Key Employment Law changes for employers 2018
Below are listed all the changes in Employment Law for 2018, and those on the horizon coming in 2019.
Larger employers were kept very busy preparing to publish their Gender Pay Gaps by the April 2018 deadline. Companies are supposed to detail plans for how they will tackle any gap. Given the sizeable gaps revealed across the board, and the media spotlight on the issue, the pressure on individual employers to show reduced gaps by next April 2019 will be very high; an ongoing priority for HRs and boards.
There are important changes to the taxation of termination payments, as well as increases to the National Minimum Wage rate in April 2018 (and coming in April 2019). 2018 sees increases also to statutory payments e.g SSP and redundancy pay.
Throughout the year, the courts have been busy deciding on the employment status of workers in the gig economy. We explain the likely effect of the rulings, as they come in, on business practice.
Following the abolition of ET fees last July, the number of people lodging claims at Employment Tribunals has been rising fast, to a remarkable 90% increase between October to December 2017 compared to the same period in 2016, according to the Ministry of Justice figures published in March. (It’s worth noting that this 90% rise is from a very small base, as the numbers of employees bringing ET cases plumetted after fees were introduced in 2013). Nonetheless, now would a good time to review our advice for best practice and rules for de-risking your business against workplace claims.
And then there is GDPR compliance from 25th May and beyond. We have listed the 10 things Employers and HRs must do. The key with GDPR compliance is to start, and then to keep going, reviewing it regularly.
Click on the headings in the table for more details. The “Next Steps” column highlights initial actions to take.
To keep up to date with the new employment laws and what they mean for your business, subscribe to our updates by clicking the sign up now button in the column to the right of this article.
Key Employment Law changes for employers 2018
|Date||Key Employment Laws
Spring 2018 – 2019
|1st April 2018||
National Living Wage rise
25 yrs+ £7.83 (NLW)
The Low Pay Commission has begun to consult on the national minimum wage rates for 2019.
We explain the difference between National Living Wage, National Minimum Wage and the Living Wage here.
|Ensure all staff salaries are reviewed to comply with the new hourly rates.|
|1st April 2018
From 1st April 2018, the rates of Statutory Maternity, Paternity, Shared Parental and Adoption Pay rise to £145.18 per week
From 1st April 2018, employees qualifying for SMP, SAP are still paid enhanced pay of 90% of their average weekly earnings for the first 6 weeks, but the remainder (33 weeks for SMP, for SAP the remainder of the adoption period) is paid at this new rate £145.18.
Maternity Allowance also rises to £145.18 per week from 9th April 2018.
|SMP,SPP,ShPP, SAP rate rises from£140.90 per week to £145.18 per week.|
|6th April 2018||
SSP, Statutory Sick Pay
The rate of Statutory Sick Pay increases to £92.05 per week.
The same qualification criteria apply to receive these statutory payments.
To be entitled, the employee’s average earnings must be equal to or more than the lower earnings limit.The lower earnings limit increases to £116 in April 2018.
|SPP rises from £89.35 to £92.05 per week.|
6th April 2018
Changes to taxation of termination payments
From 6th April 2018, all payments in lieu of notice are subject to tax and NI, regardless of whether they are contractual or not.
In the past, whether or not a payment in lieu of notice (PILON) was subject to tax depended on the terms of the employee’s contract and what was the custom and practice of the employer when making previous PILONs.
If the contract had an express clause allowing payment in lieu of notice, or if the employer’s practice was to pay in lieu, the payment was considered as wages, and subject to tax and NI.
If there was no express clause, no custom and practice and no possibility of it being implied in the contract, the payment was considered as compensation for breach of contract, and the first £30,000 was tax free.
HMRC has tightened up the rules so that in almost all cases the employer will deduct tax and NI from the leaving employee for any payment which covers the notice period which the employee would usually have worked but the employer has decided instead to pay as a PILON.
The employer will need to show to HMRC a calculation of this Post-Employment Notice Pay.
