Employers are increasingly aware of the ongoing cost of living pressures facing employees and the impact these can have on wellbeing, morale and retention. In periods of economic uncertainty, many organisations look for practical ways to provide additional support to their workforce, whether through enhanced benefits, one-off payments or temporary financial assistance.

While such initiatives are often well received, employers should take care to ensure that any additional payments are structured and communicated appropriately. Temporary support payments can be an effective way to assist employees, but there are several important considerations to keep in mind before offering payments over and above normal remuneration.

First and foremost, when communicating this benefit to employees, it is important to make clear that the payments are temporary in nature and do not form part of employees’ contractual remuneration. You should write to employees and expressly inform them that the proposed payments:

• Are a form of temporary support, are non-contractual and are at the discretion of the company;
• Will be payable on specified dates only;
• Will be paid as part of employees’ normal salary, via payroll and subject to normal deductions; and
• Will cease automatically after the final payment on a specific date.

You might also explain that “normal deductions” mean the usual payroll deductions, including income tax and National Insurance, and (where relevant) any pension contributions or salary sacrifice arrangements already in place. You should also encourage employees to consider their personal circumstances and seek independent advice where appropriate, as the payment may have tax implications and could affect entitlement to means-tested benefits, including Universal Credit.

A lack of clarity can lead to employees assuming they are entitled to these payments through “custom and practice,” which could lead to complaints when the payments cease. Without clear communication, employees may view the cessation of the payments as a reduction in pay rather than the ending of a temporary support measure. In a worst-case scenario, this could lead to complaints or claims for unlawful deduction from wages.

You should apply this incentive consistently and fairly across the workforce. For example, providing a higher payment to senior management than to a part‑time employee could give rise to complaints of less favourable treatment, on the grounds of part‑time worker status.

There may be circumstances where you do not wish to make payments to particular employees, for example where they are under notice to terminate their employment. If you do decide to exclude certain employees, you will need to ensure there is a clear and objective justification for doing so. You should also consider setting out clear eligibility criteria, applying them consistently and communicating transparently to employees.

To ensure you are well prepared, it is sensible to anticipate questions from employees in advance. You may wish to reduce the volume of follow‑up queries by including a brief FAQ section in your communication, addressing points you expect to arise, such as how the payment will appear on payslips, the anticipated statutory deductions, and who employees should contact if they have any questions.

Careful planning and clear communication are essential to ensure that a well-intentioned initiative does not create unintended contractual or legal consequences. By clearly defining the temporary nature of the payments, applying eligibility criteria consistently and ensuring employees understand how the payments will operate in practice, employers can provide meaningful support while minimising the risk of future disputes or claims.

 

For legal guidance and advice regarding Employment Law queries, please contact Emma Doherty or a member of our Employment Team for more information.

While great care has been taken in the preparation of the content of this article, it does not purport to be a comprehensive statement of the relevant law and full professional advice should be taken before any action is taken in reliance on any item covered.