The UK Employment Law Changes that You Need to Know About

As April rolls around, it comes with a few changes in UK employment law. Businesses need to understand what the current law is, the subsequent changes and how it affects them. Some of the amendments are a direct result of the Good Work Plan. It should also be mentioned that the Early May Bank Holiday has been moved back four days for the 75th anniversary of VE Day.

What is the Good Work Plan?

The Good Work Plan published in 2018 by the Department for Business, Energy and Industrial Strategy, is a response to the Taylor Review. The 2017 review on modern working practices by Matthew Taylor, Chief Executive of the Royal Society of Arts, set out recommendations for the UK Government. The Good Work Plan, described as the Government’s vision for the future of the UK labour market, indicates how the recommendations will be addressed and create positive change for UK workers and employees.

Jack’s Law: The Parental Bereavement (Leave and Pay) Act 2018

What is the Current Law?

There is no existing employment law on parental bereavement. Consequently, employers have no obligation to give staff time off. The Employment Rights Act 1996 allows employees time off for emergencies relating to dependants; spouse, civil partner, child, parent or someone you care for. This includes experiencing a loss, employers must give reasonable time off to register the death, arrange the funeral and attend. Compassionate or bereavement leave policies are at the employer’s discretion.

What is the New Law?

The Parental Bereavement (Leave and Pay) Act 2018, known as Jack’s Law in memory of Jack Herd, whose mother campaigned for the establishment of such a law. The Act, with the following regulations; the Parental Bereavement Leave Regulations 2020 and Statutory Parental Bereavement Pay (General) Regulations 2020, gives parents, who have lost a child under 18 or suffer a stillbirth from 24 weeks of pregnancy, the right to a statutory two weeks’ leave.

It is a day-one right; employees cannot be dismissed for exercising their right to take the leave. It applies to parents, adoptive parents, intended parents, parents in-fact, partners of parents, foster carers and anyone who cares for a child daily, but not paid to do so.

The leave can be taken in the first 56 weeks following the bereavement, in one-two week block or two separate weeks. The notice period in the first seven weeks is before work on the first day of absence, after that a week’s notice is required. Parents are entitled to separate bereavement leave for each child lost.

Employees must have at least 26 weeks’ continuous service and earn at least £118 per week (expected to be £120 for 2020/21) to get Statutory Parental Bereavement Pay (SPBP), paid the same as other statutory rates like Maternity Pay.

Employees who suffer a stillbirth from 24 weeks or lose their child during maternity leave are still entitled to their maternity leave and pay. It is generally the same for paternity rights.

What Does it Mean for Businesses?

Employers must have the right support for employees experiencing bereavement, throughout the entire process. There is no one right solution for coping with grief, it can manifest in different ways. It’s good practice to have a written bereavement policy to give employees security in a difficult time.

Employment Rights Act 1996: Statement of Terms of Employment

What is the Current Law?

Employers must provide employees with a written statement of terms, also known as particulars, within two months of employment beginning. The terms don’t have to be issued together but are most often seen in the employment contract.

At the minimum it must include; business’ name, employee’s name, job title, start date, payment terms, hours of work, holiday entitlement as well as, workplace address.

What is the New Law?

As of 6 April 2020, it is a day-one right for new workers to receive a full written statement of terms on the first day of employment. The terms cannot be delivered separately. The terms must now also include:

  • Working days, if they’re variable, how they vary and how this is determined.
  • Additional paid leave.
  • All benefits such as childcare vouchers and health insurance.
  • Probationary period specifics.
  • Training information.

Existing employees can ask for their own updated statement, to be delivered within one month of submitting the request.

What Does it Mean for Businesses?

Businesses will now be required to do more preparation during the recruitment process and have the statement ready, agreed by the new starter, HR and the hiring manager ahead of their first day. Employers should also be prepared for existing employees to ask for their own updated statement. The terms may vary depending on the job and type of work.

Working Time Regulations 1998: Holiday Pay for Variable Workers

What is the Current Law?

All employees can take paid annual leave, employees with fixed hours i.e. 9 to 5, are paid based on their usual pay rate. However, employees without regular hours or consistent pay, receive holiday pay calculated from a pay reference period under the Working Time Regulations 1998. This is their average hours worked and pay from the previous 12 weeks, causing heavy fluctuations in holiday pay for variable workers.

