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April 2020 Employment Law Changes – A Recap of What’s New

Even before the COVID-19 pandemic, 2020 was shaping up to be a year of significant change in employment law.  Notwithstanding the many developments which are being brought in to support companies in responding to the threat of Coronavirus, other major changes planned for this year have still taken place (with one major exception).  Here, we revisit some of the important changes affecting your business in 2020.

Employee Written Statement of Terms

Employment Rights (Employment Particulars and Paid Annual Leave) (Amendment) Regulations 2018 (SI 2018/1378) came into force on 6 April 2020

A written statement of terms, usually all covered in a contract of employment, must now be given on or before the first day of employment to all new workers – this previously had to be given within two months of employment starting and only to employees.

In addition, more information than previously must be included in the statement. For instance the written statement now has to include a description of working hours, paid leave, probationary period, training entitlement and benefits.

What does it mean for your business?

The requirement to produce statements on or before day one means that employers must now know the full details of the job offered from the outset and amend internal processes to ensure contracts are issued before new staff begin. Clear communication between managers, recruiters and candidates will make all the difference.

Holiday Pay

Employment Rights (Employment Particulars and Paid Annual Leave) (Amendment) Regulations 2018 (SI 2018/1378) came into force on 6 April 2020

The reference period for determining an average week’s pay for holiday pay purposes has now increased from 12 weeks to 52 weeks (or, if the worker has been employed for under 52 weeks, the number of complete weeks for which the worker has been employed).

What does it mean for your business?

A review of current working practices and calculation methods will be important. If your company has an external payroll function, request confirmation that the changes have been factored into the calculation methodology.

Agency Workers

The Agency Workers (Amendment) Regulations 2019 (SI 2019/724) came into force on 6 April 2020

Temporary work agencies must provide agency work seekers with a “Key Information Document,” which must include information on the type of contract, the minimum expected rate of pay, the mode of payment and who will be making the payment.

What does it mean for your business?

Whilst not anticipated to have a significant impact on the private, voluntary or public sectors, these changes will provide greater transparency for workers about the terms they are signing up to.

Pay Parity

Conduct of Employment Agencies and Employment Businesses (Amendment) Regulations 2019 came into force on 6 April 2020

The “Swedish Derogation“ has now been removed from the Agency Workers Regulations 2010.  Employment businesses are no longer able to avoid pay parity between agency workers and direct employees.  Before, if agency workers had a “Pay Between Assignment Contract”  they would 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 had gaps between assignments.

Agencies must also inform relevant agency workers by 30 April 2020 that the Swedish Derogation no longer applies.

What does it mean for your business?

If your company previously hired agency workers under Swedish Derogation contracts, then these changes could have significant financial implications.  In most cases, your company will now have to pay worker at least the same rate as direct recruits.

Take the time to check with the agencies you contract with and understand the terms of their contracts with their agents.

Informing and Consulting with your Employees

The Employment Rights (Miscellaneous Amendments) Regulations 2019 (SI 2019/731) came into force on 6 April 2020

Employees have the right to request that their employer sets up or changes arrangements to inform and consult (I&C) them about issues in their organisation. The requirement to inform and consult employees does not come about automatically.

Following these changes, in a business with 50+ employees, only 2% of the workforce now need to request I&C for this to become a requirement, subject to certain exceptions.  Prior to April 2020, that threshold was 10% of the workforce.

What does it mean for your business?

Even though this is European-derived legislation, the UK Government has decided to strengthen the requirement to I&C.  Employers can take a pro-active approach and introduce an agreed I&C arrangement before any request.  

National Insurance Contributions

The National Insurance Contributions (Termination Awards and Sporting Testimonials) Act 2019 came into force 6 April 2020

All termination payments above the £30,000 threshold are now subject to Class 1A National Insurance contributions (NICs).

That will affect payments and benefits that are received in connection with the termination of a person’s employment.

What does it mean for your business?

Currently, certain forms of termination awards are exempt from employee and employer NICs and the first £30,000 of a compensatory payment on termination is free from income tax. This change will prevent employers seeking NIC exemption through disguised termination payments.

Parental Bereavement

The Parental Bereavement (Leave and Pay) Act 2018 came into effect on 6th April 2020

Employed parents or carers who have lost a child (under the age of 18 or a stillbirth after 24 weeks of pregnancy) are entitled to two weeks’ leave (irrespective of their length of service).  This may be taken in one block or in two separate blocks of one week. Where an employee is eligible, the leave is paid at the same rate as statutory paternity pay i.e. £151.20 per week or 90% of weekly earnings if lower.

What does it mean for your business?

This reform not only concerns biological parents but also includes adopters, foster parents and guardians, as well as close relatives or family friends who have taken responsibility for the child’s care in the absence of parents. It is therefore very important to think very carefully before deciding who to grant this leave to.

Offering time and flexibility to bereaved families at a time that best suits them might also be extremely beneficial to bereaved parents.  Providing this support at such a difficult time demonstrates the values and culture of a business, as well as strengthening the relationship between the company and its employees.

IR35

Draft Finance Bill which was published on 11 July 2019, changes were expected in April 2020 but have been postponed to 2021

The off-payroll working rules were introduced in 2000 and require that individuals who work like employees, but through their own company, pay similar taxes to other employees.

With the new reform, large and medium-sized organisations in the private sector will become responsible for assessing the correct employment status of the contractors they engage to work for them.

From April 2021, all payments made to personal service companies will be treated as payments of employment income on which the client (or a third-party intermediary) must account for tax. This shifts responsibility for IR35 tax compliance from the personal service company to the client or intermediary that uses the services of the personal service company.

What does it mean for your business?

The Government is keen on making sure everyone is paying the proper amount of tax for their work and there can be substantial financial impacts for your company if it appears there are errors in the employment status of the contractors you engage to work for you.  Although the changes have been postponed, it would be prudent for businesses to continue to prepare as best they can, seeking advice from qualified specialists.

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