Employment law changes this April: Our checklist for compliance

Written on 6 Mar 2020

As employers look to manage the impact of the coronavirus on their workplace, and against the backdrop of the government's trade negotiations with the EU, employers must take care not to be caught out by a number of imminent employment law changes coming into force this April.

1 April 2020

National minimum wage raises

The statutory minimum wage rates are set to rise as follows:

  • National Living Wage (for workers aged 25 and over) increases from £8.21 to £8.72 per hour.
  • National Minimum Wage (NMW) for workers aged at least 21 but under 25 increases from £7.70 to £8.20 per hour.
  • NMW for workers aged at least 18 but under 21 increases from £6.15 to £6.45 per hour.
  • NMW for workers aged 16 or 17 increases from £4.35 to £4.55 per hour.
  • The apprentice rate increases from £3.90 to £4.14 per hour.
Action: As well as ensuring the new minimum wage rates are properly reflected, take the opportunity now to review any policies/practices that may inadvertently reduce pay below the statutory minimum, such as preparation time and uniform policies.
The government is committed to cracking down on breaches of the NMW rules. It has increased the funding for compliance and enforcement year on year and has said that it will create a new and enhanced labour market enforcement body to push NMW compliance.

4 April 2020

Gender pay reporting

Not a change as such, but 4 April marks the deadline for the third round of gender pay gap reporting for employers with 250 plus employees. Action: Upload the required gender pay information to the government website and your own company website. Consider also providing a voluntary narrative to provide context to the data and identify actions to address any issues. We are still awaiting the outcome of the government's consultation on ethnicity pay reporting.

5 April 2020

Family leave statutory pay rates increasing

The rates of statutory maternity pay, statutory paternity pay, statutory adoption pay and statutory shared parental pay are to increase from £148.68 to £151.20 per week. Action: Ensure these new rates are reflected in your policies as appropriate. From 6 April 2020, this new rate of £151.20 per week will also apply to the new entitlement to statutory bereavement leave on the death of a child (see below).

6 April 2020

IR35 reforms in private sector

Users and suppliers of contractors/consultants working through personal service companies (PSCs) in both private and public sector situations must actively prepare for IR35 reforms confirmed to come into force on 6 April 2020. The reforms bring potentially significant financial repercussions for organisations which directly or indirectly (through staffing companies or consultancy companies) receive services from PSCs. Action: Identify arrangements caught by the new rules and consider on what basis they will engage with, directly or indirectly, contractors/consultants going forwards. However, blanket bans of PSCs may lead to loss of business critical resource and key talent unless pay rates are grossed up. Many organisations are therefore having to adopt a more nuanced approach to compliance. We have a dedicated team advising employers on these changes. Please contact your usual OC contact for more details.

Increased cost on taxing termination payments above £30,000

Employer's class 1A national insurance contributions (NICs) will be payable on termination payments above £30,000. The whole termination payment is still exempt from employee NICs. However, it has recently been confirmed that the new rules will only apply in respect of dismissals taking place on or after 6 April 2020. Action: Ensure the additional cost is factored in when paying termination awards above £30,000. Where appropriate, it may be sensible to ensure any termination date is before 6 April 2020 where the employer NICs cost could be significant.

Section 1 statement changes and extension to workers

New mandatory particulars must now be provided as part of the "section 1 statement" requirements for employees starting employment on or after 6 April 2020 (although existing employees can request an amended statement to reflect the new requirements). The statement must also now be provided to workers and in all cases will become a "day 1" right. Action: See our insight here. The section 1 particulars for employees are often included in the employment contract so any templates should be amended accordingly. You may also want to use the opportunity to review other provisions, particularly around restrictive covenants, data protection, confidentiality/permitted disclosures and holiday pay in light of recent case law developments and the General Data Protection Regulation rules. Consider preparing a separate template for workers.

Increase in statutory holiday reference period from 12 weeks to 52 weeks

The reference period used for determining a week's pay when calculating holiday pay for workers with irregular hours increases from 12 weeks to 52 weeks. Action: Payroll systems will need to be updated to reflect the new reference period. The government has now issued its updated guidance. Employers should note that this statutory change in reference period does not directly impact the current uncertainties over what constitutes normal remuneration and also how this is calculated for workers with fixed hours and fixed pay. For some employers, it may now be appropriate to consider adopting a 52-week reference period in all cases when calculating holiday pay. Please contact your usual OC contact for further advice.

Statutory right to parental bereavement leave

New legislation provides for employees who lose a child under the age of 18 (or suffer a still birth after 24 weeks of pregnancy) to take at least two weeks leave.

