Employment law update

  • Posted

In 2020 we see new legalisation pushing “fairness”. This includes extending existing employment law rights such as holiday pay, information and consultation rights for employees. There are increased liabilities for employers who do not comply.

We have summarised the key changes likely to impact on private companies.

We look at:

Employers required to provide more details to staff about their packages

Most employers will be aware of the basic information they need to provide to new employees. Often there was a leisurely approach as there was a two month time limit for providing the statement of terms and conditions. Furthermore, information could be provided in different documents.

Changes affecting all employers

From April 2020 new law will definitely create more work for employers who will need to think more carefully about the statement of employment terms issued for new joiners.  There is a risk that an unwitting employer creates unintended contractual benefits by not drafting the position as intended.

New requirements for all employers

The edited list of highlights emerging from the new law includes:

  • Workers now need a statement of terms and conditions. Previously it was only needed for employees. Sounds simple but in practice determining who is a worker and who is an employee is not easy.
  • The two month time limit has gone. The requirement to provide a statement is from day one with no exception for how long the job will last.
  • Employers need to include all employment details in one document.

The new requirements for the statement of terms for employment cover:

  • The days of the week the worker is required to work and whether working hours or days may be variable, with details of how they may vary.
  • Any entitlement to paid leave, including maternity leave and paternity leave.
  • Any other remuneration or benefits provided by the employer.
  • Any probationary period, including any conditions and its duration.
  • Any training provided by the employer which the employee or worker is required to complete. If the employee or worker is expected to pay for any training details must be provided.

Terms which may not have been set out in the statement of terms but which must now be included cover:

  • Details relating to absence due to incapacity and sick pay.
  • Terms as to length of temporary or fixed-term work.

Reference periods for holiday pay are extended from 12 weeks to 52 weeks, or the number of complete weeks for which the worker has been employed.

Leavers

Existing employees do not benefit from the new rights.  However, leavers can request a statement of their terms at any time up to three months after the end of their employment. Employers have respond within one month after the request.

Existing employees

Any change which was not provided in the original statement of terms relating to the employment have to be notified to an existing employee. If the change impacts on all employees then all employees must be notified.

Tax and IR35

On 6 April 2021 the IR35 reforms will be implemented for the private sector, shifting the responsibility away from Personal Service Companies (PSC) to end users in an attempt to create more widespread compliance. This is a major change that will impact on many contractors and larger businesses.

The rules bite on “end users”.  If say you are a larger company (see below on what this means) you are an “end user”.  As an end user if you contract with Mr Software Development (a one man band or personal services company for what is essentially a one man band that reports to you) as end user you will be responsible for payment of  the PAYE and NI even if you paid gross of tax on presentation of the VAT invoice.

Applicability of IR35 for larger companies

The IR35 rules will apply to “larger companies” which can include private sector companies if they meet 2 or more of the following conditions:

  • You have an annual turnover of more than £10.2 million
  • You have a balance sheet total of more than £5.1 million
  • You have more than 50 employees

Implications of IR35

If the end user is a “larger company” the end user client will be responsible for determining employment status and deducting tax and national insurance under PAYE where appropriate from those deemed to be employees under the legislation.  End users will face employer’s national insurance costs previously avoided with contractors.

Termination payments

From 6 April 2020, all termination payments above the £30,000 threshold will be subject to Class 1A employer NICs. This will mean a liability at 13.8% on the balance above £30,000. This charge is only levied on the employer and not the employee. Therefore, this change will only increase the cost of settlement payments for employers.

Agencies

Temporary work agencies must provide agency work-seekers with a key information document. This document must include information on the type of contract, minimum expected rate of pay, how they will be paid and by whom.

Previously, employment businesses could avoid pay parity between agency workers and direct employees if certain conditions were met. This was known as the Swedish Derogation rule. This rule will be abolished on 6 April 2020.

What does this mean? All agency workers will be entitled to pay parity. Pay parity means that if an agency worker undertakes the same role with the same employer for a 12 week period, agency workers will be entitled to the same pay, working and employment conditions as direct recruits.

By 30 April 2020, Temporary Work Agencies will be required to inform workers, whose contracts contain a Swedish Derogation provision, that the rule no longer applies. Failure to do so, could allow Agency workers to bring a claim in the Employment Tribunal.

