speakers at the seminar alongside Carey Olsen partner Elaine Gray and counsel Natasha Newell, with pensions expert Julie Currie joining the speakers to answer Q&As. The event, which was looking at the beginning of the lifecycle of the employment relationship, also covered topics including contract arrangements, population management and the work permit process. It was the first in a series of employment seminars to be held by Carey Olsen in 2020.