What is the New Law?

The regulations are to be amended, extending the pay reference period to 52 weeks or total number of weeks worked, where it’s less than 52 weeks. It will apply to any variable worker and is intended to ensure they have more reliable holiday pay. Any weeks not worked can be excluded from the pay reference period.

What Does it Mean for Businesses?

Businesses need to identify which workers the changes will affect and must be more stringent in pay record-keeping to make sure holiday pay is accurate. If the business does not already have a variable pay policy, create one and prepare for the likelihood of backdated annual leave pay claims. The amendments can be applied before or on 6 April 2020.

IR35 and the Private Sector

What is the Current Law?

In the private sector, it is currently the contractor’s, in a limited company or personal service company (PSC), responsibility to determine the employment status of its workers. IR35 exists to eliminate tax avoidance in off-payroll working.

What is the New Law?

The private sector will now emulate the public sector, where the end client will be responsible for determining the employment status of contractors. If the end client deems the contractor to be inside IR35, they must issue a Status Determination Statement. The fee-payer will be obligated to deduct income tax and National Insurance Contributions (NICs) from the contractor. The fee-payer may be the client or a third party, like a recruitment agency.

Businesses that meet at least two of the following criteria will be exempt:

  • Have an annual turnover of less than £10.2m.
  • Balance sheets total of £5.1m or less.
  •  Fewer than 50 employees.

What Does it Mean for Businesses?

Medium and large businesses in the private sector, must assess and audit contractors and contracts according to the new IR35 rules. It will apply to any new contractors or existing contracts after 6 April. A record should be kept of all the decisions made regarding IR35 for future reference, businesses are encouraged to use the HMRC’s Check Employment Status for Tax (CEST) tool. Legal advice may be required.

The Agency Worker Regulations 2010 (AWR)

What is the Current Law?

Agency workers are paid the same as permanent workers after 12 weeks unless their contract contains the Swedish derogation model. Part of the Agency Worker Regulations 2010 (AWR), the derogation means agency workers contracted to a temporary work agency and paid by the agency between assignments, are exempt from equal pay rights.

What is the New Law?

The Swedish derogation will be withdrawn, giving all agency workers the right to equal pay after 12 weeks. They must also be given a key information document to include employment terms and conditions, pay rates and arrangements.

Agencies must produce a written statement, by 30 April, that the Swedish derogation clause no longer applies on any existing contracts. Agency workers cannot be dismissed for exercising their rights under AWR.

What Does it Mean for Businesses?

Employers with agency workers must understand the changes fully and amend any existing policies accordingly to ensure compliance.

Information and Consultation of Employees Regulations 2004

What is the Current Law?

Employees in businesses with 50 or more personnel have a right to be informed and consulted on work issues (Information and Consultation of Employees Regulations 2004). A formal agreement request can be made by at least 15 or 10% of employees, whichever is higher. If an agreement exists, employees must be consulted on any major changes in the business. Employers have a responsibility to inform employees on certain matters, like plans to sell the business or redundancies, even when there is no formal agreement.

What is the New Law?

The percentage of employees required to make a formal agreement request will be reduced from 10% to 2%. A formal agreement request under these regulations, to be valid must be now be made by at least 15 or 2% of employees, whichever number is bigger.

What Does it Mean for Businesses?

Businesses must acknowledge the changes and follow the appropriate processes, when a valid formal agreement request is made.

Compliance to National Minimum Wage and Other Statutory Increases

The rates for National Minimum Wage and National Living Wage will increase on 1 April 2020:

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

Pay rates and thresholds will be changing for 2020/21. Statutory maternity, adoption, paternity and shared parental pay will rise to £151.20 and statutory sick pay will reach £95.85. The maximum week’s pay for calculating redundancy payments and unfair dismissal will increase to £538. The limit on compensation for unfair dismissal will rise to £88,519.

From 6 April 2020, more flexibility will be afforded to salaried workers with additional payment cycles brought in including fortnightly and four-weekly. Employers will also be able to choose the best calculation year for their workers, eliminating underpayment. As well as, give salaried workers access to premium pay like on bank holidays, without losing equal pay rights.

