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Along with the usual increases in statutory payments and national minimum wage, 2018 will see the Data Protection Bill being finalised, GDPR coming into force in the UK in May, Brexit negotiations will hopefully be finalised by October and we expect some landmark cases on holidays, working time and self-employed status.  The forthcoming changes will likely place a greater burden on the small employer, but we do hope for some clarification on some tricky areas.

This blog gives you some pointers for consideration and aims to help you plan for the year ahead.

Changes to plan for in 2018

Data Protection Changes

The EU General Protection Regulation (GDPR) will become part of UK law on 25th May 2018.  It builds on data protection law which already exists in the UK.  It imposes additional obligations on organisations which hold and process personal data on individuals, and gives additional rights to individuals in relation to their data.  The Information Commissioner’s Office (ICO) has already produced some guidance with more to come in the next few months.

In addition, the government is currently attempting to pass a new law on data protection, the Data Protection Bill, which, amongst other provisions, seeks to incorporate the GDPR into UK law.

There will be an administrative burden on companies to carry out audits of the personal information they hold, and to produce information for employees and customers on the use of all forms of personal data.  In relation to employee data, there will be a much reduced reliance on employees giving consent to the use of their data.  Rather, employers will need to explain to their employees the reasons why they are holding and processing personal data, such as payroll information, or information used in training and appraisals, and what steps they are taking to keep this information secure.  Employers of under 250 employees will have reduced obligations to report to employees, compared with larger employers, but there is still work to do.

Penalties for breaching the new rules could be very high, with fines of up to 4% of global annual turnover or 20million euros, whichever is higher, for the most serious of offences.

Brexit Update

Article 50 of the Treaty on European Union obliges the EU to agree with the UK a withdrawal agreement.  Article 50 was triggered on 29 March 2017 which began the process of leaving the EU.  We’ve not seen specific discussions about any employment law changes as the government focusses on negotiating with the EU on trade, data protection, intellectual property etc and the status of European Union citizens and their families in the UK.  Businesses employing EU citizens do not need to do anything now but will need to monitor developments in the negotiations carefully.

Next year will be a big year for the UK with Brexit negotiations.  A draft of the withdrawal agreement is expected to be prepared in the New Year and then finalised by October 2018 to allow time for the agreement to be agreed in both Houses of Parliament before March 2019.

Immigration Bill

Alongside the Brexit negotiations, the UK is due to establish a new national policy on immigration, including new powers concerning the immigration status of European Economic Area (EEA) nationals.  It is anticipated that a first draft of the new law will be considered in January 2018.

Minimum wage increases

All workers and employees are entitled to be paid the National Living Wage or National Minimum Wage, the appropriate rate, dependant on age.  Apprentices who are under 19 or over 19 and in the first year of their apprenticeship are paid at an apprentice rate.

All employers need to make sure they are paying the appropriate rate by calculating an average of all the different rates they pay the individual employee or worker.  The consequences of getting it wrong include: fighting costly employment tribunal claims and reputational damage of being named and shamed on the government website.

The government has announced that from April 2018, the minimum payment rates will increase to:

  • £7.83 per hour – 25 yrs old and over
  • £7.38 per hour – 21-24 yrs old
  • £5.90 per hour – 18-20 yrs old
  • £4.20 per hour – 16-17 yrs old
  • £3.70 for apprentices under 19 or 19 or over who are in the first year of apprenticeship.

Statutory Payments

All employers face sickness absence and staff taking time off to have children.  Apart from the myriad of procedures an employer has to follow in those situations, an employer needs to get the payments right.

The government has announced the following proposed increases to statutory benefit payments for April 2018:

  • Statutory maternity, paternity, adoption, shared parental pay and maternity allowance will all be £145.18 a week (up from £140.98).
  • Statutory sick pay will be £95.05 a week (up from £89.35).

Pension auto enrolment process continues

All employers will have already completed the auto-enrolment process by April 2018.  However, the implementation of the auto-enrolment process will be ongoing as contributions will be increased gradually over time.  From 6 April 2018, the minimum amount an employer will have to pay in will be 2% of a worker’s pay, and the amount the worker will put in will rise to 3%.   Your pension provider should be able to help you prepare for this.

