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The 8 Major Employment Law Changes of 2016 – And How They Could Affect Your Small Business
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2016 has been another busy year of changes to employment law in Britain.  From the shock of Brexit to the high profile spotlight on the employment practices of Uber and Sports Direct; and everything in between. Make sure you are up-to-date with the employment law changes of 2016 and that your business is compliant. We’ve compiled this blog for you to use as a checklist and each section has links to more detail on each of the changes where applicable.

1.     National Living Wage / National Minimum Wage

The National Living Wage was introduced in April this year as the new minimum wage level for employees and workers aged 25 or over.  Minimum wage levels for employees under 25 continue to be in place and are confusingly still known as National Minimum Wage.

The current level of National Living Wage is £7.20 per hour and the government has just announced that it will be increasing this rate to £7.50 per hour next April.

The levels of National Minimum Wage for under 25s were increased in October 2016, and will be rising again in April next year.  Check out the current rates here.

It is an offence to pay an employee or a worker less than the National Living Wage or the National Minimum Wage (depending on how old they are).  Maximum penalties are up to £20,000 per worker, and the government regularly publishes lists of employers found to be paying less than the correct minimum wage, hoping that naming and shaming companies will encourage them to check that they are compliant.  And it’s not just the government who are watching this sort of thing – the press can do the same – as Michel Roux Jr found to his cost.

When checking if you are correctly paying minimum wage, it’s really important to look at the average salary across all the number of hours worked – if you pay less for some hours such as travelling time, but only pay minimum wage for other hours worked, that will produce an average that is below minimum wage and so will be against the law.

2.     Employing Illegal Workers

Provisions in the Immigration Act 2016 came into force in July this year, making it easier to prosecute employers who employ workers who do not have the right to work in the UK.  In addition to the existing offence of knowingly employing an illegal worker, there is now an offence of employing someone whilst having ‘reasonable cause to believe’ that they don’t have the right to work for you.

In practice this means that you must ask all employees to show you documents proving that they have a right to work in the UK.  This can be as simple as seeing and copying their passport, but can involve more complicated checks.  Not bothering to checking these documents or just relying on what the employee says are not safe things to do anymore.

There have also been increases in the maximum prison sentences for employing illegal workers (now up to 5 years) and in the levels of financial penalties payable (now up to £20,000 per illegal worker).

For more detail on how to make sure you get this process right, see our earlier blog on Right To Work in the UK.

3.     Zero Hours Contracts

You are hopefully already aware that the law relating to zero hours contracts was changed in 2015 to ban provisions which require an employee to work for you exclusively if they have no guarantee of work from you.

In January 2016, the government gave any employee who is asked to work in this way the right to claim unfair dismissal from the start of their employment with you, rather than having to wait for some qualifying period like the normal 2 year period before many unfair dismissal claims can be made.

4.     Health and Safety Enforcement Changes

The government’s tougher line on breaches of Health and Safety law is now a reality. New court guidelines on sentencing for Health and Safety offences came into force on 1st February 2016.

It is widely anticipated that these new guidelines will lead to stiffer sentences being imposed, even for more minor breaches.  They are intended to increase the level of fines for businesses who commit breaches, and to lower the threshold at which prison is considered for individual directors or owners for serious offences.

It is important to make sure that you carry out the necessary risk assessments for your business operations and try to take all sensible preventative action to minimise the possibility of falling foul of these rules.

5.      Auto-Enrolment Pensions

We’ve had another year of staging dates arriving for more employers.  By April 2018 all employers will be obliged to provide a pension scheme and auto-enrol their staff into it.  If you haven’t already set up your pension scheme and haven’t found out when your staging date is, you can’t afford to wait any longer.

You can check what your staging date is by going to the pension regulator’s website. You will need to know your company PAYE number.

Recent news reports are suggesting that a significant minority of smaller employers are missing their staging date and running the risk of financial penalties. Make sure you are not one of them, and start your auto-enrolment preparations in plenty of time – ideally now!

6.     Brexit

Britain’s vote to leave the EU has obviously dominated the news in the second half of 2016, but how does this change things practically for employers?  The truth is that very little has changed so far, after all we have not yet even started the process of leaving, but equally the uncertainty about the detail of what sort of Brexit will be negotiated makes it difficult to plan ahead.

Ultimately many aspects of employment law could be affected, particularly the process of employing staff from other EU countries, as we try to unravel the connections with EU law.  For now, our best advice is to keep communicating well and regularly with your staff, particularly those from other EU countries, in order to reassure where you can, and spot potential issues early.

7.     Holiday Pay

This year has seen another decision in the long-running case of Lock –v- British Gas relating to whether an element of commission should be included in the calculation of holiday pay.  Whilst the Court of Appeal have now confirmed that in their view the Working Time Regulations can be interpreted to allow commission to be included in what amounts to ‘normal’ pay when calculating holiday pay, we are still lacking any detailed guidance as to how this should be calculated.

The direction of travel appears currently to be that elements of commission and some forms of overtime need to included in holiday pay calculations, but as this is based on European law, there is scope for the government to change this as part of Brexit.  We have also picked up that a recent government briefing paper on the impact of Brexit on employment law has indicated that controversial issues such as what is included in the calculation of holiday pay could be re-litigated in the UK after Brexit to establish the rules.

If you haven’t already done so, you need to have a look at what elements you are including in your holiday pay calculations and communicate any changes you decide to make carefully to your staff.

8.     Uber Drivers’ ‘Employment Law Case of the Year‘.

The other significant line of employment cases that has emerged in 2016 is that relating to the rights of people working in the gig-economy.  In particular, Uber has now faced an employment tribunal decision against them deciding that some of their drivers should be classified as workers and not as self-employed contractors.  This will mean that they are entitled to some basic employment rights such as the right to be paid at least the National Living Wage or National Minimum Wage, and the right to rest breaks and paid holiday.

This could have huge financial consequences for Uber and other similar companies, and we are aware of other claims currently in front of employment tribunals concerning, for example, some bike courier companies and the restaurant delivery service Deliveroo.

For now, Uber have appealed the decision, but at the same time there is intense scrutiny of this whole area outside court through a recently announced government inquiry, a Commons Select Committee inquiry, and a new specialist unit at HMRC investigating companies who seek to avoid giving workers employment rights by wrongly calling them agency staff or self-employed. This is not, therefore, likely to be the end of the story and we expect more developments in this area in 2017.

It may well be time, therefore, for you to review any relationships you have with self-employed contractors to see if you are exposed to the risk that they could be considered workers.  You need to consider all the circumstances of your relationship and especially the degree of control and management you want to exercise over them.  What you call them in your contracts is not enough in itself.

It can be tough keeping on the right side of the law, especially as it seems to change so frequently. CitrusHR is here to help small business owners who are often not able to dedicate enough time to the details that employment law and HR requires. If you need help ensuring your business is compliant now in 2016 and beyond, why not get in touch with our team today on 0333 444 0165 or email help@citrushr.com.


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