Permitted Payments and Benefits to employees, board
members and their close relatives.
On the 2 November 2010
the Welsh Assembly Government ("WAG") published new guidance on
Paragraph 2, Schedule 1 of the Housing Act 1996 ("the Act"). This
determination provides further regulatory provisions for Housing
Associations ("HAs") on what permitted payments and benefits they
can make to their staff, officers and their close relatives.
Paragraph 2, Schedule 1
of the Act is well known to HAs. The main theme of this legislation
prohibits any payment to employees or board members other than
those made under their contracts of employment. However, there are
exemptions to the prohibition.
Initial guidance was
published in 1996. It provided HAs with 7 exemptions that they
could apply to certain situations where they wanted to provide a
benefit or payment to an employee, officer or one of their close
relatives. These 7 exemptions are well known, they range from
providing housing to employees through to employing relatives of
employees.
Under the latest guidance
to be published in, the amount exemptions have doubled from 7 to
14. The new exemptions are as follows:
- Payments to organisation in the management of which the
registered social landlord's employees or officers are directly
concerned
- Permitted payments and benefits of a general nature (up to a
maximum of £500)
- Payments and benefits to departing employees outside their
contract of employment
- Payments in full and final settlement of employment related
disputes
- Provision of indemnity
- Provision of services to employees and officers and their
relatives
- Payments and benefits to shareholder members
These new exemptions
demonstrate the spirit of WAG's developing approach towards
corporate governance and commercial reality in the Welsh social
housing sector. For instance, the introduction of an exemption to
allow HAs to make payments to organisations that the HA's employees
or board members have an involvement in the management of is an
example of this development.
Following WAG's
consultation on payments and benefits to departing employees, HAs
are now permitted by the exemptions to make payments and benefits
to departing employees up to a maximum of that employees gross
yearly remuneration.
WAG has also set down a
new exemption dealing with payments made in relation to employment
disputes. Provided that, the HA seeks legal advice in relation to
the dispute, and the payment to settle the dispute does not exceed
£50,000, it will be exempt.
HAs are now able to
provide indemnity cover for any expenses incurred by relevant
officers against civil and criminal proceedings. This exemption
allows HAs assist their officers financially, while litigation or
other proceedings are going on, and allows HAs to indemnify their
directors against certain liabilities to third parties even if the
officer(s) are at fault.
WAG has also expressed
their view for HAs as being a component of the community mutual
organisation landscape within Wales. This has opened the door for
HAs to develop new services and increase their remit in this
important area of work. In meeting this objective two new
exemptions have been introduced. Firstly, HAs can now provide new
services for staff or board members, for example, older persons
support, adaption to property or renewable energy developments. The
second exemption applies to community mutual HAs that have
shareholding members. Under this exemption, the HAs who encourage
their tenants to participate in a shareholding membership scheme
are able to make payments to the shareholding member.
WAG makes the proviso
that the guidance is there to provide general conditions to ensure
compliance with the legislation. They stress, however, if HAs wish
to utilise these exemptions, then they must be approved in
accordance within the HA's specific constitution. If HAs don't
believe that any exemptions apply to their situation, then they
must revert to following the Act. It should be noted that
Contravention of the Act can lead to the HA being ordered by WAG to
recover any payment/benefit that does not comply with it. If the HA
is unsure of a proposed transaction is captured by the exemptions
or not it would be well worth seeking legal advice.
Administrative guidance
In order for HAs to take full advantage of
these exemptions, they will need to ensure that they keep a
register of all the cases/transactions that fall within the
exemptions. The details for these exemption registers should
include, the names of the persons concerned, the connections of
those persons to the landlord, the address of the property, the job
titles of those concerned along with the date and minute number of
the meeting at which the decision to apply the exemption was
made.
As well as keeping a
register, HAs must also provide an annual statement to the Senior
Regulation Manager of the Housing Regulation Unit. This annual
statement should be delivered no later than 2 months following the
end of the financial year. If no exemptions are made during the
period, an annual statement will still have to be filed, outlining
that no exemptions were made.
Step-change in
England
The enactment of the
Housing & Regeneration Act 2008 repealed Paragraph 2 Schedule 1
of the Housing Act 1996 in England (but not Wales). There are now
no provisions/prohibitions to awarding payments or benefits to
employees and board members. The 2008 Act has effectively
de-regulated the framework for HAs in England. The Tenancy Services
Authority has now taken overarching regulatory control in this
area. The TSA was setup under the 2008, however the Housing
Minister Grant Shapps declared on the 22 November 2010 that the TSA
will be scrapped and has outlined that a new Localism Bill will be
introduced during this parliament, which will radically reform
Housing in England yet again. At the time of writing, the TSA are
still in place and they set the framework in which HAs go about
their business in England. This De-regulatory approach has
now put the onus on HAs to decide on what good corporate governance
is, and the decision to make benefits and payments is now solely
down to the HA.
How can Hugh James help?
Hugh James can help and advise you on how best
to take full advantage of these exemptions. We are able to provide
the following bespoke services to ensure full compliance:
- Provide further advice on the specifics of the guidance and
legislation to your organisation
- Employment health check to ensure all employment contracts and
service agreements are up to date and able to take full advantage
of the exemptions
- Corporate governance advice on how best to apply these
exemptions
- Assistance with property transactions under the guidance
- Advice on termination
- Compromise Agreements
- In-house HR Training