Employees with 26 weeks' continuous service will also be entitled to two weeks paid leave at the statutory rate. Bereaved parents will, as with the other statutory leave rights, be entitled to protection from detriment, redundancy and dismissal as a result of them taking bereavement leave.

Action: Many employers already exercise their discretion to allow an employee to take paid time off work on the death of a family member or close relative. Ensure that going forwards the new statutory requirements are reflected as a minimum. Unfortunately, as with the other statutory leave rights, the notification requirements are onerous, particularly given the circumstances of the leave request, and employers may prefer to produce or update any current policy with just a short reference to the new statutory right and how to initiate a request so that the HR manager can take them through any requirements at the relevant time.

Statutory sick pay increases

Statutory sick pay will increase from £94.25 per week to £95.85 per week. Action: Again, ensure these new rates are reflected in any sick pay arrangements as appropriate.

More flexibility in paying 'salaried hours work' under NMW rules

Following consultation, the government has indicated that it is proposing to introduce a number of NMW reforms this April as follows:

  • new statutory provisions around "salaried-hours workers" (where staff receive an annual salary in equal instalments for a set number of contracted hours), including widening the range of pay arrangements caught enabling workers paid per hour or per day to benefit; allowing employers to choose the most appropriate "calculation year"; and ensuring workers can receive "premium pay", for example, for working on a bank holiday, do not fall outside the arrangements;
  • clarification around penalties where salary sacrifice schemes cause pay to fall below the NMW; and
  • a reintroduction of the naming and shaming scheme;
Action: Take note of these changes and understand how the new flexibility around salaried hours work could benefit your pay arrangements. Determining whether someone is a salaried worker and what the salary is can be a complicated exercise.
Legal advice should be sought on the impact of salary sacrifice and other deduction schemes on NMW calculations to avoid breaching the statutory requirements and understand the repercussions. You may also need to check the effectiveness of your salary sacrifice agreements from a tax perspective.
The government has said it will create a new enforcement body which will, amongst other things, to help workers to understand and enforce their rights under the NMW legislation.

Key information statement for agency workers

Employment businesses will need to provide a key information document for agency workers that is intended to improve transparency of information for agency workers, particularly around pay. Like the new section 1 requirements set out above, this new requirement will only apply to agency workers who sign up to an employment business from 6 April 2020. Action: Agency workers who are also classed as employees or workers will be entitled to both a section 1 written statement and a key information document.

Abolition of the Swedish derogation for agency workers

The Swedish derogation which allows agency workers to agree terms providing guaranteed pay between assignments in exchange for their right to equal pay with comparable permanent employees on assignment is being abolished. Action: Watch out for any additional costs associated with the new terms on which agency workers are employed by an employment business and which may be passed onto end-user clients.

Lower threshold to request information and consultation arrangements

The threshold required for a valid request to set up statutory information and consultation arrangements will be reduced from 10% to 2% of employees but is still subject to the requirement that a minimum of 15 employees must make the request. Action: Use the change as a reminder to consider what information and consultation arrangements they currently have in place with staff, such as a staff association or employee council and how effective these are in maintaining good employee relations. This is particularly against the backdrop of changes to corporate governance rules which require companies with at least 250 employees to provide more detail on their employee engagement in the annual directors' report.

Employment tribunal compensation limits increase

The annual employment tribunal compensation limits are set to increase. A week's pay for basic award and statutory redundancy purposes increases from £525 to £538 for all dismissals on or after 6 April 2020. The maximum compensatory award (subject to the threshold of 12 months' pay if lower) increases from £86,444 to £88,519. Action: The impact of these rises will need to be factored in as appropriate to any dismissals on or after 6 April 2020.

What next for employers?

While a lot of focus is naturally diverted at present to the immediate need to understand and manage the impact of the coronavirus on businesses and workplace, it is important not to overlook the above changes and ensure all is in order come April.

We anticipate further employment laws during the course of this year, promised as part of a new Employment Bill announced in last December's Queen's Speech. Expectations are that the Bill will include rules around the creation of a new single enforcement body for enforcing workers' rights; the right of workers' to a more predictable contract; a right to request flexible working for all; and other measures to support families (such as rights to leave and pay for parents of babies that require neonatal care after birth). The Bill is also expected to include provisions for safeguards around existing employment laws following the end of the Brexit transition period in December 2020. The government's need to protect the economy in light of current events is likely to dominate the agenda, but more details may be forthcoming in the Budget on 11 March.