Periodical payment orders: what does the new classification mean for clients?

The reclassification of the Standard Occupational Classification (SOC) in 2020 introduced complexities in calculating the increase in periodical payments, particularly those linked to ASHE 6115.

The Annual Survey of Hours and Earnings (ASHE) is a critical source for determining the rates for care workers, and the shift from SOC 2010 to SOC 2020 has necessitated adjustments in the interpretation of this data. The reclassification combined codes 6135 and 6136 under the new SOC 2020, which correspond to care workers and home carers, and senior care workers, respectively. This change was significant because ASHE 6115 continues to be a pivotal reference for periodical payment orders, which are indexed to reflect the earnings of care workers.

The Office of National Statistics (ONS) has emphasised that the impact of the pandemic and the furlough scheme has made the collection and interpretation of earnings data more challenging. As a result, the ONS advises caution when considering the 2020 and 2021 data and recommends focusing on long-term trends rather than year-on-year changes.

This advice is particularly pertinent given that direct comparisons of provisional and revised data for ASHE 2021 are not straightforward due to the reclassification. For instance, a comparison between the provisional figures under SOC 2010 and the revised figures under SOC 2020 shows a marked difference, which is higher than typically observed and actually indicates a decrease in the 90th, 80th, and 75th percentiles.

This change has knock-on effects that must be carefully considered

Furthermore, the reclassification has implications for the Thompstone model order, which anticipated that the ONS would publish revised data for the prior year for both the previous and new SOC. However, this did not occur during the last reclassification in 2010, leading to an amendment in the model order to accommodate scenarios where the ONS does not publish such revised data. This amendment, known as the RH amended wording, should now be included in all periodical payment orders to prevent difficulties arising from the lack of revised data for the previous year.

Working together can enhance accuracy

In light of these challenges, it is crucial for those involved in calculating periodical payments linked to ASHE 6115 to be aware of the reclassification and its effects on the data. The synergy created by legal professionals working with financial experts – in what we call “the circle of trust” - can ensure accurate recalculations, taking into account the reclassification and the advisories from the ONS.

Keep up-to-date

It is also essential to stay informed about any judicial decisions or amendments that may clarify the calculation methods to be used in light of the reclassification.

The declaration made by Mrs Justice Lambert DBE in the Part 8 Claim brought by the National Health Services Litigation Authority regarding the second reclassification of ASHE 6115 is a perfect example of this. It had been discovered that the model order's wording led to the use of the gross hourly wage rate at the time of settlement, rather than the rate following the first reclassification in 2010, which was not the drafters' intention.

To rectify this, Mrs Justice Lambert DBE declared that the model order should include the phrase “and A will be the numerical value of AR calculated when reclassification last occurred,” ensuring that the correct rate is used for future calculations.

In summary, professionals must navigate these complexities with a thorough understanding of the changes and their implications on periodical payment orders.