Information and Consultation

The threshold to request an information and consultation agreement under Information and Consultation of Employees (ICE) regulations is set to be lowered. The ICE regulations apply to businesses with 50 or more employees. ICE regulations give employees the right to request information about issues such as the business’s economic situation, employment prospects substantial changes in the organisation.  This is the reason behind the change it is thought that high levels of employee engagement improve organisational performance and productivity, and leads to more fulfilling work.

Smaller employers are not required to comply with ICE

At the moment most SMEs will fall within the exemption to the ICE regulations meaning they do not currently have to comply with ICE.  But, the position could change.

Tighter rules

If you are a larger employer to whom ICE does apply – currently, to request a formal agreement that sets out the process for consultation, the request must be made by at least 15 employees or 10% of employees, whichever number is greater.  As of April 6 2020, the threshold required for a request to set up information and consultation arrangements will reduce from 10% to 2% of employees (subject to the existing minimum of 15 employees).

#TimesUp

Sexual Harassment Code

Consultations on issues such as the misuse of confidentiality clauses or NDAs to settle harassment or discrimination complaints and workplace sexual harassment have taken place in 2019.

New guidance is expected to be produced to clarify the law and good practice. Where appropriate the government will legislate to curb the use of NDA provisions in employment contracts and settlement agreements.

Proposals such as introducing a mandatory duty to prevent harassment in the workplace have been put forward. Also being mooting is to extend the three-month time limit for bringing work place discrimination and harassment claims to six months. The extension to the time limit would be to allow more time for discussion and settlement of claims presumably.  We will keep you updated.

Given the changing climate and publicity generated by cases such as Harvey Weinstein employers of all sizes are well advised to review their practices and procedures and “clean up their act” as appropriate.

Parental bereavement and leave pay

Paid parental bereavement leave will be introduced on 6 April 2020. Previously, there was no legal obligation for employers to provide bereavement pay or time off for grieving parents.

Small employers will be able to recover all statutory parental bereavement pay. Adhering to GDPR is essential, even for smaller businesses. Customers, Business partners and investors will still expect a small business to demonstrate their compliance.

In the event of an employee taking bereavement leave, employers should be cautious as to what details colleagues are given and ensure the wishes of the employee are stringently followed.

National Minimum Wage regulations and Holiday pay calculations

From April 2020, the new national minimum wage for workers will be as follows;

  • £8.72 for workers aged 25 and above
  • £8.20 for 21-24 year olds
  • £6.45 for 18-20 year olds
  • £4.55 for under 18s
  • £4.15 for apprentices

Holiday Pay

From 6 April, the reference period for calculating an average weeks pay for holiday purposes will increase from 12 to 52 weeks. Where a worker has been employed for less than 52 weeks, the number of weeks they have been employed will be used.

Extending the reference period to 52 weeks means an employees holiday pay would reflect their average hours for the entire year. This is a fairer approach for employees whose working hours may fluctuate due to some periods of the year being quieter than others.

For example. A retail employee works an average of 35 hours per week in the busy period and 25 hours per week in the quitter period. Under the 12 week reference period, if the employee took holiday immediately after the quieter time, their holiday pay will reflect the 25 hour working week. Therefore, they will receive less holiday pay compared to the busy part of the year.

With a 52 week reference period, the holiday pay would reflect the average working hours of the employee for the entire year.

Recent employment law cases that will have an impact in 2019

  • The courts have been active and yet again the employment law landscape is changing.  The law catches all employers and again there is no exemption for smaller employers.

UBER appeals… again

On 22 and 23 July 2020, the Supreme Court will consider the issue of ‘worker’ status for employment law purposes. The case, Uber BV v Aslam and others, which started back in December 2018 has been at the forefront of determining worker status in the gig economy.

The Court of Appeal held up the ET and EAT’s decision that Uber drivers are workers under the Employment Rights Act and are therefore entitled to claim for failure to pay national minimum wage, holiday pay and unlawful deduction of wages. This also opens up claims for discrimination and harassment to such groups of people.

There are many changes giving plenty to think about. If you have any questions please do give us a call on 020 7438 1060.