Take note, the Treasury now has power to change the £30,000 tax free termination payment level. An additional tax free or ex-gratia compensation payment is sometimes agreed in a settlement negotiation. This payment does not have tax or NI deducted up to the £30,000 level because it is not a contractual payment under the employment contract eg. for salary and benefits, commissions, bonus etc. For any compensation payment above £30,000 the employer must deduct tax and from 6 April 2019 employer NICs (currently 13.8%) but not employee NICs (currently 2%).
|Ensure you deduct tax and NI from all payments in lieu of notice.
Settlement negotiations are usually complex.
We will help you make sure that the Post-Employment Notice Pay is correctly calculated so you are ready if HMRC investigate.
Employers will need to ensure they can clearly explain the taxation of the settlement payments so the employee knows they are being treated fairly and correctly.
Get in contact to plan these negotiations before you start them and to ensure that the settlement package complies with these tax law changes.
|4th April 2018 deadline for publishing||
Gender Pay Gap reporting
for the private sector.
Over 10,000 private and charity organisations with more than 250 staff published their gender pay gap information by the 4th April deadline. The information was made public on a government database, and the results caused a media storm. The data shows that 78% of employers pay men more than women. 8% reported no gap at all.
The Gender Pay Gap figures of large public sector employers, reporting by the end of March, revealed that men are paid, on average more than women in 90% of cases.
Women working in the public sector receive on average 19% less than men, with significant gaps reported in NHS, universities, central and local government.
The gender pay gap is the difference between the average hourly earnings and bonus payments of men and women. It is worked out using most common hourly earnings figures. See a worked example below.
Companies are also asked to report the difference in median hourly earnings and bonus payments of men and women. This is a typically more accurate figure, as the mean (a simple average) can be skewed by a handful of highly paid employees.
|This is just the beginning of a longterm nationwide debate as UK organisations work to limit and remove the gap.
Whatever the size of your business, consider taking new or faster actions to identify, reduce or eliminate gender pay gaps within your organisation. Follow our worked example of a simple pay gap calculation below.
ACAS reporting guidance also has some helpful tools for gender pay gap reporting including a template letter for reporting to employees.
Much has been written already in the media about the reasons for the sizeable gender pay gap in the UK that has been revealed by this reporting. The data suggests that the principal reason is under-representation of women in senior roles.
Removal of unconscious bias from organisations, a call to embed a culture of flexible working, and increased help with childcare costs are among many ideas that are being considered.
Solutions by sector, and on a company by company basis are likely to emerge as sectors and organisations take action to address their specific challenges, and effective best practice begins to appear, and be adopted.
|25th May 2018||
New Data Protection regime arrives GDPR
The EU General Data Protection Regulation (GDPR) harmonises data protection rules across the EU including the UK and will affect employers in 2018.The new Data Protection Act 2108 enshrines GDPR into UK law no matter what happens with the UK:EU relationship.
The overall premise of GDPR is that individuals should be in charge of their personal data. GDPR require companies (called “Data Controllers” because they determine “How” and “Why” personal data is collected and used) to analyse and make clear how they collect and process the data of an individual (called a “Data Subject”), why they are keeping it, for how long, and how they keep it secure.
The Information Commissioners Office (ICO) can levy fines on firms who break the rules. The fines can be up to 4% of turnover in serious situations.
Every employee will be a Data Subject and his/her HR data is covered by GDPR. His/her HR data is personal information from which the employee can be identified. e.g names, addresses, bank details, IP address, national insurance numbers, next of kin, sickness absence and health data.
The employer has to be particularly careful to ensure it clearly explains to employees why it may need to collect health data and certain other sensitive data eg ethnicity for equal opportunities monitoring at the recruitment stage.
The changes, put briefly, are as follows:
6 principles: these principles confirm that the employer can only collect data with basically employee consent or where there is a legitimate purpose which is clearly explained. The employer should only collect a reasonable and necessary amount of data, maintain its accuracy, keep it for only as long as is necessary and store it securely (whether onsite or via a third party (called a “Data Processor”) eg a payroll supplier using the cloud.
