However, there are still a number of key changes for employers to take on board, most of which result from the Government’s Good Work Plan and are due to take effect from April 2020. A summary of the main changes for 2020 is set out below.
Increases to statutory rates of pay
With effect from 1 April 2020, the hourly rates of the National Minimum Wage and National Living Wage will increase as follows:
- Apprentice rate (under 19 or in the first year of an apprenticeship): £3.90 to £4.15
- 16-17 years: £4.35 to £4.55
- 18-20 years: £6.15 to £6.45
- 21-24 years: £7.70 to £8.20
- 25+ (National Living Wage): £8.21 to £8.72.
The weekly rate of statutory maternity, paternity, adoption and shared parental pay is due to increase from £148.68 to £151.20 per week, with effect from 5 April 2020 (to be confirmed).
Statutory sick pay (SSP) is also due to increase from £94.25 to £95.85 per week from
5 April 2020 (to be confirmed).
Written statements of terms
From 6 April 2020, all new employees and workers will have the right to a statement of written terms of engagement from their first day of work. Additional information will have to be included as part of the extended right.
Currently, only employees have to be provided with a written statement of terms, within two months of starting work. The new obligation is to provide a statement to both employees and workers on ‘day one’. Employers will also need to ensure that the statement is revised as necessary to include every element of the new requirement.
Employers should also consider who might qualify as a worker, issuing contracts of employment only to employees and using a separate template when issuing statements for workers.
IR35 in the private sector
From 6 April 2020, changes to IR35 rules will affect those medium and large businesses within the private sector that engage individual contractors (known as off-payroll workers). These changes will largely mirror changes that took effect in the public sector in 2017.
The IR35 rules apply where an individual worker performs services for a client through an intermediary (usually a personal service company or PSC) and the relationship between the parties is regarded as being one of ‘deemed employment’ for tax purposes.
At present, in the private sector it is the intermediary’s responsibility to determine whether IR35 applies and whether tax should be deducted on payments to the worker. Under the new regime, the onus will shift from the intermediary to the end user client to make a status determination for tax purposes. Responsibility for accounting for tax and national insurance on payments for the worker’s services will shift from the intermediary to the party who pays for the individual’s services, known as the ‘fee-payer’. This may be the end user client, or agency if the worker is engaged through an agency.
The Government has recently launched a review into implementation of these changes, due to conclude by mid-February. It is not anticipated that this will delay the introduction of the reforms, but it has announced that the changes will only apply to services provided on or after 6 April 2020 (not as previously thought to payments made on or after that date).
In anticipation of the new rules, it is essential that medium and large businesses carry out an assessment to determine whether the new rules will apply to their independent contractors, and carry out a status determination in respect of each contractor. HMRC has recently updated its CEST tool to assist businesses in carrying out a status determination for tax purposes.
From 6 April 2020, the ‘Swedish derogation’ is removed from the Agency Workers Regulations 2010. This currently provides an exemption to the right to equal pay for agency workers who are employed under a permanent contract of employment with the temporary work agency and are paid by the agency for periods between assignments. After 6 April 2020, all agency workers who have completed 12 weeks’ continuous service working in the same role will be entitled to equal pay to workers who are engaged directly by the employer.
On or prior to 30 April 2020, agency workers whose existing contracts contain a Swedish derogation provision must be provided with a written notification by the agency that it will no longer have effect.
In addition, from 6 April 2020 all agency work-seekers must be provided with a key facts statement setting out the terms under which they will undertake the work.
As we reported last year, government guidance on the Agency Workers Regulations 2010 has been updated to reflect the removal of the Swedish derogation.
Holiday pay reference period
From 6 April 2020, the period for calculating an individual’s average weekly pay (for the purposes of calculating statutory holiday pay) will increase from 12 weeks to 52 weeks. This will apply to workers with no normal working hours, and workers with normal working hours but whose pay varies with the amount of work or the times/days when it is done.
Employers will be required to use the 52 weeks prior to the holiday period, disregarding any weeks not worked or where no pay was received, to calculate the average weekly pay. If the worker has worked for less than 52 weeks, the employer should use the complete number of weeks the individual has worked.
The intention behind this change is to even out variations in pay for calculating holiday pay for those who do not have a regular working pattern throughout the year, particularly for those in seasonal roles.
The existing guidance on calculating holiday pay has not yet been updated to reflect this change.
Information and Consultation
From 6 April 2020, the threshold for requesting formal information and consultation arrangements under the Information and Consultation of Employees Regulations 2004 will be reduced from 10% to 2% of employees, subject to a minimum of 15 employees and only in workplaces with 50 or more employees. A valid request will trigger the statutory process for implementing information and consultation arrangements, and the lowering of the threshold will therefore make it easier for employees to seek such arrangements.
Taxation of termination payments
From 6 April 2020, termination payments above £30,000 will be subject to employer’s class 1A National Insurance Contributions. Currently, most termination payments (other than payments in respect of notice pay or other payments taxable as earnings) are not subject to either employer or employee NICs. Payments above £30,000 will continue to be exempt from employee NICs.
The Parental Bereavement (Leave and Pay) Act 2018 gained royal assent in September 2018 and will give bereaved parents the right to two weeks of leave following the loss of child under the age of 18, or a stillbirth after 24 weeks of pregnancy.
It has been confirmed that the new right will come into force on 6 April 2020. Separate regulations have now been published setting out details of the new right.
Bereaved parents will be entitled to take their leave in one two-week block or in two separate blocks of one week in the period of 56 weeks following the child’s death. The right is available to all employed parents, but only those with a minimum of 26 weeks’ service will be entitled to receive statutory parental bereavement pay.
For further details, see our previous article.
Following the December 2019 Queen’s speech, we are likely to see a new Employment Bill published at some point during 2020, including at least some (if not all) of the following proposed measures:
- a new single enforcement body for the labour market, which has already been the subject of a government consultation (response awaited)
- protecting tips and service charges for workers
- a new right to request a more predictable and stable contract after 26 weeks’ service. The Government has already consulted on ‘one-sided flexibility’ and has indicated that a separate consultation will be published on the right to request a more stable contract
- extending redundancy protection during pregnancy and on returning from maternity leave. This has already been the subject of a consultation and the Government has confirmed that the redundancy protection period will extend to six months following a mother’s return to work
- extending the period of leave available to parents of premature or sick babies. This has already been the subject of a government consultation (response awaited)
- proposals in the Conservative Party’s manifesto relating to leave for unpaid carers and flexible working (both subject to further consultation).
This article is from the January 2020 issue of Employment and Immigration Law Update, our monthly newsletter for HR professionals. To download the latest issue, please visit the newsletter section of our website. For further information please contact Liz Stevens or another member of Birketts' Employment Law Team.
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at January 2020.