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Employment law changes 2020: what employers need to know

24 January 2020

There are a number of important employment law developments already confirmed with other new developments on the horizon in 2020.

1 April 2020: Increases to National Living Wage and National Minimum Wage

The National Living Wage (payable to workers aged 25 and over) will increase from £8.21 to £8.72.

The Nation Minimum Wage will increase as follows:

  • Workers aged 21-24 from £7.70 to £8.20
  • Workers aged 18-20 from £6.15 to £6.45
  • Workers aged over compulsory school age under 18 from £4.35 to £4.55
  • Apprentices from £3.90 to £4.15

6 April 2020: Change to Employment Contracts/Section 1 Written statement of terms

All employees and workers who start work on or after 6 April 2020 must be given a written statement on or before the first day of work, rather that within two months, as currently required in relation to employees. This is known as a ‘day one’ right. In addition to information that employers are already required to provide, the written statements/contracts must also set out:

  • Details of any probationary period including any conditions that apply
  • The days of the week the individual is required to work and whether the days or hours could change and if so how
  • Any paid leave (other than sickness or holiday)
  • Any training provided by the employer and any other training the individual has to complete which the individual has to pay for.

There are transitional arrangements which mean that updated written statements do not have to be issued to existing employees on 6 April but they can request their employer to provide the updated information, which must be provided within one month of the request.

6 April: Changes to Holiday pay calculation period for workers with irregular working hours

The current rules for calculating holiday pay for workers, who have irregular working patterns, with fluctuating hours and payment, requires calculating a week’s pay by averaging the hours of the previous 12 weeks worked. From 6 April, the reference period will increase from 12 weeks to 52 weeks.

If the worker has worked for less than 52 weeks, their holiday pay will be based on the number of complete weeks they have worked. This change is more likely to fairly reflect the average pay of a worker.

You can read our recent article on Section 1 statements here.

6 April: Changes to Taxation of Termination Payments over £30,000

Most termination payments in excess of the notice period/notice pay will be free of PAYE and employer and employee NICs up to the first £30,000 with any excess subject to PAYE but not NICs.

From 6 April, PAYE and employers NICs of 13.8% will apply to the amount of the termination payments in excess of £30,000.

6 April: Changes to the ‘Swedish derogation’ for Agency Workers

The Agency Workers Regulations currently allow temporary work agencies to enter into employment contracts with agency workers where the agency workers opt out of the right to receive equal pay with direct employees of the hirer after they have worked for the hirer for 12 weeks.

The opt out of pay parity (known as a Swedish derogation agreement) will no longer be possible. Those agency workers who have entered into a Swedish derogation agreement must, by no later than 30 April 2020, be given a written statement by the agency that they are entitled to pay-related equal treatment under the Agency Workers Regulations.

Those client companies who engage agency workers for more than 12 weeks may find that their costs will increase as a result of this change.

6 April: Off payroll working – new IR35 Rules

The new IR35 rules or the ‘off-payroll workers’ will ensure that medium and large businesses become responsible for assessing the employment status of individuals who work for them via a personal service company (PSC) or some other intermediary.

If (ignoring the existence of the PSC/Intermediary) a worker would be regarded as an employee for tax purpose, the fee payer will need to deduct PAYE and employee NICs from any fee paid to the intermediary/PSC and account for it to HMRC and will also be liable to pay employer NICs.

Medium and large businesses will need to prepare ahead for these changes. You can read our Insight piece on this topic for more details here.

Although the government announced in the new year that there would be a Treasury review, the Treasury confirmed last week on its website that the IR35 changes are still expected to come into force on 6 April. The review, which is due to end in mid-February, will focus on how to ensure implementation of the reforms will be as ‘smooth as possible’.

6 April 2020: Parental Bereavement Leave and Pay – to be called ‘Jack’s Law’

Parents who lose a child under 18 or who suffer a still birth (from 24 weeks of pregnancy) will be entitled to take two weeks’ statutory leave but the employee must have 26 weeks’ continuous employment before they are entitled to receive statutory pay during their bereavement leave.

The leave can be taken in two consecutive weeks or two single weeks within the first 12 months of the child’s death. Birth parents as well as those with parental responsibility will be entitled to bereavement leave.

Employment Bill

The Queen’s Speech included an Employment Bill most of which was included in the Good Work Plan or the Conservative’s manifesto. The proposals include:

  • A right to request a more predictable contract for all workers (which will be particularly relevant to those working on zero hour or variable hour contracts)
  • A new right to neo-natal leave for parents whose babies require neo-natal care after birth
  • A right to one week’s leave for unpaid carers
  • Extending redundancy protection to prevent pregnancy and maternity discrimination for employees whilst pregnant or shortly after returning from maternity leave or adoption leave
  • The introduction of ‘flexible working by default’ – but this will be subject to a government Consultation before any change in the law is made.

Brexit

Although the UK is due to leave the EU on 31 January, it is not clear if we will see any Brexit-related employment changes in 2020.

During the transition period up to 31 December 2020 the UK will continue to apply EU law and the decisions of the Court of Justice of the European Union will continue to be binding on UK courts and tribunals.

Brexit workforce planning

During the transition period until 31 December 2020, EEA nationals will still be able to come and work in the UK. Employers should ensure that their EEA workers obtain settled status to enable them to stay after the expiry of the transition period.

EEA Nationals who are resident in the UK by 31 December will have until 30 June 2021 to make an application for settled status.

There is likely to be a new points-based immigration system that will be in place after the transition period and the Migration Advisory Committee is expected to report further on this later this month.

Employers should carry out an audit of their workforce to see if there may be staffing gaps if they currently rely on EEA nationals.

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