Accountability: this means that the employer must show it is complying with the GDPR principles. The way to show this is by following certain required processes (see next column) and having a documented ongoing compliance plan.
Right to be forgotten:
Data Subject’s Rights “Amend it, Delete it, Freeze it”:
Transfer of Data outside the EU: GDPR stops data transfers outside the EU unless certain safeguards are in place and followed.
|GDPR compliance is not just for 25th May.
Ongoing compliance is equally important to show the Accountability obligation has been complied with. The infographic below explains the types of HR data that organisations collect, and how HR data is typically stored and where it is often outsourced for processing to Data Processors.
Once you have mapped the HR data flow in your organisation, you will be in a position to list your processing activities and risk assess the important areas for your GDPR compliance plan: for example, you can plan the changes you will need to make so that employees receive an additional document called a Privacy Notice explaining how the employer will process their personal data. In effect you are conducting a Data Audit.
Once you have identified where employee HR data is outsourced to be processed (for example to your payroll, pension, healthcare scheme companies) you can plan the new contractual terms with those companies that GDPR requires for processing that data. These organisations may also be joint Data Controllers if they also determine “How” and “Why” personal data is being collected and used.
Employers need the following documents and work-streams as part of their ongoing compliance plan:
We have seen from advising our clients over the last 18 months on GDPR that each organisation has different GDPR compliance requirements and risk areas. Careful thought and analysis is required in steps 1 to 9 above to show that the Accountability obligation has been met.
This is therefore not a comprehensive GDPR compliance list but a very good starting point to speak with us. Get in touch if you need help becoming and staying GDPR compliant.
Employment Status of Workers
The Good Work plan: government proposals in response to The Taylor Review.
To Taylor’s recommendations on employment status of workers, the Government offered no firm commitments, instead proposing a further consultation (one of 4) to explore the best ways to get better clarity for those on the boundary between employment and self-employment. The consultation also covers certain other Taylor Review recommendations that the Government has neither committed to nor rejected. It also covers issues concerning the definition of working time for the purposes of the national minimum wage (NMW). So it seems unlikely that there wil be any legislative change to employment status tests soon.
The Government did accept many of Taylor’s recommendations in principal, and stated its commitment to:
It rejected the Taylor Review’s recommendation on the use of rolled-up holiday pay as unlawful under EU case law.
On a closely related issue, the government has said it will propose employee representation on company boards. As yet there are no real details and again we will report on this as they emerge.
There are similar reports from BEIS and DWP due in late 2018, Spring 2019.
Update November 2018
Uber to appeal to CA the Landmark ET ruling
|Employment Status of workers
Addison Lee v Gascoigne
In May 2018, Addison Lee (AL) lost its appeal to the Employment Appeal Tribunal which upheld an earlier Employment Tribunal (ET) decision that an Addison Lee cycle courier was a worker, not a self-employed contractor.
The EAT found that once the courier was logged onto the AL app, there was sufficient mutuality of obligation (both sides expected he was available for work, would be provided with it and would carry it out as directed by the AL controller) to establish his status as a worker.
The courier had brought a claim for holiday pay in 2017, arguing that he was a “worker” as defined under “Limb B of the Working Time Regulations 1998″.
A further EAT ruling against Addison Lee in this later Lang case, confirmed that Lang was a worker because he was continuously logged into the AL app and therefore under their control.
Pimlico Plumbers v Smith
Now established as a worker within the meaning of The Employment Rights Act 1996. Mr Smith may now bring a case for unfair dismissal.
Uber V Aslam
Uber launches an appeal to the Court of Appeal challenging the landmark ET ruling (in 2016) that the company’s drivers were workers. Both the plumbers and the Uber drivers were found to be workers, rather than self-employed.
This trend of the courts finding for worker status when business are challenged looks set to continue. But each case will depend on the specific facts and the terms made between the individual and the company they work for, (this is important, read the next steps column).
