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Employment law review 2016/2017

05 January 2017

An overview of the significant changes to employment law that took effect last year and a look ahead to the major reforms in store for 2017 and beyond.

The Brexit vote last June and its associated political fallout means that the Government has had rather more than employment law reform to focus on recently. Nonetheless, a number of changes have taken place in the past year and some significant reforms are planned for 2017.

Reforms implemented in 2016

Modern slavery

The Modern Slavery Act 2015 requires all organisations with a turnover above £36 million to publish a statement on their website setting out the steps the organisation has taken to ensure slavery and human trafficking is not taking place in its supply chain or within its own business. Organisations with a financial year ending on 31 March 2016 were the first to be required to publish their statements.

Financial penalties for employers

The Government has introduced new financial penalties for employers who fail to pay Employment Tribunal (“ET”) awards on time, which came into force on 6 April 2016. Once a payment is late, the claimant can complete a penalty enforcement form, which will then be implemented by an enforcement officer after issuing a penalty notice to the employer. The amount of the penalty is 50% of the sum owing, subject to a minimum of £100 and maximum of £5,000, with a 50% discount if paid within 14 days.

New limits on ET postponements

From 6 April 2016, there have been new limits on the number of postponements of a hearing that can be granted in ET cases. Only two postponements will be granted per party, except in various exceptional circumstances. There are also potential costs consequences of postponement applications made less than a week before the ET hearing.

Calculating holiday pay

There has been an important case-law development, rather than a reform, in the ongoing saga about how to calculate holiday pay. In the case of Lock v British Gas Trading, the Court of Appeal confirmed that it is permissible to add words to the Working Time Regulations 1998 to ensure that results-based commission is included in the calculation of holiday pay. British Gas is now seeking leave to appeal to the Supreme Court.

What’s coming next?

Looking forward to the year ahead, the most significant reforms currently planned are outlined below.

Gender pay gap reporting

The final version of the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 has been published, setting out how employers with over 250 employees should calculate and report on the gender pay gap within their organisation. The new legislation is due to come into force on 6 April 2017, with the first report required to be published on the employer’s website by 5 April 2018 at the latest. The Government has also announced plans to extend the regime to the public sector and we are awaiting developments following publication of a consultation paper in 2016.

Industrial action reforms

The Trade Union Act 2016 became law in May last year, but we have been awaiting further legislation to bring the various reforms into force. The Government has now started to publish some of this legislation and associated Codes of Practice. On 1 March 2017, regulations will come into force requiring industrial action by persons in “important public services” to be supported by at least 40% of those entitled to vote. During 2017, we are also expecting the requirement (applying to all industrial action ballots) for a minimum 50% turnout and the additional requirement (applying only to important public services) for 40% support to come into force, as well as the new obligation for unions to appoint a picket supervisor. As yet, though, we do not have draft regulations or an implementation date for these reforms.

Taxation of termination payments

The Government is proposing to make a number of changes to the tax and national insurance (“NI”) treatment of termination payments. After various consultations, the draft legislation was published in December for consultation. The three main changes are:

  • employer NI and income tax treatment is to be aligned, meaning that employer’s NI is payable on any taxable termination payment
  • all payments in lieu of notice will be subject to income tax and NI contributions in full
  • the foreign service relief exemption is to be abolished.

Consultation on the draft closes on 1 February 2017, following which the changes are due to take effect for payments made on or after 6 April 2018.

Apprenticeship levy

Replacing the current system for apprenticeships, the new levy will enable employers to choose and pay for the apprenticeship training they want. All UK employers in both the private and public sectors that have annual wage bills of more than £3 million will have to pay 0.5% towards the cost of apprenticeship training. HM Revenue & Customs published amended draft regulations implementing the levy alongside a further consultation in December 2016. The levy is scheduled to come into effect in April 2017.

Sunday working

The Enterprise Act 2016 will place new obligations on retail employers in relation to Sunday working. There will be extra protection for shop workers who do not wish to work on Sundays and a new right to object to working additional hours on Sundays. The new provisions are not yet in force, but once they are implemented retail employers will have a two-month period in which to act.

Employment status

This looks set to continue to be a hot topic in 2017. The House of Commons Business, Energy and Industrial Strategy Committee is conducting an inquiry into the future world of work and the rights of workers. In a separate but related development, the Government launched an independent review into employment practices in the modern economy last October. The Work and Pensions Committee has also launched an inquiry into self-employment and the gig economy, with a deadline of 16 January 2017. The Government has confirmed its intention to amend the IR35 legislation from 6 April 2017 for workers who provide services via a personal services company to a public sector engager. As a result, the person paying the personal services company will generally be required to operate PAYE and pay NI contributions on those fees. Finally, we are expecting an appeal against the recent ET decision that Uber drivers are “workers”, rather than self-employed contractors.

And finally… Brexit!

It is too early to know for sure what the implications for employment law of Brexit will be, but this may start to become clearer in 2017 when (if?) we find out what “Brexit means Brexit” actually means…

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