As the new year begins with a new government, the prospect of Brexit and a number of significant employment law changes on the horizon, here’s our guide to the key issues that are likely to affect SME organisations in 2020/21 and the steps that employers can take to ensure they meet their obligations and are prepared for the year ahead.

1. Continue to plan for Brexit
Now that the withdrawal agreement has passed the vote in the House of Commons and Brexit is due to go ahead on 31 January 2020, employers should ensure that any members of their staff who are EEA nationals have commenced the application process for settled or pre-settled status, as well as carrying out an audit of their workforce and consider where there may be staffing issues if they currently rely on EEA nationals. Read more..

2. Prepare for Statutory Rate Changes
The statutory rates for the national minimum wage will increase on 1 April 2020. The national living wage rate, for workers aged 25 and over, will increase from £8.21 to £8.72 and rates for apprentices and younger workers will also rise. On 5 April 2020, the rates of statutory maternity, adoption, paternity and shared parental pay, as well as statutory sick pay are also expected to go up. Read more..

3. Be aware of changes to the taxation of termination payments
Currently, when employers make termination payments, any amount over £30,000 is subject to income tax, but currently not NICs. From 6 April 2020, payment in excess of £30,000 will be subject to employer’s NICs (but not employee’s NICs). It will, therefore be more costly for employers to make such payments. Read more..

4. Update Parental Bereavement Policies and Procedures
From April 2020, it is expected that parents and primary carers will be granted the right to take up to two weeks’ paid leave following a still birth or death of a child. Employers should update their policies and procedures accordingly.  Read more..

5. Comply with the new rules on written statements of particulars
From 6 April 2020, employers must provide a written statement of employment particulars to all workers, not just to employees, from the start of employment, rather than within two months. The information that must be provided in the statement will also be expanded, so for staff starting on or after 6th April, steps should be taken to make sure that contracts/statements of particulars (suitably updated to reflect the changes) are ready before the start of the employment or service, or on day one. Read more..

6. Change how you calculate holiday pay for workers with irregular hours
From 6 April 2020, the reference period for calculating holiday pay will increase to 52 weeks. This means employers will need to pay workers without normal hours their average weekly pay, calculated over the previous year, rather than the previous 12 weeks. This will require some administrative adjustment and employers should check that their payroll provider is ready to implement the change. Read more..

7. Prepare for the introduction of new IR35 Rules
Reforms to the IR35 rules on off-payroll working are due to be extended to medium and large private-sector employers in April 2020.  Employers affected should, therefore, ensure they are prepared for the new system by assessing the true employment status of each individual worker engaged via a PSC and, potentially, renegotiating the basis of that relationship. Read more..

8. Look out for other changes on the horizon
In addition to the specific changes mentioned, the government will continue with the Good Work Plan which has promised a variety of changes to aspects of employment law, including employee pay and family-friendly rights. It intends to allow parents to take extended leave for neonatal care and to introduce the right to one week of leave for unpaid carers. Other commitments include creating a new, single enforcement body to give workers greater protections; introducing a new right for all workers to request a more predictable contract and making flexible working the default, unless employers have a good reason for not allowing it.  Read more..

1. Continue to plan for Brexit

Now that the withdrawal agreement has passed the vote in the House of Commons and Brexit is due to go ahead on 31 January 2020, there is slightly less uncertainty for European Economic Area (EEA) nationals and their employers. Following Brexit, there will be a transition period until 31 December 2020, during which EEA nationals will still be able to come and work in the UK.

The new EU Settlement Scheme will mean that, legally residing EU citizens will become ‘illegal immigrants’ if they do not obtain settled or pre-settled status, to enable them to continue to live and work in the UK by the government’s deadline. The current position is that EEA nationals who are resident in the UK by 31 December 2020 have until 30 June 2021 to make an application. Employers should, therefore, ensure that any members of their staff who are EEA nationals have commenced the application process and may consider offering their staff assistance with their application, if required.

Employers should also prepare for the new immigration system that will be in place after the transition period. In September, the Conservative home secretary asked the Migration Advisory Committee (MAC) to review how an Australian-style points-based immigration system could be introduced in Britain to strengthen the UK labour market. However, it remains unclear how this new system will work in practice and the MAC is expected to report back later this month.

Since the referendum, many EEA nationals working in the UK have already returned home and employers across every sector, and every region have found it increasingly difficult to find staff – including staff across every skill level from unskilled to highly-skilled. Employers should carry out an audit of their workforce and consider where there may be staffing issues if they currently rely on EEA nationals. They should look for potential skills gaps and consider the impact of the new immigration system. Employers may need to obtain a sponsor licence to recruit the staff they need from abroad.
Back to top…

2. Prepare for Statutory Rate Changes

The rates for the national minimum wage will increase on 1 April 2020. The national living wage rate, for workers aged 25 and over, will increase from £8.21 to £8.72.

The rates for younger workers will also increase, with hourly rates rising to £8.20 for workers aged at least 21 but under 25, to £6.45 for workers aged at least 18 but under 21 and to £4.55 for workers aged under 18 who are no longer of compulsory school age. The rate for apprentices will rise to £4.15.

The government has pledged that the national living wage rate will reach two-thirds of median earnings within five years. On current projections, this would be around £10.50 in 2024. The age threshold is also to be incrementally lowered to 23+ in 2021 and finally 21+ by 2024. It is hoped that the lead-in time to this change will help employers to factor increased the resulting wage bills into their future budgets.

