Are you ready for the April 2017 Employment law changes?
April always brings a number of Employment law changes but April 2017 brings a great deal more than most. Many have had a lot of publicity, but here's a reminder of the key changes that employers and their HR staff need to be aware of, together with some perhaps less well-publicised measures.
Don’t forget that our new 2017-18 Employment law Handy Fact Card contains most of the new Employment law facts and figures taking effect this month so they are always at your fingertips.
Click on the links below.
1. National Minimum Wage increases
2. Family Friendly Pay and Statutory Sick Pay
3. Redundancy pay and unfair dismissal compensation limits
4. Restrictions on salary sacrifice
5. Gender Pay Reporting in the private and public sectors
6. Apprenticeships and the Apprenticeship Levy
7. New tax-free pensions advice allowance
8. Off-payroll working in relation to public authorities
9. Employing foreign workers
10. Whistleblowing: prescribed person reporting changes
And finally…the Great Repeal Bill
From 1 April 2017 the National Living Wage (NLW) increased to £7.50 per hour and the new National Minimum Wage (NMW) rates are £7.05 (21-24 year-olds); £5.60 (18-20 year olds); £4.05 (16-17 year olds) and £3.50 for apprentices under 19 or in their first year of apprenticeship. Although the NMW rates increased as recently as October 2016, this second increase is designed to align the timing of increases to the NLW and NMW. From now on any increases will take effect in April each year.
As of 2 April 2017 the prescribed rate of Statutory Maternity, Paternity, Adoption and Shared Parental Pay rose from £139.58 to £140.98.
On 6 April 2017 Statutory Sick Pay rises from £88.45 to £89.35 and the Lower Earnings Limit, which is relevant to eligibility for SMP etc, rises from £112 to £113.
From 6 April 2017, there are increases to the statutory compensation limits as follows:
- The limit on a week's gross pay (used to calculate the basic award for unfair dismissal and the statutory redundancy payment) increases from £479 a week to £489 a week.
- The maximum compensatory award for unfair dismissal increases from £78,962 to £80,541 or 52 weeks' pay whichever is lower.
The new limits will apply to dismissals which take effect on or after 6 April 2017. If a dismissal occurred before 6 April 2017, the old limit still applies even if compensation is awarded after that date.
Salary sacrifice arrangements entered into on or after 6 April 2017 will no longer benefit from tax and employer National Insurance advantages, except for arrangements relating to pensions (including advice), childcare, Cycle to Work and ultra-low emission cars. Salary sacrifice arrangements in place before 6 April 2017 will be protected until 6 April 2018, and arrangements for cars, accommodation and school fees will be protected until 6 April 2021, unless the arrangement is ended, modified or renewed before those dates. No changes are proposed for salary exchanged for non-tangible benefits such as flexible working or additional holiday entitlement.
For private and voluntary sector employers, The Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 come into force on 6 April 2017 in England, Wales and Scotland (but not in Northern Ireland). Employers with 250 or more employees will be required to report certain information on gender pay and publish it on their website for 3 years. Employers will need to calculate gender pay gaps using a snapshot of data for the pay period encompassing 5 April 2017 but note that, in relation to bonuses, the period is 6 April 2016 to 5 April 2017. Employers must then publish information about their gender pay within 12 months that is, by 4 April 2018 and thereafter annually. Please see our previous two briefings:
- on the final Regulations including details on which employees count, the calculations required and how the Regulations differ from previous draft versions of the regulations; and
- on the joint draft Guidance on the Regulations produced by the ACAS and the Government Equalities Office including some differences between the Regulations and the Guidance.
The Equality Act 2010 (Specific Duties and Public Authorities) Regulations 2017 came into force on 31 March 2017 for public sector employers in England (including relevant cross-border authorities in England and Wales and certain public authorities operating across Great Britain in relation to non-devolved functions). Where these employers have 250 or more employees, publication of the gender pay information must be by 30 March 2018 and the relevant snapshot date on which the pay period is based is 31 March. As well as new pay gap reporting, these Regulations also contain the existing public sector specific equality duties for England which continue unchanged. However, unless named or described in the Regulations, public authorities in Wales and Scotland will continue to comply with the Welsh and Scottish specific equality duties respectively.
