The end of the financial year will bring important employment law changes that all businesses have on their radar. Making your HR department aware of updated legislation now will save a lot of stress in the future. We have rounded up the two most important changes that you should know about today.
Following the Matthew Taylor Good Work review, the government has revealed their proposed changes to employment law, along with draft legislation.
Included in these changes is an increase in the period for calculating an average week’s pay for holiday pay. This will apply to organisations where workers have variable pay. The current reference period is 12 weeks. However, from 6 April 2020, this will increase to 52 weeks. If an employee has been employed by an organisation for less than 52 weeks, the number of weeks of employment will be used.
How to prepare
Assess your variable pay policy
If you decide to include variable pay in your holiday pay, it is important for HRs to review what pay components they will cover. HRs and line managers should also consider whether implementing a variable pay policy would encourage a surge in claims for backdated holiday pay.
Decide when to implement the changes
You will need to make a decision on when to implement their holiday pay changes. The changes to the way you calculate holiday pay can begin on April 6th 2020 or HRs might consider implementing the changes at the beginning of the holiday year (January 1st 2020).
If your organisation experiences an increase in overtime during the Christmas period, it is important to keep in mind the potential issues that might arise from applying the changes in January. You should prepare for the potential backlash from employees that receive different amounts of holiday pay due to the dates they take annual leave.
It is also important to remember that, if your financial year ends after April 6th, the value of accrued holiday will increase. Therefore, you might wish to limit how much holiday can be carried forward.
Changes to IR35 tax legislation (off-payroll working) will also come into effect from 6th April 2020. The draft legislation will require private sector businesses to deduct National Insurance contributions and income tax via payroll from fees paid to a personal service company (PSC). This will apply in instances where the individual would be regarded as an employee of the organisation for tax purposes.
The tax deducted from the fees paid to these individuals will depend on whether or not they are truly self-employed, or if they are an employee of an organisation for tax purposes.
How to prepare
Conduct an off-payroll audit
Businesses should consider doing this as soon as possible. Not all PSCs will require the same approach, therefore, you will have to approach each one individually. When auditing your off-payroll labour, investigate what each off-payroll worker for that they contribute to the company, the contracts they are under, how they are paid and how they work.
Seek professional advice if required
Auditing your off-payroll labour might incur further actions that will require legal advice. Businesses should consider [seeking consultancy] if the following actions are required ahead of April 6th 2020:
- Determining PSCs, freelancers and contracted workers’ employment status
- Amending or drafting contractual documentation
- Pension liability
You should also consider how these employment law changes will affect the following:
- Your businesses’ gender pay gap reporting figures
- The apprenticeship levy
- Policies surrounding immigration
January 2020, let alone the end of the financial year, might seem like a lifetime away. However, ensuring that these changes are on your team’s radar now will ensure that any transitions will be seamless. By making the preparations now for employment legislation changes, you will also be able to diminish any concerns that employees might have in the future. Ask yourself, “how much time can you save your business by preparing for these changes now?”
By Jayne Harrison
Jayne Harrison is a Partner and Head of Employment Law at Richard Nelson LLP. Richard Nelson LLP is a national firm of solicitors providing a range of specialist legal services to professionals, businesses and individuals throughout England and Wales. The firm is regarded as Top Tier in The Legal 500 for 2019.
Jayne has over 14 years of experience as a partner and head employment services. She advises on all areas of employment law including tribunal advocacy, discrimination, dismissals, contracts of employment, staff handbooks, TUPE, settlement agreements, grievances and disciplinaries. Jayne has also been commended in Legal 500 for her experience in employment law.
Kizzi Nkwocha is the editor of Business Game Changer Magazine and publisher of The UK Newspaper, Money and Finance Magazine, the net’s fastest growing wealth creation publication. Kizzi Nkwocha is chair of The Ethical Publishers Association and co-chair of The Logistics Association. Kizzi made his mark in the UK as a publicist, journalist and social media pioneer. As a widely respected and successful media consultant he has represented a diverse range of clients including the King of Uganda, and Amnesty International. Nkwocha has also become a well-known personality on both radio and television. He has been the focus of a Channel 4 documentary on publicity and has hosted his own talk show, London Line, on Sky TV. He has also produced and presented both radio and TV shows in Cyprus and Spain.