Each year employers have to keep up to date with things like levels of minimum wage and other statutory rates, but this year there has been an even heavier burden on small businesses to make sure they know about auto enrolment, GDPR and the apprenticeship levy, never mind keeping a close eye on the impact of Brexit, particularly when employing EU nationals.
2017 has also presented some difficult court decisions for smaller employers. Holiday pay calculations continue to confuse everyone, even the lawyers. What counts as working time has become more complex. The gig economy cases and the debate over when someone is classified as self-employed in modern working practices have taken further twists and turns.
Many small employers consider employment law and particularly the ever changing court decisions to be a confusing minefield. Most of our employment law does not make allowances for small businesses and so regardless of your size, you need to know what is changing on this front. Here is a brief summary of this year’s key changes and how they could affect your business.
1.Employment Tribunal Fees scrapped
In July this year, Employment Tribunal and Employment Appeal Tribunal Fees were abolished. The Supreme Court ruled that the fees were discriminatory and prevented access to justice.
This is good news for employees and workers but not so good news for employers. The latest statistics, since employees could bring claims without paying a fee, show a large increase in claims, up to 50% in some areas. Claims are expected to continue to increase next year 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.
2. Data Protection and GDPR
With the passing of the EU General Data Protection Regulation (GDPR) in 2016, the last year has seen many companies start to prepare for the introduction of these new data protection rules in the UK in May 2018. The purpose of GDPR is to harmonise data protection rules across the EU, but it does place additional burdens on those controlling or processing people’s personal data to communicate with those individuals about the data that is being held, what is being done with it and why. The general principles remain to try to minimise the amount of personal data that is held, the number of people who have access to it and the time it is held, whilst taking all reasonable precautions to keep that information secure. The new rules are designed to give individuals more information about their data and more rights over it in some circumstances.
Some guidance has been issued by the Information Commissioner’s Office (ICO) based on the EU regulation, including information more recently for small businesses. The government also introduced a Data Protection Bill into Parliament this year which seeks, amongst other things, to incorporate GDPR into UK law, but this is still being reviewed and debated and is not yet law.
The threat of much stiffer penalties for failing to comply with GDPR once in force next May means that businesses cannot afford to ignore these changes and still have time to act.
3. 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 watch this space for more information as the negotiations continue.
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.
4. Auto-Enrolment Pensions
Small businesses should have already received their staging date by which they will need to provide a pension scheme and auto-enrol their staff into it. We are reaching the end of the existing staging schedule in April 2018. For those still to comply, our auto-enrolment blog from 2015, provides a useful preparation checklist for a small business.
As an employer, if you don’t set up a workplace pension and auto enrol your eligible employees on to it when are supposed to, The Pensions Regulator can issue a fines, notices and criminal prosecutions. This year we saw the first criminal prosecution of a bus company, Stotts Tours, that failed to provide a workplace pension for 36 staff. We await to hear what sentences the directors of the company will face but it could be up to two years imprisonment. If that is not bad enough for the Stotts Tours directors, The Pensions Regulator is separately pursuing the company for £14,000 in civil fines as well.
5. National Living Wage / National Minimum Wage
This year the government continued to crack down on employers who pay less than the appropriate minimum wage. This has resulted in fines and the government regularly naming and shaming employers who break the law. Imagine the potential damage to your reputation with your customers if you end up on that list.
The correct hourly rate you need to pay your workers and employees depends on the age of the employee or worker. We explain the current National Minimum Wage rates in our blog from April 2017. The rates will increase in 2018.
Assessing whether you have been paying the correct amount is interlinked with the need to correctly assess what is considered to be working time. You do not want to be inadvertently falling foul of the law by not realising that you need to pay for waiting time, travelling time etc.
6. Working hours – developments on sleep-in shifts
Workers must be paid for all ‘working hours’ no less than the appropriate minimum wage and workers should not be required to work over 42 hours a week. This can be difficult for small employers to administer as the case law continues to expand the meaning of working time.
