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While employers are busy grappling with the overwhelming challenges posed by the Coronavirus (“COVID-19”) pandemic and the number of unknowns thrown up by the Coronavirus Job Retention Scheme, it can be difficult to think of business as usual, but a number of notable U.K. employment law changes quietly came into force on 6 April 2020. Meanwhile, the U.K. Government had previously announced that radical changes to the off-payroll rules, known as IR35, would be postponed until 6 April 2021 and other deadlines would be suspended until further notice in light of the obvious economic pressures caused by the COVID-19 pandemic. Therefore, we summarise below the changes now in force and those coming down the proverbial pike so that there are fewer “unknowns” for employers in this strangest of times.
Changes in Force from 6 April 2020:
A. Section 1 Statements
Prior to 6 April 2020, employers were obliged to provide employees with written statements of particulars of employment—setting out certain terms of the relevant employee’s employment—within two months of their commencement date. However, this duty will be extended for those who did not receive a written statement before 6 April 2020, as follows:
- Employers must provide both employees and workers with written particulars;
- Written particulars must be provided before the relevant employee or worker commences work (subject to certain exceptions such as details relating to pensions schemes, which may be provided up to two months after the start of employment), irrespective of the anticipated length of the engagement; and
- The extent of the information to be provided will be expanded to include, for example, details relating to any applicable probationary period, training, and benefits provided by the employer.
Employers should check their take-on documents to ensure that they are compliant. A failure to comply with this obligation may result in the employees or workers making a complaint to the Employment Tribunal for a determination and/or, if the employee or worker has a successful substantive claim, a claim for compensation of between 2–4 weeks’ pay (subject to the statutory cap on a week’s pay).
B. Holiday Pay
As of 6 April 2020, holiday pay should be calculated by reference to average pay over a 52-week reference period (or the individual’s length of engagement if they have fewer than 52 weeks’ service). The traditional method of calculating holiday entitlement at 12.07% of hours worked remains a fairly accurate method for those individuals with regular working patterns, but is no longer considered an appropriate way of calculating holiday pay for those with irregular hours.
Whether employers can require their employees to take accrued annual leave during furlough leave remains a hot topic. This matter has been exacerbated by a Government announcement that employees and workers may carry over any accrued but untaken portion of their four-week statutory minimum period of annual leave under the Working Time Regulations to the next two leave years, if it is “not reasonably practicable” for them to take the leave as a result of the effects of COVID-19. This will need to be borne in mind by employers over the next two years or so, in respect of their existing workforce and leavers who are entitled to accrued but untaken annual leave on termination.
C. New Minimum Statutory Rates
Statutory minimum payments have increased since 6 April 2020, in line with the annual increase in the Consumer Prices Index. Subject to eligibility criteria and other requirements, these include the following:
- Statutory maternity / paternity / adoption pay / maternity allowance / shared parental pay : £151.20 per week
- Statutory sick pay: £95.85 per week
- Statutory redundancy pay: capped at £16,140
- Week’s pay (for the purposes of statutory redundancy pay and unfair dismissal compensation): capped at £538
In addition, the National Minimum Wage has increased since 1 April 2020. This means, for example, that employees and workers aged 25 years and older are entitled to at least £8.72 per hour (up from £8.21 per hour). This is the most substantial increase to the National Minimum Wage in recent years.
D. Information and Consultation
The threshold required for a request to set up information and consultation arrangements has decreased from 10% to 2% of employees in the undertaking, subject to a minimum of 15 employees required to make the request.
E. Key Information Documents
All agency workers must be provided with a document setting out certain key information relating to their engagement before agreeing to terms under which the work-seeker will undertake work, including the following:
- The type of contract;
- Details relating to pay, including the method of payment and any fees or other deductions that may be taken; and
- Any entitlement to annual leave.
F. Swedish Derogation
The “Swedish derogation”, which provides an exception to provide pay parity between agency workers and employees subject to certain criteria, is no longer effective since 6 April 2020.
As a result, by 30 April 2020, agencies must provide agency workers with written confirmation that those provisions will no longer apply. In addition, employers who rely on Swedish derogation provisions will need to consider more generally how to structure their engagement of agency workers going forward.
Postponed Changes / Suspended Deadlines:
A. Changes to Existing IR35 Rules, from April 2021
The Government has announced radical changes to the off-payroll rules, known as IR35. The new rules apply to certain medium- and large-sized private companies that meet two or more of the following conditions:
- Annual turnover greater than £10.2 million; and/or
- Balance sheet total greater than £5.1 million; and/or
- More than 50 employees.
If those conditions are met, the company and its subsidiaries (if any) are required to assess the employment status of any worker engaged via a third party intermediary and pass that status determination statement (including the reasons for the determination) to both the relevant intermediary and worker. If the company determines that the worker would be classed as an employee if they were contracted directly, the company is obliged to deduct and pay tax and National Insurance contributions to Her Majesty’s Revenue and Custom.
If the third-party intermediary disagrees with the company’s assessment, the company must consider the basis for the disagreement and within 45 days of receiving the notification, provide a response either: (i) confirming the original determination and giving reasons why; or (ii) provide a new determination.
Failure to take reasonable care to make a determination as to employment status and/or failure to respond within 45 days of a challenge from the intermediary as to employment status may result in the company being liable for the worker’s tax and National Insurance contributions.
B. 2019/2020 Gender Pay Gap Report, Suspended
It has been announced that the obligation for relevant employers to publish their 2019/2020 gender pay gap information has been suspended, due to the unprecedented uncertainty and pressure caused by the COVID-19 pandemic. This means that employers will not be subject to any investigation or enforcement action if they have failed to publish their gender pay gap report in accordance with statutory requirement before 6 April 2020.
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