A number of employment law reforms are expected to come into force in April 2020 which HR Optimisation recommends you prepare for. Below is a summary of the key changes that could affect your business in the coming months.

The Leave and Pay Act
Expected to be rolled out in April 2020, this is a parental bereavement leave right which will give employees a period of time off from work following the death of a child under the age of 18 or a stillbirth. Employees who have been with a company for 26 weeks or more will be entitled to paid leave whereas other shorter serving employees will be entitled to unpaid leave. Although as the details of the entitlement have not yet been published for consultation, this may be delayed.

Holiday pay reference period
From 6 April 2020, the reference period for determining an average week’s earnings for holiday pay calculation purposes will increase from 12 weeks to 52 weeks for workers who work different hours from one week to another. This is intended to ensure that workers who do not have a regular working pattern throughout the year are not disadvantaged by having to take their holiday at a quiet time when their weekly pay may be lower. This means that employers will need to look back over the past 52 weeks, discarding any weeks that a worker did not earn, to calculate their average weekly pay.

Agency workers
From 6 April 2020, all agency workers will have a right to the same pay as direct employees after 12 weeks of service. The current exceptions allowing differences in pay will no longer be permitted (known as “the Swedish derogation” rule). This means that your outgoings for agency workers may increase to mirror the pay of permanent employees for longer assignments.

Contracts By First Day of Employment
From 6 April 2020, all workers (so not just employees) will have a right to receive a written statement setting out the terms of their employment either before they begin work or on the very first day that they start. Currently, an employer has two months to give a worker such a statement. The new rules require additional information to be provided in the statement which includes: referring to working days and hours (and, where this varies, how this will be determined); training entitlement; paid leave (such as family-related leave); and other benefits not already mentioned. This means that companies should be preparing a written statement during the recruitment process and ensuring anyone hired before April 2020 has already received their statement.

IR35
As it stands, IR35 will continue to be extended from the public to private sectors from 6 April 2020. As such they will be ultimately responsible for tax and National Insurance contributions (NICs) through PAYE if they engage workers by contracting with personal service companies (PSCs) where the arrangements amount to “disguised employment”. Currently it is down to the PSC to determine the status of the individual (and to be responsible for tax and NIC if they get it wrong) but responsibility will shift to the end-user who will need to determine whether but for the PSC, the individual would be employed for tax purposes, and then deduct tax and NICs accordingly. Those using contractors need to take immediate action.

Employers should review the contracts and pay arrangements for their contractors to determine how the new rules will affect them (see prior newsletter for suggestions). Assessments should be made by as soon as possible and you will also need to set up an appeal process to enable determinations to be challenged.

Settlement agreements
Legitimate termination payments to employees on termination are currently tax free up to a limit of £30,000 if they meet certain criteria. Termination payments are then subject to income tax only on amounts over the threshold (and no other taxes). This will change from April 2020 as payments > £30,000 threshold will become subject to class 1A employer National Insurance contributions resulting in a higher tax bill for the employer when offering settlement to employees > £30,000.

National Minimum Wage
National Minimum Wage rates for April 2020 were delayed due to the November 2019 budget cancellation, but have now been announced. They represent what the Government has called “the biggest cash increase ever”. The new rates are as follows:

  • for ages 25 and above, £8.72 (increase of 6.2%)
  • for ages 21-24, £8.20 (increase of 6.2%)
  • for ages 18-20, £6.45 (increase of 4.9%)
  • for under 18s, £4.55 (increase of 4.5%)
  • for apprentices, £4.15 (increase of 6.4%).

Brexit
The UK is scheduled to leave the EU on 31 January 2020 (Exit Day). We are expected to leave with a deal and under the current proposals, EU citizens who are resident in the UK by 31 December 2020 will have until 30 June 2021 to apply under the EU Settlement Scheme for immigration status.

In the unlikely event that there is no deal, EU citizens who are resident in the UK by Exit Day will have until 31 December 2020 to apply under the EU Settlement Scheme for immigration status.

The general suggestion is that HR should write to employees who are European Economic Area (EEA) nationals to urge them (and their family) to apply for settled or pre-settled status, so they can remain living and working in the UK indefinitely.

The type of status granted depends on length of residence in the UK. EU nationals will either be granted ‘pre-settled status’ where they have been resident for less than five years or ‘settled status’ where they have been resident for five years or more.

New immigration system
A new Australian-style points-based immigration system will be adopted from 1 January 2021. This will make the EU citizens subject to the same UK immigration controls as non-EU citizens, though the details are still being finalised. There will be no changes to the way employers conduct right to work checks until 1 January 2021, when the new system is in place.
For now, employers can continue to accept EU passports and national ID cards as evidence of right to work (although ID cards are expected to be phased out during 2020).

Mental Health
Finally, mental health in the workplace will continue to be a focus for employers. We may see the introduction of a right to request workplace modifications for employees with a health condition that does not amount to a disability as part of the Government’s national disability strategy. Such a duty would have significant implications for how managers handle sick and absent employees.