Abolition of the Agricultural Wages Board – Final Piece of the Jigsaw?

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As most employers in the Agricultural sector will know, the Agricultural Wages Board (AWB) which determines the Agricultural Wages Order (AWO) in England and Wales was abolished on 25th June 2013.

Following abolition it was decided that the current AWO 2012 would remain in force until 1st October 2013. This means that from 1st October 2013 employers will be free to engage new agricultural workers on terms and conditions that are no longer bound by the terms of the AWO. However, employers will now need to ensure that new contractual terms comply with other national legislation, for example the Working Time Regulations (WTR) 1998 and the National Minimum Wage (NMW) Act 1998.

Before we consider the implications of this change further, it is important to note the abolition of the AWB, depending on the wording of the contract, may have no impact on the current contractual terms of agricultural workers. Existing contractual terms which incorporate the statutory minimums specified in the AWO are likely still to be binding on the employer and employee unless the parties enter into a new contract which changes the terms.

However, it must be borne in mind that an attempt to force a worker to enter into a new contract may well lead to a situation which would entitle the employee to bring a claim for constructive or unfair dismissal. Following a fair procedure to implement any changes is essential to reduce the risk of expensive claims and we would recommend that employers seek preliminary advice before embarking on this course of action.

We turn now to consider those terms and conditions that were covered by the AWO and are, consequently, affected by the abolition.

If employers are considering making any changes to the contractual terms of existing employees, or introducing those changes in a new contract after 1 October 2013, then they should bear the following areas in mind:

Pay – the AWO specified the hourly rate of pay that should be paid to Agricultural workers. For employees taken on after 1st October 2013 the National Minimum Wage (NMW) applies. Please remember those staff on rates of pay higher than the NMW will usually retain that rate of pay until the NMW "catches up" or a contractual change is agreed and implemented.

Salary – one other change with regard to pay concerns the payment of annual salaries. The AWO only recognised weekly or hourly rates of pay. In future, employers will be able to specify an annual salary for agricultural workers provided that the amount paid equates to an hourly rate equal to or greater than the NMW.

Overtime – overtime rates were set by the AWO for each agricultural grade. There is no longer any statutory provision that requires overtime to be paid at a higher hourly rate than the normal rate being paid. So employers will be able to agree the basis, if any, on which overtime will be paid and at what rate to new workers. This is also true of the Night Work Payment that was specified by the AWO.

Piece Work – a worker who is paid for each task they perform is a piece worker. For example, any worker who is paid for each box of fruit they pick. The payment for piece work for workers employed under the terms of the AWO had to at least equal the specified minimum wage for each of the hours they worked. Following abolition, employers need to calculate and pay a rate for new piece workers that is, at least, equivalent to the NMW for each hour worked.

Sick Pay – Agricultural Sick Pay (ASP) was payable to existing employees after 12 months’ service and was paid at the minimum rate for their grade detailed in the AWO. Going forward employers will only need to pay new workers Statutory Sick Pay (SSP) in accordance with the applicable regulations providing that the worker meets the qualifying criteria.

Holidays – holiday entitlements were clearly set out in the AWO based on the number of days worked each week (e.g. 6 days per week = 35 days per year, including bank holidays.) There were rules on holiday carry over and the buying out of holiday days. For workers taken on after 1st October the current statutory holiday entitlement is 5.6 weeks per year (e.g. 5 days per week = 28 days plus bank holidays.). It should be noted that 28 days is the maximum entitlement. Therefore, an employee who works 6 days per week is still only entitled to 28 days. Also, there is no right to carry over and holiday rights cannot be bought out.

Bank Holidays – under the AWO, a worker who works on a bank holiday was entitled to be paid the overtime rate for that day. After 1st October there is no statutory requirement to pay overtime rate if a new employee works on a bank holiday.

Accommodation – the maximum amount of deduction for accommodation provided to a worker was set out in the AWO and subject to the NMW Regulations. Also, before the deduction could be made the worker had to work a minimum of 15 hours in the particular week that the deduction was being made. From October 2013, the offset rate for accommodation charges is £4.91 per day. If employers charge more than this, the difference is taken off the worker’s pay which counts towards the NMW. This means the higher the accommodation charge, the lower a worker’s pay will be when ensuring the worker is in receipt of the NMW.

Other Entitlements – entitlement to a birth grant, entitlement to paid bereavement leave, a dog allowance and an on-call allowance were all prescribed by the AWO but have no equivalents or basis in any other statutory enactment. Employers are not obliged to offer these benefits when offering new terms and conditions following the abolition of the AWB.

It is clear that the abolition of the AWB may have major implications for the terms on which agricultural workers are employed, whether they were employed under the terms of the AWO or not. Employers will need to decide how they are to deal with these matters but we would encourage employers to seek quality advice before deciding on any major changes.

One final point should be made on the applicability of the changes detailed above. Agricultural workers in Scotland continue to be covered by the Scottish Agricultural Wages Board. In Wales, the current arrangements remain in force pending a ruling by the Supreme Court.