Taxation changes: salary sacrifice

Do you allow your employees to give up part of their salary in return for a benefit such as car allowance, enhanced pension contributions, cycle schemes?  This is commonly known as a salary sacrifice scheme which can have tax benefits for both employer and employees.  If you enter into a new salary sacrifice arrangement with an employee, you need to be aware that the types of benefits that enjoy such tax relief are now limited.  However, if you were already in an arrangement before 6 April 2017, you can continue with them until 6 April 2018 or in the case of cars, accommodation and school fees until 6 April 2021.

After the introduction of the new-tax free childcare scheme in 2017, the old childcare voucher schemes can continue but will not be available to new employees from 6 April 2018.

Taxation changes: termination payments

If you need to settle a dispute, one option is to make a termination payment in return for an employee or worker’s promise not to bring any claims against you.  This can be attractive to both employers and employees who do not want a costly battle in an employment tribunal.

There will be several changes to the taxation of such termination payments from 6 April 2018.  Up to £30,000 of a termination payment can still be paid free of tax and national insurance contributions but anything paid above £30,000 must be taxed and national insurance contributions paid.

In the past, pay in lieu of notice could sometimes be included in the termination payment, but the new tax rules will require an amount representing the earnings an employee or worker would have earned had he or she worked his or her notice to be separated out and taxed in the normal way.

Likely changes to look out for in 2018

More employment tribunal claims

Since employees and workers have stopped having to pay a fee to bring a claim in the employment tribunals from last summer, we have seen a large increase in claims (over 50% in some areas).  The increase in claims is likely to continue as employees simply press a button to bring their claims.

The impact of an employment claim on a small business (even if you win) can be catastrophic both financially and reputationally.  Not to mention the amount of management time involved in fighting a claim.  We cannot recommend enough the need to get your documents, such as your contracts, policies and procedures into shape so that they can be effective tools for managing your staff.  In addition, disciplinaries and grievances need to be done to the letter of the law to avoid claims or so that you have a good chance of defending a claim.

Self-employed status

We are likely to see more legal debate on the difference between a self-employed person and a worker.  The gig economy names: Uber, Deliveroo, Addison Lee, Citysprint will continue to be in headline news as the modern ways of working do not fit neatly into our current employment status tests.  The Pimlico Plumbers case, a major case in this area, is due to be heard by the Supreme Court in February 2018.

In July last year, Matthew Taylor undertook a government funded review of  modern ways of working and he came to the conclusion that some of our employment laws need amending.  This year, the government is due to give its response to the Taylor Review’s recommendations for clear and user-friendly tests for the different types of status and it suggests a re-brand of worker to ‘dependent contractor’.   We await to see if the government’s response moves this issue forward but with its mind on Brexit, it may well be only the courts that continue shaping this area of law for the immediate future, which increases the level of insecurity for employers.

Getting the status of a worker wrong, means liability for holiday pay, sick pay, the potential pension contributions, not to mention the potential employment rights.  On top of this the HMRC is also vigilantly investigating the payment of taxes if there is any doubt of the self-employed status and new tax rules are going to be debated.

Working Time – covering more?

There will continue to be cases about what constitutes working time.  Standby time, waiting time and sleeping in at work cases to name a few.  The cases are likely to follow the decisions of recent years where the meaning of working time is expanded to cover the times even when a worker is not actually physically working but required to be at the employer’s premises or ready to work.  This will continue to have a knock-on effect on minimum wage calculations and the 48 hour a week working limit.

Holiday pay – clarification in 2018?

Following a number of surprising cases on holiday pay in recent years, many are waiting for the courts to clarify what is normal pay for the first four weeks of holiday.  Guidance is needed on how to decide what to include in holiday pay and how to calculate a daily rate for holiday pay where the employee receives varying payments each month.    We are working with our customers to help them assess the risks on this tricky issue.

We understand that business owners often just don’t have the time to devote to changes in employment law. That’s why we created citrusHR; to help small businesses, just like yours, get the information they need when the law changes. We explain it without the legalese and send our customers a monthly update to ensure their businesses are protected.

If this sounds like help you may need now, or in the future, please do get in touch with us on 0333 444 0165 or email help@citrushr.com to chat with one of our qualified HR consultants today.