April 2020 is set to be a busy month in the Employment Law calendar with a number of changes coming into force that businesses need to be aware of. Some of these result from the Good Work Plan published in December 2018 and which has been described as the government’s “vision for the future of the UK labour market”.
As with any new developments, businesses need to think about how these changes affect them now and plan ahead. With a new year now under way, it seems an appropriate time to look forward and make sure your business or organisation is fully prepared. Here is a brief overview of what lies ahead.
IR35
The off-payroll working rules (“IR35”) introduced to the public sector in 2017 are scheduled to be introduced to the private sector with effect from 6 April 2020.
The new IR35 legislation applies where an individual personally provides their services to a client through an intermediary, which is usually but does not have to be a limited company, otherwise known as a personal service company (PSC). The PSC is a limited company that they own, and if it was not for the PSC, the individual would be an employee or office-holder (e.g. director) of the client.
The new rules will apply to:
- medium and large businesses in the private sector that are the end-client of the individual’s services,
- to the fee-payer, if different, such as fee-payers in the recruitment sector, and
- individuals providing services to medium and large businesses
and will require private sector businesses to deduct income tax and National Insurance contributions from fees for services paid to a PSC. The responsibility for assessing IR35 obligations shifts from the individual or intermediary to the end-client. The end-client is the company that benefits from the individual’s services.
Many contractors use a PSC to prevent a direct contractual link between them and the company, and thus avoid being classed as an employee or worker. IR35 allows HMRC to obtain supplementary payment in such cases and whilst the contractor appears to be an employee their role is not formally defined as such.
The rules have been heavily scrutinised and although they are scheduled to apply from 6 April 2020, the final legislation to introduce these changes not only remains incomplete but the rules are expected to be reviewed as outlined in the Conservative Party Manifesto released prior to the recent election.
It does however remain sensible for businesses to continue with preparation given the changes are set to generate significant revenue. It is essential that medium and large businesses carry out an assessment to determine whether the new rules under IR35 apply to their independent contractors and review their contracts and pay arrangements. Small businesses will not be caught by the changes.
Statement of ‘written particulars’
Employers are currently obliged to provide employees, who are to be employed continuously for more than one month, with a written statement of certain terms of their employment together with a separate document setting out other required information (particulars) within two months of their employment commencing.
From 6 April 2020, the entitlement to a statement of ‘written particulars’ will include workers as well as employees under the Employment Rights (Miscellaneous Amendments) Regulations 2019 (SI 2019/731) which must be given to all new employees and workers will on or before their first day of employment.
In addition to the current information that must be provided, on or after 6 April 2020 the statement should also include:
- how long a job is expected to last, or the end date of a fixed-term contract
- how much notice the employer and worker are required to give to terminate the agreement
- details of eligibility for sick leave and pay
- details of other types of paid leave e.g. maternity leave and paternity leave
- the duration and conditions of any probationary period
- all remuneration (not just pay) e.g. vouchers, lunch, health insurance
- the normal working hours, the days of the week the worker is required to work, and whether or not such hours or days may be variable, and if they may be how they vary or how that variation is to be determined
- any training entitlement provided by the employer, any part of that training entitlement which the employer requires the worker to complete, and any other training which the employer requires the worker to complete and which the employer will not bear the cost.
Given the new obligation is to provide particulars on ‘day one’ employers should consider putting procedures in place to ensure documentation is issued on or before the first day of work. Employers should also review all current contracts and recruitment processes to ensure that all the required information is included in the contracts.
Agency Workers
- Swedish Derogation Appeal
The Agency Workers (Amendment) Regulations 2019 will come into force on 6 April 2020 removing the “Swedish derogation” provisions set out within the Agency Worker Regulations 2010.
Workers engaged on such contracts with a temporary worker agency presently give up the right to pay parity with comparable permanent staff in return for a guarantee to receive a certain amount of pay when they have gaps between assignments. The aim of abolishing this kind of arrangement, which has become known as the Swedish derogation is to encourage more employers to employ permanent employees and so, providing a greater level of certainty and security to those individuals.