This year’s cases relate to sleeping at work when on an overnight shift. The courts found that all the time the worker is required to be on site with a significant degree of responsibility, whether sleeping, actively working or not, are working hours. This poses issues for businesses who had previously only paid for the time they spent awake and working. Of course, all the overnight working hours will need to be included in the calculations for the national minimum wage. This has impacted the care sector most of all and Mencap have recently reported its decision to reform its pay structure for ‘sleep-in’ shifts.
7. Holiday pay – latest developments
The case of Dudley Metropolitan Borough Council v Willetts surprised us all by saying that even voluntary overtime which is done regularly enough and over a long period of time, should be included in 4 weeks holiday pay. Check out our blog on Voluntary Overtime Included In Holiday Pay.
We are left with two different tests for what to include in holiday pay, one test for the first 4 weeks of holiday entitlement and another for the remaining 1.6 weeks of entitlement. We are also left guessing on how to make the necessary calculations if a staff member does not get paid the same amount each month.
The holiday pay issue is not going to go away and employers cannot afford to ignore recent legal decisions. We expect more case law, and here at citrusHR we will be monitoring developments closely. Of course, some hope that leaving the EU may resolve the issues by simplifying the matter through a change in UK law, but others believe that, considering the difficulties that the government are having with Brexit, it will not be on their agenda for some considerable time.
8. King v Sash Windows – Bombshell decision
It was established UK law that holiday entitlement could not be carried over from one year to the next other than in exceptional cases, like long term sick or maternity leave etc. The case of Mr King and Sash Windows appears to have turned our UK law on its head after a ‘bombshell’ decision at the European Court of Justice saying that holiday can be carried over without limitation if an employer has denied a worker the right to paid holiday.
The decision poses risks for those businesses who use self-employed consultants but there is doubt about whether they are in fact more properly classified as workers. As you will see below, the self-employed status is getting a lot of attention and it is estimated that many that call themselves, self-employed, will, in legal terms, be workers and entitled to claim holiday pay. If any correction needs to be made, you could be facing a large bill for unpaid holiday.
9. Self-employed or not?
Our prediction to expect more scrutiny and cases in 2017 has proved right and this year the saga continues. We saw Uber’s loss at an employment tribunal confirmed by the Employment Appeal Tribunal and Deliveroo’s success in proving the self-employed status only after a radical and, some say unworkable, overhaul of its working arrangements to suit the self-employed criteria. More information on the gig-economy can be found here. The law hasn’t really changed since last year and some have suggested that until the law is updated to reflect modern working practices, using our current definitions of ‘employee’, ‘worker’ and ‘self-employed’ is like trying to fit a square peg into a round hole.
10. The Taylor Review
Matthew Taylor reviewed the modern ways of working and he came to the conclusion that some of our employment laws need amending. The Good work: the Taylor Review of Modern Working Practices was published in July this year. The review made a number of recommendations but of particular importance, was the need for clear and user-friendly tests for the different types of status and it suggests a re-brand of worker to ‘dependent contractor’. The government has yet to implement any of the recommendations and 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.
11. Statutory Payments increase
Statutory payments typically change each April. In April 2017, the rates of Statutory Maternity, Paternity, Adoption and Shared Parental Leave Pay increased to £140.98 per week or 90% of the average weekly salary if lower.
Statutory Sick pay also increased to £89.35 per week.
12. Apprenticeship Levy
The Appenticeship Levy came into force in April 2017, requiring businesses with a salary bill of over £3 million to contribute funding towards the costs of UK apprentices.
The aim of the Levy is to provide funding to smaller businesses to allow them to employ apprentices without the burden of the costs. Small businesses may not need to cover any of the costs or in some cases only 10%, with the government footing the bill.
The Federation of Small Businesses reported that a quarter of its members have at least one apprentice in their business.
If you haven’t done so already, it is probably well worth investigating the possibilities for apprenticeships in your sector. Here is a link to the government’s web page which is a good starting point.
13. Tax-free childcare scheme
A new tax-free childcare scheme was introduced in April 2017 which replaces the childcare voucher scheme. The aim of the “tax-free childcare” scheme is to enable parents of children under 6 to apply online for tax-free childcare and receive a government top-up of £2 for every £8 they pay into their tax-free childcare account, up to £2,000 per child per year.
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 2017 and beyond, why not get in touch with our team today on 0333 444 0165 or email firstname.lastname@example.org.