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20 May 09 - At Whose Expense?

Benjamin Franklin once said “Beware of the little expenses; a small leak will sink a great ship”. In light of the revelations on MPs’ expenses in recent days and weeks, no doubt the leaders of the big three political parties are wishing that they had taken rather a tighter reign on their MPs.

Following the public outcry and resignation of Michael Martin as Speaker of the House of Commons, a change in the way that MPs’ expenses are handled is now a certainty.

During these thrifty financial times, although no doubt not as generous as the scheme for MPs, many businesses will be considering adjusting their own employee expenses policies (among others) to shave any unnecessary additional expenditure where at all possible.

If you are looking to do this, the first thing to remember is that an employer and employee have a contractual relationship. The process and amount claimable for expenses is potentially a term of that contract. For some, these terms will be expressly agreed as part of their written statement of terms and conditions of employment, for others the terms may be implied into the contract.

Generally, an employer can only change contractual terms, whether express or implied, with consent, or in accordance with the terms of the contract.

If adjusting such a term without express agreement and without contractual authority to do so therefore, this could potentially give rise to costly claims for breach of contract or in some circumstances constructive dismissal. Moreover, even if no such formal claims materialise, then adopting an overly harsh and insensitive approach will at best upset and de-motivate employees.

If you are considering any such changes, whether in respect of expenses or any other term of the contractual employment relationship, it pays to take a measured and reasonable approach. Employers would be wise to bear in mind the following:

• Don’t forget that when proposing such changes, you’re ultimately seeking the informed agreement of your employees. Realistically therefore, the process is tantamount to a selling exercise. It would be wise therefore to try and think of imaginative ways to get employees to accept the changes perhaps by offering a one off incentive.
• Explain to employees why the change is necessary for the business. For example whether the changes are being introduced to save cost and avoid potential redundancies.
• If possible implement the changes gradually. Some employees will react negatively to sudden change and are more likely to co-operate where transitional provisions are put in place.
• Get the timing right. Try to introduce the changes at a time where morale is high or perhaps present the changes linking them into such things as pay reviews.
• Follow good practice procedures by openly and genuinely consulting on the changes.

Whilst accordance with these guidelines will not necessarily guarantee immunity from and claims being brought, it should at the very least minimise as far as possible any upset and ill-will from the perspective of the employees and make the employer’s life that little bit easier.

For more information contact James Collings, Associate at Foot Anstey on james.collings@footanstey.com or 01872 243307