Employment law changes expected this year

2018 and it's time to look ahead to the changes due to take effect within Employment Law.

2017 was a busy year for employment law, with changes including the quashing of employment tribunal fees, the publication of the Taylor Report and the numerous gig economy cases. We are yet to see the full impact of some of these changes, and wait eagerly for decisions in a number of cases.

With a new year now under way, it seems an appropriate time to look forward at the changes and updates which we are expecting to occur this year. This is a brief overview of some of those changes.

Change to tax regulations for compensation and PILON

Currently the situation regarding Pay in Lieu of Notice (PILON) is that if the employer has a contractual duty to pay this, it will be paid subject to tax and national insurance contributions. However, where there is no contractual duty to pay, it is considered to be ‘damages for breach of contract’ and therefore the first £30,000 is paid tax free.

However, from 6 April 2018, the position is changing. All PILON will be subject to tax and national insurance contributions, regardless of whether there is a contractual duty to pay this.

In addition to this, another change being implemented will be in relation to ‘ex-gratia’ payments. Employers will be required to pay tax and national insurance contributions on any non-contractual payments made to employees over the £30,000 exemption.

These changes are likely to increase the cost to employers of terminating an employee’s contract. The changes to the treatment of PILONs and compensation payments above £30,000 will increase liability to employer NICs.  Further, increased financial packages may have to be offered to exiting employees to offset the extra tax the employee is likely to have to pay under the new rules.  However, the good news is that the Government has decided to keep the £30,000 exemption the same rather than reduce this to a lower amount. There were also rumours that contribution to legal fees might become taxable, however, these are remaining tax free for the time being.

Publication of Gender Pay Gap Reports

For many large public sector employers, gender pay gap reporting became mandatory in March 2017. However, from April 2018, this will also apply to large private or voluntary bodies, consisting of 250 or more employees on the snapshot date (5 April in the relevant year).The gender pay gap report must be produced by 4 April 2018, and thereafter they must produce and publish a report on an annual basis.  The report must show both the mean and median hourly pay of all relevant employees. A relevant employee is an employee who is employed by the employer on the snapshot date, although does not include partners (including LLP members). Only full pay of relevant employees will be included, therefore, employees receiving sick pay which is less than full pay or family-related leave will not be included in the number.

For those employers who are around or slightly under the threshold of 250 employees, they have the option of voluntarily publishing their figures which might be seen as the best thing to do for business reasons. There may be some dubiety over who should be included in this number. The total employees of an organisation for the purpose of calculating the gender pay gap should include all employees, whether or not they are ‘relevant employees’. Casual workers who are engaged on an umbrella contract should also be included, even where they have not been given an assignment during the pay period. However, a worker who has been engaged where there is no mutuality of obligations will only be included where they have been engaged for work on the snapshot date. As such, employers should be careful to ensure that they consider each year whether they will fall within the requirement to produce and publish a report. 

Childcare Voucher Scheme

From 6 April 2018, it will no longer be possible for new applicants to enter into the childcare voucher scheme. Those who are already in the scheme will continue to receive the vouchers as long as the employer continues to run the scheme and as long as the employee continues to be employed by the employer. However, it might be possible to get tax free childcare instead (you cannot claim both). This will depend on your circumstances and whether you are eligible.

Gig Economy

There have been several ‘gig economy’ cases which have been brought in the past year, in order to establish whether or not individuals engaged are classed as being self-employed or workers. In most cases, the individuals were held to be workers and were therefore entitled to be provided with benefits in line with this status including the payment of minimum wage, holiday pay and sick pay.

In Pimlico Plumbers Ltd and Another v Smith it was held by the Court of Appeal that the plumber in this case was a worker. This is now being further appealed to the Supreme Court and will be heard in February 2018.

The EAT decision in Uber BV v Aslam also held that the drivers were workers. Uber had sought permission to appeal directly to the Supreme Court, although this request was denied and as such, the appeal to the Court of Appeal is expected to be heard at some point in 2018.

It is thought that these cases (in particular, the Pimlico case at the Supreme Court) might clarify the situation and will, hopefully, result in a consensus as to the situations in which an individual will be deemed to be self-employed and when they will be deemed to be a worker and therefore be entitled to a larger bundle of rights. 

National Minimum Wage Increase

Family Related Statutory Pay

We will continue to provide updates on relevant cases and legislation throughout the New Year. We also run update seminars twice per year; please visit our website for more information on how to attend.   

For more information, or if you have any questions about these changes please contact a member of our specialist Employment Law team.