The Equality Act 2010 does not extend to Northern Ireland, so neither set of gender pay reporting regulations will take effect there, but the Employment Act (Northern Ireland) 2016 makes provision for regulations to be made there on this topic by 30 June 2017 (including a requirement for employers to publish an action plan, details on ethnicity and disability and a potentially hefty fine for non-compliance).
There isn't that much time to prepare: the first pay period used will be the one in which the snapshot date of 5 April/31 March 2017 falls (the 12 months from April/March 2016 to April/March 2017 for bonuses) and the figures could take some time for employers to produce. Although publication is not compulsory before March/April 2018, the private/voluntary sector Guidance recommends publication "as soon after the snapshot date as is reasonable" and some employers like Virgin Money have voluntarily published their gender pay gap figures early. For both private and public sector, the calculations required go much further than previous draft regulations, have very specific requirements and do not always match up with the Government Guidance (at least in the draft guidance which was available at the time of writing – some amendments may now have been made in the final Guidance). Our gender pay reporting experts can guide you through these issues and please see contact details in our Equal Pay Audit service flyer.
The Apprenticeship Levy comes into force on 6 April 2017 and we now have final Regulations which stipulate details of calculating, paying and reporting the levy. Employers will be required to pay 0.5% of their annual wage bill but receive an annual allowance of £15,000 to offset against their levy payment. So, employers who had a wage bill (or combined wage bill for "connected" companies or charities) of £3m or more in the previous tax year, or expect to do so in a tax year commencing on or after 6 April 2017, must notify HMRC of their levy liability. Generally, public authorities are not "connected" unless they are charities or companies. Where employers are "connected" (and the rules on that are the same as those for the Employment Allowance) they have to share the £15,000 allowance between them, but can notify HMRC how they want the allowance to be divided.
Employers in England have been able to register with the online "Apprenticeship Service" since 13 February so they are able to start spending the levy (with registered apprenticeship providers) from when they declare the Levy. Apprenticeships are a devolved policy and different rules on spending funds will apply to Scotland, Wales and Northern Ireland. It has been confirmed in Wales that there will be no online account for employers to access the funding – it will go to the Welsh Government which plans to create a minimum number of 100,000 high quality, all-age apprenticeships over the next five years in certain priority areas.
Further changes in the area of apprenticeship funding will affect all employers (whether they pay the levy or not) for apprenticeships starting on or after 1 May 2017.
The Public Sector Apprenticeship Targets Regulations 2017 came into force on 31 March 2017 for public bodies with more than 250 employees in England. The target is at least 2.3% apprenticeship starts each year between 2017 and 2021.
Finally, from 6 April 2017 it will be a criminal offence for a training provider in England to describe training as an apprenticeship if it is not a statutory apprenticeship.
At the 2014 Budget, the Chancellor of the Exchequer announced sweeping changes to the tax rules applying when an individual decides to access money purchase pension savings.
Flowing on from that is the concern for members to be properly advised (and presumably to take away some pressure from The Pensions Advisory Service and Citizens Advice). From 6 April 2017, a new category of authorised member payment is being created called a "pension advice allowance payment".
In other words, members of money purchase and hybrid (i.e. mixed defined contribution/defined benefit) schemes will be able to take a tax free amount of £500 from their scheme, to cover the expense of taking regulated independent financial advice. As well as advice itself, the payment may cover implementation of the advice.
A person is entitled to three separate pension advice allowance payments over the course of their life, but no more than one in any given tax year. For the payment to be authorised for tax purposes, the following conditions must be met:
- The payment must not exceed £500.
- The payment must be requested in writing by the person receiving the advice.
- The request must contain a declaration that no more than two pension advice allowance payments have been previously made overall, and no payment has been made in the tax year in question, in respect of them.
- Payment must be made directly to the financial adviser.
