UK: Employment law changes – 2020 vision

This year a number of significant employment law changes are coming into force in April. Some of the changes are introduced as a result of the government’s Good Work Plan which has been described as “the biggest package of workplace reforms for over 20 years”. We have outlined the key changes which employers need to be aware of:

Statement of Work Terms

Employers will have to provide a statement of “work” terms to workers including those on zero hours contracts as well as employees (in accordance with section 1 of the Employment Rights Act 1996 as amended).

In addition, staff must be provided with this information on or before day one of their employment. At the moment, employers have two months to provide employees with terms and conditions of their employment.

In addition to the current requirements, employers will have to give details of:

• any probationary period, including its conditions and length;
• the hours and days a worker is required to work, and whether these terms can be changed and the process;
• any paid leave entitlement on top of annual leave and holiday pay, such as maternity leave or paternity leave;
• all additional remuneration and benefits;
• any training provided by the employer, including whether any training must be completed by the worker and/or must be paid for by the worker.

These additional requirements will only apply to work arrangements starting on or after 6 April 2020 however there are rules for existing employees who request this information.

Agency staff

There are three important changes to agency workers’ rights.

• Agency workers must be paid the same rate of pay as permanent workers doing the same job after a 12 week assignment. The Swedish derogation rule which is being abolished currently allows agencies to pay their workers less than permanent staff employed by the end user in certain circumstances.
• All agency workers will be entitled to key information terms and conditions from their agency including the type of contract provided to them, the minimum expected rate of pay, how they will be paid and by whom (for example, by an intermediary or umbrella company), any deductions or fees that will be taken, any non-monetary benefits to which they will be entitled, any entitlement to annual leave and payment in respect of such leave.
• Agency workers who are considered to be employees will be protected from unfair dismissal or suffering a detriment if the reasons are related to asserting rights associated with The Agency Worker Regulations.

 By no later than 30 April 2020, temporary work agencies must provide agency workers whose existing contracts contain a Swedish derogation provision with a written statement advising that, with effect from 6 April 2020, those provisions no longer apply.

Termination payments

As well as being subject to deductions for income tax, all termination payments above £30,000 will also be subject to class 1A employers National Insurance Contributions from 6 April 2020. This is irrespective of whether or not they are paid under the terms of a Settlement Agreement.

Parental bereavement leave and pay

The Parental Bereavement (Leave and Pay) Act 2018 comes into effect on 6 April. Employees will be able to take at least two weeks’ leave following the loss of a child under the age of 18 or a stillbirth after 24 weeks of pregnancy. Employees with 26 weeks’ continuous service will be entitled to two weeks leave which will be paid at the statutory rate payable for maternity and paternity pay. Employees who have been employed for less time will be entitled to unpaid leave.

Key rules are:

• Bereaved parent’ includes primary carers – not just parents. This includes adopters, foster parents and guardians, as well as more informal groups such close relatives or family friends who have taken responsibility for the child’s care in the absence of parents.
• This will be a Day 1 right – for leave purposes – but to qualify for the pay element, employees will need a minimum of 26 weeks’ continuous service (and be earning more than the lower earnings limit).
• Any contractual pay paid to an employee during the period in which they’re entitled to statutory bereavement pay can be offset against the liability to pay statutory bereavement pay.
• Bereavement leave and pay must be taken within a 56-week window from the death of the child. If more than one child dies, the parent will be entitled to leave in respect of each child (i.e. the period of leave would multiply). Parents can split the leave into blocks of one week.

Wage increases

From 1 April 2020, the new minimum wage rates are:

• National Living Wage for ages 25 and above: £8.72 (up 6.2%)
• National Minimum Wage for 21 to 24-year-olds: £8.20 (up 6.5%)
• For 18 to 20-year-olds: £6.45 (up 4.9%)
• For under-18s: £4.55 (up 4.6%)
• For apprentices: £4.15 (up 6.4%)

 The government has pledged a National Living Wage of £10.50 for those aged over 21 over the next parliament, which equates to a 27% increase on the current National Living Wage.

Holiday pay reform 

Holiday pay for staff who do not have fixed hours or pay (including those who work overtime or receive shift premiums) must be based on “normal remuneration” rather than contracted hours.

Normal remuneration is currently calculated using a 12 week reference period to determine an average week’s pay. From 6 April 2020, the reference period will increase from 12 weeks to 52 weeks. This change is designed to even out the seasonal variation in pay for many casual workers.

