The following changes are due to come into force in 2020:
1. Written statement of key terms to be provided to all workers (including employees)
Currently, employees are entitled to a statement of terms and conditions (as set out in section 1 of the Employment Rights Act) within two months of them commencing employment.
From 6 April 2020, all workers, including employees starting work on or after 6 April 2020, will be entitled to a written statement of key terms on or before the date they start work.
In addition to the information stated in section 1 of ERA, the Statement will need to include:
- the days of the week the worker is required to work, whether the working hours may be variable and how any variation will be determined;
- any paid leave to which the worker is entitled;
- details of any other benefits provided by the employer that are not already included in the statement;
- any probationary period, including any conditions and its duration; and
- any training entitlement provided by the employer, including whether any training is mandatory and/or must be paid for by the worker.
- It has always been good practice to issue a section 1 statement, contract of employment or worker agreement (whichever is relevant) on commencement of employment to ensure that both parties understand their obligations. This change simply creates a legal requirement to do so.
2. Holiday Pay – Changes to the holiday reference period and holiday pay calculations
Where a worker (or employee) does not have set working hours or their pay varies with the amount of work done or the days worked, in order to determine their holiday pay, at present, it is calculated by averaging out their pay over a 12-week period. From 6 April 2020, the holiday pay reference period will increase from 12 weeks to 52 weeks. This is to ensure that those who do not work regular hours or a regular pattern throughout the year are not disadvantaged. For those employed for less than a year, the calculation in based on the period worked.As you will already be aware, the calculation of holiday pay has become much more complicated over recent years following a series of high profile cases. As a result of the Employment Appeal Tribunal’s latest decisions and assuming the workers are paid regularly or repeatedly over a sufficient period to count as normal pay, the following should be included in the calculation of holiday pay for holiday pay (in respect of the 28 days including bank holidays for a FTE):
- Commission payments;
- Incentive bonuses;
- Overtime pay including overtime premiums whether compulsory or voluntary, guaranteed or non-guaranteed;
- Payments that relate to the “personal and professional status” of workers, such as those based on seniority, length of service or professional qualifications;
- Productivity/performance bonuses;
- Shift allowances and premiums (additional rates for working particular shifts, such as “time and a half”);
- Standby payments and payments for emergency call-out duties; and
- Travel and other allowances that are treated as taxable remuneration.
The following should not be included in the calculation of holiday pay for holiday pay (in respect of the 28 days including bank holidays for a FTE):
- Benefits in kind;
- Bonuses not linked to workers’ performance;
- Expenses (including travel expenses) which reimburse workers for costs incurred; and
- One-off bonuses and occasional payments. There currently remains a grey area over whether annual discretionary bonuses should be factored in when calculating holiday pay.
3. Termination Payments – Employers NICs payable in addition to income tax on termination payments
Currently where a termination payment of £30,000 or more is paid to an employee, the employee must pay income tax at their usual rate, on any amount over £30,000. No National Insurance contributions are payable. However, with effect from 6 April 2020 (and in respect of any payments payable on or after 6 April 2020), employers will have to pay class 1A employer national contributions on the amount of the termination payment over £30,000. Employee NICs are not payable. As such, employers should ensure that when budgeting for these payments, this additional cost is taken into account.
4. Parental Bereavement Leave and Pay
The Parental Bereavement (Leave and Pay) Act 2018 is expected to come into force in 2020 which entitles all employed parents or carers to a day-one right to up to two weeks’ leave if they lose a child under the age of 18 or suffer a stillbirth after 24 weeks of pregnancy. If the employee has more than 26 weeks’ continuous service, it is expected that they will be entitled to receive the statutory rate of pay (the same as statutory maternity or paternity pay). Otherwise, the leave is unpaid. This is subject to regulations which are yet to be confirmed.
5. IR35 and off payroll rules for private sector employers
The IR35 rules will be extended to the private sector from 6 April 2020.
The responsibility for deciding whether the amended off-payroll working rules apply will fall on the organisation receiving the individual’s services.
HMRC has issued its guidance in this respect which can be found at https://www.gov.uk/guidance/prepare-for-changes-to-the-off-payroll-working-rules-ir35
The guidance lays out the four key steps an organisation should take in order to ensure a smooth transition, including identifying affected individuals and implementing new processes to ensure the organisation is prepared.
Businesses should ensure that if they have any contractors who work via intermediaries, clients or agencies, that they have an action plan to review their current arrangements, their internal systems and their policies should the changes apply to them.
6. Agency Workers
Regulations come into force on 6 April 2020 which remove the Swedish Derogation exemption from the Agency Workers Regulations 2020. Currently, the exemption allows employment businesses to avoid pay parity between agency workers and direct employees if certain conditions are met, specifically that the workers are employed under contracts of employment. Agencies must inform relevant agency workers by no later than 30 April 2020 that the Swedish Derogation exemption no longer applies by providing them with a written statement to this effect.
From 6 April 2020, Agency workers will also be entitled to receive a key information document containing prescribed information including:
- their type of contract;
- the minimum expected rate of pay;
- how they will be paid and by whom (for example, an intermediary or umbrella company);
- any deductions or fees that will be taken;
- any non-monetary benefits to which they will be entitled; and
- any entitlement to annual leave and payment in respect of such leave, and an illustrative example of what this might mean for take-home pay.
The government also announced plans in the Good Work Plan to expand the remit of the Employment Agency Standards Inspectorate (EASI) to cover umbrella companies. We await further details in this respect.