By no later than 30 April 2020, temporary work agencies must provide agency workers whose existing contract contains a Swedish derogation provision with a written statement advising that, with effect from 6 April, those provisions no longer apply. An agency worker shall now be entitled to the same basic working and employment conditions as direct recruits of the same business (including pay) once he/she has undertaken the same role with the same hirer for 12 continuous calendar weeks.
- Key Information Document
From 6 April 2020, temporary work agencies must provide agency work-seekers with a Key Information document, including information on the type of contract, the minimum expected rate of pay, how they will be paid and by whom under the Conduct of Employment Agencies and Employment Businesses (Amendment) Regulations 2019 (SI 2019/725).
Parental Bereavement Leave and Pay
The Parental Bereavement (Leave and Pay) Act 2018 which introduces parental bereavement leave and an entitlement to statutory parental bereavement pay for any qualifying parent whose child (under the age of 18) dies, or for any qualifying parent who suffers a still-birth from 24 weeks of pregnancy is set to come into effect from April 2020.
Employees with 26 weeks' continuous service will be entitled to paid leave at the statutory rate and other employees will be entitled to unpaid leave. Leave must be taken within a 56-weeks of the child’s death but there is no obligation to take the full entitlement. This will allow parents time off, for example on the anniversary of the death, or what would have been the child’s birthday.
Statutory parental bereavement pay will be paid at the same statutory flat weekly rate as applies for statutory maternity pay (£148.68 for 2019/20), or 90% of average earnings, where this is lower.
Mothers who lose a child after 24 weeks of pregnancy, or during maternity leave, will not lose their entitlement to maternity leave and pay. Rights to paternity leave and shared parental leave (where notice of leave has been given) will generally also be maintained.
Although the Act was passed in September 2018 the underpinning regulations to set out and implement the Act, i.e. when it can be taken and safeguards against detriment (redundancy/dismissal) have not yet been published.
Employers can, however, begin preparing for the implementation by considering putting a written bereavement leave policy in place and be mindful for the possible long-term effects of bereavement.
Holiday Pay
The calculation of holiday pay can be complicated, particularly for those with variable hours and variable rates of pay. Currently, the holiday pay reference period is 12 weeks. As of 6 April 2020 the reference period will change to 52 weeks. Employers will be required to look back at the previous 52 weeks where a worker has worked and received pay, discarding any weeks not worked or where no pay was received, to calculate the average weekly pay.
It is hoped that this change will help to even out the variation in pay for workers, particularly those in, for example, agricultural roles.
Whilst the change in the law only affects the reference period, April 2020 may be a good time to review how employers calculate holiday pay more broadly. Advisers looking at this will need to consider how changing pay moving forward affects historic claims and manage employee relations.
National Minimum Wage
From April 2020, the new rates are:
- The National Living Wage for ages 25 and above - up 6.2% to £8.72
- The National Minimum Wage for 21 to 24-year-olds - up 6.5% to £8.20
- For 18 to 20-year-olds - up 4.9% to £6.45
- For under-18s - up 4.6% to £4.55
- For apprentices - up 6.4% to £4.15
Other employment rights and protections
Additional commitments to employment law changes were set out in the Conservative Party’s Manifesto including the following:
- An increase in the National Living Wage to £10.50 per hour by 2024. Furthermore, by 2024 the age limit for the National Living Wage will be incrementally lowered to those who are 21 years plus (23 years plus in 2021);
- New rights for parents in relation to child sickness and paternity leave, particularly in respect of extended leave for neonatal care, making it easier for fathers to take paternity leave and extended leave for carers;
- Flexible working environment to be the default position for companies; and
- The creation of a new single state enforcement body to tackle non-compliance in the labour market.
The timescale for introducing the right to request a more predictable and stable contract after 26 weeks’ service is not known and draft legislation is not yet available. EU Member states have until 1 August 2020 to implement the EU Directive on transparent and predictable working conditions however, it is unclear whether the UK will be bound by this.
Prior to the General Election, the Conservative Party also outlined their intention to reintroduce the Pension Scheme Bill which will provide additional powers to The Pensions Regulator meaning employers who do not protect their defined benefit schemes will be penalised for not doing so.
Chris Phillips is a Partner in our specialist Employment Law team. If you have queries about employment law matters please contact Chris on 0131 225 8705 or any member of the Employment team.