The Liability and Tax on Termination Payments

At the moment, only income tax is charged on termination payments that exceed £30,000. From April, as part of the National Insurance Contributions (Termination Awards and Sporting Testimonials) Act 2019, employers will be liable to pay Class 1A NICs on termination payments over £30,000. It doesn’t apply to any payments for terminations before 6 April 2020. The employer cannot transfer their liability to the employee.

Executive Pay Reporting

UK companies with over 250 employees, quoted on the UK’s Official List, New York Stock Exchange or a recognised stock exchange in the European Economic Area (EEA) are obligated to release their executive pay ratios as of January 2019, stated in the Companies (Miscellaneous Reporting) Regulations 2018. The first reports of which are to publish this year.

The report must contain the company’s Chief Executive Officer’s pay figure in ratio against the 25th, 50th (median) and 75th percentiles of full-time employees’ pay. It must be clear how the ratios were calculated, with an explanation for the ratio and reasons for any changes from previous figures. The data should be in the annual directors’ remuneration report, a legal requirement under the Corporate Governance Code, and form part of a table with each year’s ratios following on.

Businesses that are eligible must maintain compliance, but keep in mind how a vast difference in figures can affect reputation with clients and employees. It’s clear what it can do if management continually gets paid more while employees don’t. 

The Effect of Brexit on the Workforce

Beyond the transition period, ending 31 December 2020, it’s difficult to predict what will happen to UK employment law. The European Union (Withdrawal Agreement) Act 2020 does not contain any clauses on the protection of workers’ rights. The Government has subsequently proposed, without any set publish date, an Employment Bill.

The non-binding Political Declaration only states in any future UK-EU agreement that employment standards must be maintained at the level they currently are at. Although the UK will likely have more control over employment law, it will remain mostly dictated by the EU and the world.

The Equality Act 2010 and the Transfer of Undertakings (Protection of Employment) Regulations (TUPE) 2006 are both derived from EU legislation meaning they could be repealed. Despite it being unlikely, it is something employers should be aware of.

Employers should also get to grips with the modified UK immigration system to come January 2021. It will be a points-based system, prioritising fairness and the skills of EU and non-EU applicants. Businesses should also be aware of the EU Settlement Scheme, open until 30 June 2021.

Changes Coming with No Set Implementation Date:

  • Increase in the ‘break of service’ period: The government is looking to increase the gap which breaks continuous service from one week to four weeks, benefiting variable workers.
  • Right to request a more stable contract: Introducing a right for workers and employees, with at least 26 weeks’ service, to request a stable contractual working pattern.
  • Tips and gratuities going to staff: Legislation to stop employers taking tips and gratuities that are for their staff, to eliminate poor tipping practices.
  • Check-off arrangements: The Trade Union (Deduction of Union Subscriptions from Wages in the Public Sector) Regulations 2017 seeks to implement new procedures to give public employees other options to pay their subscriptions as opposed to the ‘check-off’ deduction from their wages.
  • Pensions dashboard service: Allowing individuals to access information online about their pensions through a dashboard service.
  • Public sector exit payments: The draft of Repayment of Public Sector Exit Payments Regulations 2016 dictates public sector employees with annual earnings £80,000+ must repay their exit payment, if they return to work in the public sector within a year of leaving. The Public Sector Exit Payment Regulations 2016 seeks to cap exit payments for public sector employees at £95,000.
  • Income tax personal allowance linked to national minimum wage: The Finance (No.2) Act 2015 contains measures to consider national minimum wage increases on income tax allowance increases.

Ongoing Consultations to be Aware of:

  • One-Sided Flexible Working: One-sided flexibility is a result of employers abusing the current system, cancelling employees shifts at short notice or sending them home based on low customer demand. The Good Work Plan hopes to establish the right of reasonable working hours’ notice and compensation when shifts are cancelled, positively impacting worker satisfaction.
  • A New Enforcement Body: Establishing a single labour enforcement body to better support vulnerable workers and exist as a single point of contact for employees and employers.
  • Protection for Unwell and Disabled Workers: Better address the wellbeing of ill or disabled workers by reviewing statutory sick pay, absence reporting and the funding of occupational health services for small and medium businesses.
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