“One of the most significant reforms in employment law in the next 12 months is a new obligation for businesses with 250+ employees to disclose the gender pay gap in their organisation. Whilst an employer is not required to report on gender pay under the draft regulations until April 2018, bonus and other incentives awarded from May 2016 fall within the new reporting requirements. An employer must also report on a “pay snapshot” taken across its organisation on 30 April each year – the first date being 30 April 2017.
Holiday pay also continues to be an important issue for many employers. Whilst the Employment Appeal Tribunal has confirmed that our working time rules can be interpreted to incorporate commission in holiday pay, we understand this decision may be appealed to the Court of Appeal.
Employers should also watch out for the new apprenticeship levy from April 2017 and start considering now how they can ensure that any levy they do pay is brought back into the business via apprenticeships.
So far as temps and agency workers are concerned, the principal development will be the abolition of most so-called umbrella arrangements from April 2016, and the reduction in take home pay for hundreds of thousands of lower paid agency workers in industrial and logistics roles. If that tax measure does not satisfactorily close down perceived tax avoidance in the staffing supply chain, there is the potential for a move towards hirers being liable for tax and national insurance from April 2017 if their suppliers are not administering that properly. This is part of a general attack on the use of personal service companies.”
Julian Hemming, Partner, Osborne Clarke
1 April 2016 – New National Living Wage
A New National Living Wage of £7.20 an hour for over 25s was introduced on 1 April 2016. This will rise to over £9.00 an hour by 2020.
1 April 2016 – Penalty for failing to pay the National Living Wage or the National Mimimum Wage
On 1 April 2016 the calculation of penalties for those who do not pay minimum wage rates rose from 100% of arrears to 200% (although this is halved if an employer pays within 14 days). This is subject to a maximum penalty of £20,000 per worker.
6 April 2016 – Limits on employment tribunal awards and statutory redundancy
On 6 April 2016 the maximum amount of a week’s pay for unfair dismissal awards and statutory redundancy increased to £479. The maximum amount of a compensatory award for unfair dismissal increased to £78,962.
6 April 2016 – Removal of dispensation notices
On 6 April 2016 new tax legislation came into force providing for a range of exemptions from tax and national insurance contributions (NICs) relating to certain business expenses.
As a result, the provision for HMRC to grant dispensation notices to employers, waiving the requirement to report certain expenses under the Income Tax (Earnings and Pensions) Act 2003 is no longer needed, and was removed as of 6 April 2016.
6 April 2016 – Expenses legislation and related anti-avoidance legislation attacking “umbrella worker models”
On 6 April 2016 the removal of certain tax relief on travel and subsistence expenses for umbrella workers, personal service companies and workers operating via other “labour service” intermediaries came into effect. The legislation includes tax debt transfer measures which could make hirers and staffing companies liable for tax compliance failures by umbrella companies and personal service companies.
Related targeted anti-avoidance legislation (section 289 of The Income Tax (Earnings and Pensions) Act 2003) is also in place to catch arrangements which reduce the amount of employment income that is subject to tax and National Insurance contributions (and one of the main purposes of such an arrangement is to avoid tax or NICs).
1 October 2016 – National Minimum Wage
On 1 October 2016 a number of changes to minimum wage rates take effect:
- the main rate of the National Minimum Wage which will apply to workers aged between 21 and 24 will be set at £6.95;
- the rate for 18 to 20 year olds will rise to £5.55 an hour;
- the rate for 16 to 17 year olds will rise to £4.00 an hour; and
- the apprentice rate will rise to £3.40 an hour.
The National Living Wage (see above) will apply to workers aged 25 and over.
October 2016 – Gender pay reporting
The government is currently consulting on draft regulations introducing gender pay reporting for employers with 250+ employees. There is currently uncertainty over the definition of employees, which may potentially include workers as well as those individuals engaged on an employment contract.
It is anticipated that the new regulations will come into force in October 2016 and will require employers to report by April 2018 on a gender pay snapshot taken on 30 April 2017. Separate reporting requirements are also in place for bonus awards and, as currently drafted, would capture bonus awards made from April 2016.
2016 – Reform of strike laws
The Trade Union Bill is currently progressing through Parliament.
If passed in its proposed form, it would represent a major change to the law on industrial action.
Proposed reforms include the following:
- any strike would need a 50% turn out;
- if a strike would affect essential public services, the bar would be higher, with the union requiring 40% of those entitled to do so to vote in favour of strike action;
- a new three month cut-off would apply after a ballot for strike action to take place;
- the notice period before taking industrial action would increase from 7 to 14 days, although the government has recently conceded that this notice period will remain at 7 days if the employer agrees; and
- employers would be allowed to use agency workers to cover striking workers.
We anticipate that these reforms will come in during 2016, although the more controversial aspects of the reforms will be subject to rigourous Parliamentary debate and adapted as the Bill progresses.
2016 – Review of employment tribunal fee system
The government is continuing with its review of the controversial employment tribunal fee system introduced in 2013. The government will consult on any proposals for reforms arising out of this review, which commenced in June 2015.
The Justice Committee is also conducting an inquiry into the impact of fees and whilst UNISON recently lost its judicial review of the fee system in the Court of Appeal, it has been granted leave to take its appeal to the Supreme Court.
2016/17 – Labour market abuse legislation
The government is consulting on potential new criminal offences of enforcement bodies to deal with breaches of minimum wage legislation, tax legislation and the Modern Slavery Act 2015 in the staffing supply chain.
2016/17 – IR35 review
The government will be consulting about changes to the so-called IR35 rules (sections 48-61 Income Tax (Earnings and Pensions) Act 2003) and may propose new simpler tests which, if failed, will pass liability for tax and NICs to hirers who use personal service company contractors
2016/17 – Volunteering leave
The Conservative party announced plans as part of its election campaign in 2015 for employees in the public sector and large private sector companies (250+ employees) to be given three days paid volunteering leave.
There has been no further news on this, but the indications are that this is still in the pipeline.
Early 2017 – Tax free childcare scheme
A new tax free childcare scheme is expected to be introduced to support eligible parents with childcare costs under the Childcare Payments Act 2014.
It is envisaged that the government will be providing 20% support up to a maximum of £2,000 per child per year. Parents will qualify if all parents in the household are working, with earnings of not more than £100,000 each a year, and are not already in receipt of tax credits or universal credit.
This was expected to be brought into force in autumn 2015 but has now been delayed until 2017. It will replace existing employer-run childcare voucher schemes, although employees will still be able to run these schemes for existing members.
April 2017 – Apprenticeship levy
In 2015 the government consulted on introducing an apprenticeship levy, which it is planning on bringing into effect from April 2017.
The levy would be at a rate of 0.5% of an employer’s wage bill. An allowance of £15,000 would mean that only employers with a wage bill of at least £3m would be caught.
It is intended that employers who had paid the levy would take on apprentices under an approved scheme, with the aim that they get back from the apprenticeship system more than they put in.
The 2016 Budget announced that, as part of the plans, employers in England would receive a 10% top-up to their monthly levy contribution to spend on apprenticeship training.
Guidance and further details are expected to be issued shortly.
For more information and details of all of the other areas covered by the Regulatory Timeline click here or download the full Timeline here.