Companies in the “gig” economy, operating through platforms or apps, and those relying on a freelance on-demand workforce, would be wise to plan for these people being workers, with rights to NMW and paid holiday etc.
There will be more cases, brought from the tax and the employment perspective. For example, delivery company Hermes has for many months been under investigation by HMRC for wrongly classifying its couriers as self-employed and not paying NI, PAYE and the NMW.
This is particularly important when companies wish to have control over the branding and quality of the service delivered.
|For employers, the key take away from all this is a caution to consider carefully whether the freelancers or contractors in the business are genuinely self employed, or are they, in fact, workers.
The issue of control, critical in the Uber and the Pimlico Plumbers cases is likely to become even more important in determining worker status.
The more control the business exerts over an individual, including over the quality of service they give and the branding at point of delivery, the more likely that person will be a worker.
In the arrangement between the business and the freelancers, contractors
then these are strong indicators that the freelancer, contractor is in fact a worker.
If on the other hand, freelancers and contractors have the freedom to choose when they work, whether to take on work or not, and can substitute someone else to do the work in their place, (substitution) these are important indicators of self-employment.
From Pimlico Plumbers V Smith employers should be aware that if a “contractor” is allowed to replace themselves only with another “approved” individual working in the same business, then the “contractor” is likely to be considered a worker.
The ruling in Addison Lee V Gascoigne confirmed the likelihood that when an individual is logged onto / working via an app, this provides enough mutuality of obligation to establish them as a worker.
But, don’t assume that individuals can no longer be self employed, including in the “gig” economy. (In the Deliveroo case late last year, riders were ruled to be self employed contractors and not workers, in large part because they had the freedom to substitute another to do their work.)
These cases turn on the facts.
Employers need to look at the actual on-the-ground, day to day, arrangement between the individual and the company, rather than relying on what is written in the contract.
Once you know what you have, make time to check and where necessary tighten contractual documents.
With case law marching ahead of the Government’s activity, this area can be a minefield.
If you are in any doubt about the employment status of your people in the business and need help or advice
|6th April 2018||
Tribunal Compensation Limits
From 6th April 2018 the maximum compensatory award for unfair dismissal rises from £80,541 to £83,682 .
The maximum amount of a week’s pay, used to calculate statutory redundancy payments, and various awards for basic and additional awards for unfair dismissal also rises from £489 to £508.
|You will need to use the updated £508 per week gross salary for calculating eg statutory redundancy payments.|
Childcare Voucher Scheme
The deadline for closing the current Childcare Voucher Scheme to new entrants is extended to October 2018.The Government has been planning to remove the current system of childcare vouchers and introduce a new tax-free childcare scheme. Plans were deferred throughout 2017 to March 2018 and have been deferred again until October this year.
|This is so important to working parents. Currently, the childcare voucher scheme can save parents up to £933 on childcare per year.
Eligible parents can have 20% of their childcare costs each year paid by the Government, up to a limit of £2000, or £4000 for a disabled child.Ensure working parents know of the extension to the decline, for the current scheme.
Contact your company Accountants, or payroll department, for advice on setting up a scheme.
Taxation of Termination Payments
The proposed introduction of employer NI contributions on termination payments of more than £30,000 which was due to come into force from 6th April 2018, has been delayed until 6th April 2019.
Employment Status of workers
Government consultations following Taylor recommendations
Taylor Review recommendation
All workers (including those in the gig economy) who are neither full employees nor genuinely self-employed should be reclassified in Employment Law as Dependent Contractors. This would mean they are automatically entitled to sick pay, holiday pay, and the minimum wage. If implemented, this reclassification would shore up the rights of those working in insecure roles and lead to greater wage costs for employers.
Government response and proposed consultations
The Government accepted that there was a lack of clarity surrounding the tests for employment status, but did not take up this recommendation, nor did it provide any solutions on how to achieve greater clarity.
