Throughout this post we are going to discuss some of the confirmed employment law changes coming into place this April.
The ‘Good work plan’ was published in December 2018, and outlined the commitment from the government to remove the legal loophole for equal pay known as ‘Swedish Derogation’ for agency workers’. The Swedish derogation is shorthand for a special type of employment contract provided for in Regulation 10 of the AWR. Its official name is a “pay between assignments” contract because workers engaged on these contracts with a temporary worker agency (TWA) 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. This option to opt-out will be stopped from 6 April 2020 when the Agency Workers (Amendment) Regulations 2019 comes into force. The reason for this change is to encourage more employers to take on permanent employees, providing individuals with more certainty and security. By no later than 30 April 2020 companies must provide workers whose existing contracts contain a Swedish derogation provision with a written statement telling them that with effect from 6 April 2020, those provisions no longer apply. Agency workers can bring a claim in the Employment Tribunal where they are not provided that statement on time. Workers asserting rights under the new Regulations will be protected from detriment and unfair dismissal.
How many people will this affect?
According to the Government’s figures, 8-10% of UK agency workers are on Swedish derogation contracts, which means as many as 130,000 people.
How to prepare
Decide on your action
Agencies will need to make the decision whether or not to terminate the SD contracts. If they wish to take no action and leave them on their current contract, they will remain employed on the same terms as before but entitled to equal pay. Workers must be provided with a written statement on or before 30th April 2020 stating they’re entitled to the equal pay, and the statement within their original contract contradicting this no longer applies. If the decision is made to keep them on the SD contracts, they may also be entitled to the ongoing pay between assignments if this is referenced as a contractual obligation if it is not amended or removed. Another option may be to terminate the SD contracts before 6th April and move agency workers to a different type of contract. However, agencies will need to remain compliant up until the 6th of April to avoid breaching regulation 10 and 11, and can only terminate SD contracts once AWR regulation 10(1)(c) have been satisfied for a minimum of four weeks over the duration of the contract. However, unfair dismissal still needs to be taken into account for SD agency workers with 2 years’ or more service. Terminating a contract even where another contract is offered could give rise to unfair
dismissal claims. Agency workers on SD who are moved to a non-SD contract will also be entitled to equal pay rates in line with the AWR from when the new contract is signed, rather than 6th April. The risks associated with terminating a SD contracts do not apply if the agency worker voluntarily ends their own contract, therefore agencies may offer workers an alternative contract and give workers the option to voluntarily terminate their SD one. If a worker has already passed their qualifying period, they will be entitled to equal treatment as soon as the new contract is signed. If they are still within their qualifying period, workers will get equal treatment either on the 6th of April or once they complete their qualifying period, which ever comes first. This method must be managed carefully, and in some cases a settlement agreement may be advisable.
Reference Period Increase
The government is also lengthening the reference period for determining an average week’s pay from 12 weeks to 52 weeks from 6 April 2020. The amount of pay that a worker receives for the holiday they take depends on the amount of hours they work and how they are paid for those hours. The principle is that pay received by a worker while they are on holiday should reflect what they would have earned if they had been at work. The majority of the UK’s workforce are full-time employees on fixed hours and fixed pay. For these workers, typically on a fixed monthly salary, if they take a week’s holiday, they will receive the
same pay at the end of the month as they normally receive. This change is intended to improve the holiday pay for seasonal workers, who tend to lose out over the way it is currently calculated. The Department for Business, Energy and Industrial Strategy (BEIS) says the intention is that the 52-week reference period will work in much the same way as the 12-week reference period does. Employers will have to count back over the last 52 weeks that an worker worked and received pay, excluding weeks where the worker did not work or receive pay. Where there are fewer than 52 weeks of pay information, the employer will have to include as many whole weeks of pay information as are available.
(BEIS has advised further guidance will be provided)
A third change will extend the entitlement to receive a statement of ‘written particulars’ to include workers as well as employees and make it a day one right. At present, employers have to provide a written statement setting out the basic terms of employment to all employees whose employment lasts for one month or more, and this must be provided within two months of the start of their employment. If an employee works abroad for more than a month during their first 2 months’ employment, the employer must give them the written statement before they leave.
What must now be included in the written statement of particulars (changes are highlighted):
• The business’s name and worker name
• Job title or description of work
• Date employment or engagement begins
• Date of continuous employment for employees
• Pay rates and frequency of pay
• Hours of work (including normal working hours, days of week and if hours/days are variable
• Holiday entitlement and holiday pay
• Length of notice of termination required from employer and worker
• Details of non-permanent employment or engagement (fixed-term or contract)
• Place of work and employer address
• Any entitlement to paid leave, including maternity leave and paternity leave
• Entitlement to sick leave and pay
• Any training which the employer requires but do not pay for
• Any other benefits
• Probationary period, including conditions and duration
Information which can be provided within two months:
• Pensions and pension schemes
• Details of any collective agreements directly affecting terms
• Disciplinary and grievance procedures
• Any other training entitlement
How to prepare
1. Identify your workers
Ensure you review the employment status of individuals you are planning to engage. This will allow employers the opportunity to have systems in place to identify ‘workers’, and ensure that the written statement is provided on their first day of work or before. This will also allow employers to view both ‘employees’ and ‘workers’ separately, as the information provided will differ dependant on the employment status.