Whilst the general election meant a delay to the announcement of the other statutory rates for 2020/2021, the majority have now been published. On 5 April 2020, the rates of statutory maternity, adoption, paternity and statutory shared parental pay is expected to go up from £148.68 to £151.20 (or 90% of the employee’s average weekly earnings if this figure is less than the statutory rate). The rate of statutory sick pay is also proposed to increase from £94.25 to £95.85 on 6 April 2020.

To be entitled to these statutory payments, the employee’s average earnings must be equal to or more than the lower earnings limit. However, the lower earnings limit from April 2020 has not yet been published.
Back to top…

3. Be aware of changes to the taxation of termination payments

Currently, the first £30,000 of a termination payment is payable without deduction of income tax or National Insurance contributions (NICs). Any amount over £30,000 is subject to income tax, but currently not NICs. From 6 April 2020, payment in excess of £30,000 will be subject to employer’s NICs (but not employee’s NICs).

If employers negotiate termination/ex gratia settlement payments during the first quarter of 2020 that are in excess of £30,000, there will be a cost efficiency to agreeing to payment on or before 5 April 2020. After that, it will cost more, as employer NICs will also have to be paid on the amount.
Back to top…

4. Update Parental Bereavement Policies and Procedures

From April 2020, if the most awful of things does happen, it is expected that parents and primary carers will be granted the right to take up to two weeks’ paid leave following a still birth after 24 weeks, or the death of a child aged up to 18 years. The leave can be taken within 56 weeks of the child’s death, in a block of two weeks, or two blocks of one week.

Employees will be entitled to parental bereavement leave from day one of their employment, but there will be a qualifying period of 26 weeks for entitlement to parental bereavement pay. The government has not yet published the regulations that will finalise the details for the introduction of parental bereavement leave and pay but, in the meantime, employers can be getting on with updating their policies and procedures in preparation for April 2020.
Back to top…

5. Comply with the new rules on written statements of particulars

From 6 April 2020, employers must provide a written statement of employment particulars to all workers, not just to employees. Employers will no longer have two months within which to provide the statement – most of the information must be provided in a single document by the start of employment. The information that must be provided in the statement will be expanded to include extra information on variable working hours, paid leave other than sick pay, benefits, probationary periods and training.

There is no standalone claim that can be made for failure to provide this statement, but it can be tacked onto another claim. In such cases, the maximum that can be awarded is two weeks’ pay. This is, therefore, mostly an issue of good housekeeping for employers. For those starting work on or after 6 April 2020, steps should be taken to make sure that contracts/statements of particulars (suitably updated to reflect the changes) are ready before the start of the employment or service, or on day one.
Back to top…

6. Change how you calculate holiday pay for workers with irregular hours

Holiday pay must be based on “normal remuneration”, such as contractual or regular patterns of overtime, pay allowances and certain commission payments. Currently, employers are required to look back at the 12 weeks before the holiday to work out what “normal” is. That reference period has caused problems, because fluctuations in pay can lead to higher holiday pay if leave is taken following peaks, and lower holiday pay if it is taken following troughs.

In order to overcome this issue, from 6 April 2020, the reference period will increase to 52 weeks (or the number of weeks of employment if less than 52 weeks). This means employers will need to pay workers without normal hours their average weekly pay, calculated over the previous year, rather than the previous 12 weeks.

This will require some administrative adjustment and employers should check that their payroll provider is on top of the change and ready to implement it.
Back to top…

7. Prepare for the introduction of new IR35 Rules

Reforms to the IR35 rules on off-payroll working are due to be extended to medium and large private-sector employers in April 2020. The new rules shift who is responsible for determining the status of a contractor for tax purposes and who is liable for deducting tax and national insurance. The tax risk of a worker providing services through a personal services company (PSC) that properly has employee tax status will move from the PSC to the client.

Employers have raised concerns over the new rules, which, some argue, will create an unfairly burdensome system that could be damaging to the contractor engagement process. Many were hoping that there would be a delay to the implementation of the rules and even a full-scale review.

The Government has this week (7 January 2020) launched a review regarding the new rules “to address any concerns from businesses and affected individuals about how they will be implemented” and to “determine if any further steps can be taken to ensure the smooth and successful implementation of the reforms, which are due to come into force in April 2020”. They have made it clear that there will not be any changes to the legislation itself.

Therefore, it would be prudent for affected organisations to proceed on the basis that the changes will take effect from 6 April 2020 as planned. This will involve assessing the true employment status of each individual worker engaged via a PSC and potentially renegotiating the basis of that relationship before 6 April 2020.
Back to top…

8. Look out for other changes on the horizon

In addition to the specific changes already mentioned, the government will continue with the Good Work Plan which has promised a variety of changes to aspects of employment law, including employee pay and family-friendly rights.

In the Queen’s speech on 19 December 2019, the government announced that there will be an Employment Bill, the key elements of which would be:

• “creating a new, single enforcement body, offering greater protections for workers;
ensuring that tips left for workers go to them in full;
• introducing a new right for all workers to request a more predictable contract;
• extending redundancy protections to prevent pregnancy and maternity discrimination;
• allowing parents to take extended leave for neonatal care; and introducing an entitlement to one week’s leave for unpaid carers; and
• subject to consultation, making flexible working the default unless employers have good reason not to.”

Employers should, therefore, remain alert and be prepared to act on further changes during the year.

Click here to view our Employment Law Timetable 2020/21

This update was curated by Nicole Squires, MA, Chartered MCIPD, an Executive Consultant at People Based Solutions. People Based Solutions is an HR support company that specialises in supporting small and medium sized businesses meet all of their HR commitments. If you want to know how People Based solutions can help you meet your HR and Employment Law obligations, you can click here for your free HR Health Check. Alternatively, call us on 01925 425 857, send an e-mail to enquries@peoplebasedsolutions.co.uk or click here to visit our website.