Despite its stated commitment to taking action in this area, including considering legislative options, its position is that these recommended changes to employment status represent the single largest shift in employment status since the Employment Rights Act in 1996.
It was concerned that any action it takes preserves flexibility in the labour market and does not impose any unnecessary burdens on business or adversely impact the ability of those in the labour market to work.
Hence its proposal of further consultation to gain clarity on Employment status for those on the boundary between employment and self-employment.
Options under consideration are:
- a “Precise Criteria” test: a test based on price and objective criteria, such as:
length of engagement,
the percentage of an individual’s income that comes from a single employer, and
where the work is done
- a “Precise structure” test: similar to above but the test is based on a clear order, hierachy and weighting of the criteria
- A less complex test by reducing the number of factors to consider. The Government used as an example the test for taxing individuals who work through agencies, which depends on whether they work under the “supervision, direction or control of another”.
The Government is launching 3 other consultations on the recommendations made by the Taylor review, seeking views on legislation for:
- protecting agency workers
- measures to increase transparency in the UK labour market and
- enforcing employment rights:
HMRC taking responsibility for enforcing the core pay rights of national minimum wage, sick pay and holiday pay for low paid workers.
naming and shaming those employers who do not pay employment tribunal awards
increasing ET fines for employers showing malice, spite or gross oversight to £20,000 and considering increasing penalties for employers who have previously lost similar cases.
The changing nature of how we work: in figures
CIPD research estimated that in 2017 there were 1.3 million people, 4% of working adults, working in the “gig” economy and suggested that this figure will continue to grow.
A more recent CIPD UK working lives survey of 6000 individuals across a number of sectors, would seem to bear out these figures
Its difficult to calculate with any certainty the numbers of people on zero hours contracts. Figures gathered by The Labour Force Survey and the Business Survey figures vary showing between just over 900,000 (LFS) and 1.8 million (BS) people on Zero Hours Contracts. The The Taylor report in 2017 noted that just under a million people, 2.8% of those in employment, are reported to be on a zero hours contract.
18% of those on ZHCs are in full time education, suggesting the flexibility of such contracts is a benefit to students.
The number of self-employed people has doubled over the past 40 years,
up from 7% of the UK labour market in 1979, to 12% in 1990, and to 16% in 2016.
Gender Pay Gap Reporting
The gender pay gap refers to the differences in average pay between men and women across an organisation, or the labour market, over a period of time, no matter what their role is.
It is worked out using most common hourly earnings figures for UK employees: see a simple worked example below.
The gender pay gap is not the same as gender pay inequality or wage discrimination. It doesn’t mean ‘women getting paid less for doing the same work, work rated as equivalent or work of the same value as men: This right to “equal work for equal pay” is set out in the Equality Act 2010.
For example, Gender Pay Gap reporting may reveal that on average men earn 36.8 % more per hour than women (as in the worked example here). or that the lowest paid quarter of the workforce is mostly female (which is also the case in our example). If you have more men than women in senior positions within your organisation, the organisation will show a gender pay gap.
General Data Protection Regulations
Below is an infographic showing an example HR Data map. This shows where HR data typically comes into the organisation, where it is stored, and where it is outsourced for processing.
This is a first step. You will need to decide whether your organisation is a Data Controller or Data Processor. All employers will be a Data Controller of HR personal data when they collect this data from their staff. These terms are used in the infographic so HR professionals can start to see an overview of the HR data collection process and start the GDPR compliance compliance plan.
Preparing for the General Data Protection Regulation (GDPR) 12 steps to take now is useful document from the Information Commissioners Office that outlines the 12 steps to take for GDPR compliance and covers customer as well as HR Data and contains further information.
The general employment law landscape and key employment law changes in 2018 mean there is much for employers to get their heads around. As this article seeks to bring you the nub of the issues and how they might affect your business and HR practices, it doesn’t constitute legal advice, and should not be taken as such. Far better to get in contact if you need help and advice on your particular situation, either by email, or call me directly on 0208 255 1914.