The government is aware that significant numbers of employers are still not calculating holiday pay correctly. Workers are entitled to 5.6 weeks’ annual leave per year which is a straightforward calculation for workers with fixed weekly hours. However, the calculation becomes more problematic for workers who work irregular hours. Employers have typically calculated holiday entitlement for such workers by using a formula which calculates accrual of holiday entitlement as 12.07% of the hours worked (52 weeks less 5.6 weeks = 46.04 weeks. 5.6 weeks is 12.07% of 46.04 weeks).

However, the 12.07% formula cannot be used for all workers as was seen in the recent case of Harpur Trust v Brazel [2019] EWCA Civ 1402. In this case the Court of Appeal held that holiday pay for part-year workers (like teachers who are only paid term-time but are on permanent contracts) should not be calculated as 12.07% of the annual salary but should instead be calculated at the end of each term with reference to the average earnings received over the last 12 working weeks (i.e. term-time) as required by the Working Time Regulations 1998 and the Employment Rights Act 1996. This resulted in holiday pay equal to 17.5% of Mrs Brazel’s actual annual working hours.

The introduction of a reference period of 52 weeks will not make any changes to the rule laid down by the Harpur case because section 224(3) of the Employment Rights Act 1996 already provides that when calculating the weekly average earnings no account must be taken of a week in which no remuneration was payable by the employer to the employee. In other words, term-time workers who are engaged throughout the year should receive holiday pay based on their term-time pay and not on their pay spread evenly over a 52-week period.

Information and Consultation regulations 

The government wants to encourage employee engagement as it believes this will improve organisational performance and productivity, and lead to more fulfilling work. As a result legislation will come into effect on 6 April 2020 lowering the threshold required for a request to set up information and consultation arrangements from 10% to 2% of employees, subject to the existing minimum of 15 employees.

Changes to off-payroll working rules (IR35)

Currently a personal service company (or other intermediary) is required to self-assess whether or not the individual providing the services would in fact be deemed an employee of the end-user client, had it not been for the existence of the personal service company. If the individual would be deemed an employee of the end-user client then the personal service company (or other intermediary) will be required to operate payroll, make deductions for income tax and employee’s national insurance contributions and pay employer’s national insurance contributions on the fees received for the services.

However, from 6 April 2020 medium and large-sized organisations in the private sector will have to account for tax and national insurance through PAYE when contracting with personal services companies (in the same way as the public sector has been required to do since April 2017 (off-payroll working rules)). As a result, IR35 will no longer apply to such contracts, as the off-payroll working rules will apply instead.

In practice this means that the burden of assessing the tax liability of individuals providing services through an intermediate company will no longer sit with the intermediate company itself but will shift to the end-user client.

This change will have significant implications for businesses when using service providers and an audit of service providers currently being used is strongly recommended in order to assess and identify those individuals in respect of which tax and national insurance contributions will need to be accounted for come 6 April. Small businesses (those subject to the small companies regime under the Companies Act 2006) are exempt from the off-payroll working rules and the current IR35 rules will continue to apply to those businesses.

UP AND COMING …..

A number of other changes are in the pipeline which employers should look out for:

Flexible working to become the default position

The Government intends to introduce flexible working as the default position for employees and workers subject to consultation. The new Employment Bill will outline new requirements for employers which include the requirement that staff should be able to work flexibly unless the employer has a good reason to change the default position. Consultation on the proposed changes is awaited.

More protection for pregnant women and those returning from maternity leave

Pregnant women and women on maternity leave who are threatened with redundancy will be further protected under new proposals.

The Government wants to extend the period of redundancy protection from the point a pregnant employee notifies their employer of their pregnancy to six months after the end of their maternity leave.

The Equality Act 2010 sets out a ‘protected period’ during which women who are pregnant or have recently given birth are protected from discrimination. During this ‘protected period’ a woman is protected against discrimination that arises as a result of:

• her pregnancy
• any illness related to her pregnancy, or absence because of that illness
• being on compulsory maternity leave
• seeking to take, taking or having taken ordinary or additional maternity leave

• she returns to work from ordinary or additional maternity leave (if she is entitled to either form of leave), or
• two weeks after the end of her pregnancy, if she is not entitled to maternity leave

© Miller Rosenfalck LLP, February 2020

The material contained in this article is provided for general purposes only and does not constitute legal or other professional advice. Appropriate legal advice should be sought for specific circumstances and before action is taken.

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