2. Review your documents & Systems
Employers should review current contracts to gain understanding of information that will need amended after April 2020. In particular, reviewing workers contracts to ensure they are updated to include mandatory information. Moving forward after April, it may be worth implementing processes for workers in particular that they are provided with the written statement during the recruitment process to ensure information is provided on time.
3. Amend/Prepare templates
Take care when preparing templates or amending documents to ensure the employment status of the recipient is considered. Some of the new information which is required to be provided to workers is not normally contractual, and could implicate that the entitlement is contractual.
Ensure you have given enough time to thoroughly undertake this assessment, as distinguishing roles which require workers rather than genuinely self-employed contractors or employees may not be straightforward.
IR35 (For private sector contractors)
*Update On 7th February, HMRC announced a significant change in the application of the changes to the off-payroll working rules. The new rules will now apply only to payments made for services provided on or after 6 April 2020. Previously, the new rules would have applied to any payments made to the PSC on or after 6 April 2020 irrespective of when the services were performed or the invoices were raised. The government has also stated companies will not have to pay any penalties for errors within the first year, except in cases of deliberate non-compliance. The reform will place the responsibility for assessing whether IR35 applies onto the clients of the worker’s services, for all payments by medium and large businesses from 6 April 2020. Where it is decided by the client that IR35 applies, they will become responsible for accounting for and paying the related tax and NIC on behalf of the worker. The changes will bring in £3.1bn in additional tax revenues between 2020 and 2024, according to HMRC. Businesses that meet at least two of the following criteria will not be affected by the changes: those with a turnover of less than £10.2m a year, balance sheet assets of less than £51m, or those with fewer than 50 employees.
How to prepare
1. Audit Current Contractors
Audit how many contractors you currently use, where they are used in the business and how valuable they’re work it to those departments.
2. Asses who is included in the changes
Once you have generated a list of how many freelancers or contractors you have, start making note of who would be considered ‘inside’ or ‘outside’ of the rules. Do not umbrella them all together to make the process easier. The GOV website offers a tool to help Check employment status for tax. You should also communicate with the contractors throughout determining their employment status; being open and honest will likely benefit both of you moving forward. You may also find that due to an increase in tax and NI dependant on their status, contractors may look to increase their rates to compensate.
3. Agreement policy
Have an agreement policy in place for any future contractors you work with after April. This can provide the employment status in a clear policy so there is a mutual understanding from the start. You may also want to consider making adjustments to current contractors agreements, especially if they are going to overlap with the new financial year. These agreements should also include the process of dealing with disagreements that arise from determination.
4. HR & Payroll
Contractors moved onto ‘inside’ status will need to be set up on your payroll system. To simply this process it may be worth grouping them into a separate payroll cycle.
“If your working hours are decided by someone else and you can be told what tasks you’re working on, where you’ll be working, and how you should work, then you may well fall under the ‘disguised employee’ banner, and therefore could be seen as being inside IR35.” Ross Pounds of Dinghy
The UK government has confirmed that paid parental bereavement leave will be introduced on 6 April 2020. The entitlement to 2 weeks paid bereavement leave is the longest period worldwide, making the
UK’s offer the most generous in the world. The law currently does not say how much time can be taken off for a dependant. It simply says the amount should be ‘reasonable’. Employers could treat time off for bereavement as sick leave or holiday leave, depending on their workplace policy and the individual circumstances The Parental Bereavement Leave and Pay Regulations, which will be known as Jack’s Law, will implement a statutory right to a minimum of 2 weeks’ leave for all employed parents if they lose a child under the age of 18, or suffer a stillbirth from 24 weeks of pregnancy, irrespective of how long they have worked for their employer. Female employees will also continue to be entitled to up to 52 weeks of maternity leave and/ or pay. Parents with at least 26 weeks’ continuous service with their employer and weekly average earnings over the lower earning limit (£118 per week for 2019 to 2020) will also be entitled to Statutory Parental Bereavement Pay (SPBP), paid at the statutory rate of £148.68 per week (for 2019 to 2020), or 90% of average weekly earnings where this is lower. Parents will be able to take the leave as either a single block of 2 weeks, or as 2 separate blocks of one week each taken at different times across the first year after their child’s death. If an employee loses more than one child, they will be entitled to take a separate period of leave for each child.
You will hold the liability for tax and National Insurance contributions until you tell the worker, and the person you contract with, of your determination and the reasons for it.
Under the new legislation, employers will not be entitled to request a copy of the child’s death certificate as evidence of an employee’s right to the entitlement. Small employers will be able to recover all statutory parental bereavement pay, while larger organisations will be able to reclaim almost all of it. The leave is a ‘day one’ right, however some employees may not be able to take advantage of it because the time off is unpaid during the first 26 weeks of their employment, and only paid at statutory levels thereafter. Under the Data Protection Act 2018, employees have the right to keep details of their child’s death confidential. Therefore you should outline amongst HR and line managers how much information is provided to the wider team. Be aware that every employee will require a different length of time to recover from bereavement of a child; 30% of UK adults stated they needed more than the two weeks before being able to return to work. Offering additional paid leave or ensuring management is flexible, and supportive to the needs of the individual may be a consideration. Employees dealing with bereavement may experience mental health issues such as depression, anxiety or post-traumatic stress disorder (PTSD), which could constitute a disability under the Equality Act 2010. In these cases, you must seek medical advice and make reasonable adjustments.