As reported in our previous briefing, the new rules about off-payroll working will have significant implications for public authorities (as defined in the Freedom of Information Act 2000), agencies that provide workers to them, and the workers themselves. The measure aims to remove the ability of an individual working through an intermediary, such as a Personal Service Company (PSC), to side-step the IR35 rules when, but for the intermediary/PSC, the arrangements between the parties are more characteristic of an employment relationship. Rather than the individual who works through a PSC being responsible for deciding whether or not the off-payroll rules for engagements in the public sector apply, responsibility will pass instead to the public authority engaging the intermediary to make that decision and it will then be down to the "fee payer" to pay the right tax and NICs. It will apply to payments made from 6 April 2017.
HMRC's online tool to help to determine employment status was published in early March. Many public authorities and staffing businesses have already taken action to review their arrangements but for further information and advice please do not hesitate to contact our Recruitment sector group and our Corporate tax team.
The Immigration Skills Charge comes into force on 6 April 2017 for employers sponsoring non-EEA nationals coming to the UK under a Tier 2 Visa. It is to be introduced at £1000 per employee for the first year, increasing by £500 for each six monthly period thereafter, with a reduced rate of £364 for small or charitable organisations, also increasing in 6 monthly periods thereafter.
Draft Regulations have now been published and businesses will be treated as "small" in the same way as they are under the Sponsor Licence system, that is, as defined by section 382 Companies Act 2006 (satisfying two or more of the following requirements: turnover of not more than £10.2 million; balance sheet total of not more than £5.1 million; no more than 50 employees). Any purported assignment of a certificate of sponsorship is invalid if the charge has not been paid.
There are exemptions for PhD level jobs, international students switching from Tier 4 to Tier 2 visas, and the Intra-Company Transfer Graduate Trainee category. The Skills Charge could increase recruitment costs if an exemption doesn't apply, and may incentivise some employers to look to the resident labour market to keep costs down.
In Autumn 2016, the minimum salary for "new entrants" into the Tier 2 General category (mainly those switching from the Tier 4 student category or under 26 years old) remained at £20,800 and will continue at that level. However, on 6 April 2017, the salary threshold for sponsoring Tier 2 General "experienced" workers will rise from £25,000 to £30,000.
Tier 2 (General) applications for some roles in the education, health and social care sectors must provide criminal record certificates (as must their adult dependants).
The Short-Term Staff Tier 2 Intra-Company Transfer closes to new entrants on 6 April 2017. The requirement for an Intra-Company Transferee to have worked for the same company overseas for at least 12 months will still apply. However, those earning more than £73,900 will not have had to have any prior overseas experience with the company. Those earning over £120,000 will be able to extend their visas for up to 9 years. The Immigration Health Charge will also become payable for Intra-Company Transferees and their dependents for each year of the intended stay.
Whether or not a whistleblower is protected from dismissal or detriment under the whistleblowing legislation depends on a qualifying disclosure being made in the appropriate way to, for example, the employer, a regulator or a "prescribed person". There are currently around 80 prescribed persons and from 1 April 2017, many of these will be under a new reporting obligation.
The Prescribed Persons (Reports on Disclosures of Information) Regulations 2017 have been published in draft form and they require prescribed persons to report annually on disclosures of information received from workers provided that the disclosures fall within their remit. The reporting period will be 12 months beginning on 1 April each year and the report must be published within 6 months of the end of the reporting period.
The Regulations set out how the report should be published and what it should contain.
In relation to publication, the report must be published on the prescribed person’s website or in such other manner considered appropriate for bringing the report to the public’s attention. As to the content of the report, without including any information that would identify the worker or employer or other person, the report must contain:
- The number of qualifying disclosures received during the reporting period that the prescribed person reasonably believes fall within its remit.
- The number of those disclosures in relation to which the prescribed person decided during the reporting period to take further action.
- A summary of the action taken during the reporting period in respect of the disclosures.
- A summary of how the disclosures have impacted on the prescribed person’s ability to perform its functions and meet its objectives during the reporting period.
- An explanation of the functions and objectives of the prescribed person.
According to a 2015 report published by the whistleblowing charity Public Concern at Work, 91% of whistleblowers first raise their concerns with their employer and the reporting obligations do not apply in those circumstances.
Although the changes won't take effect for two years, last week the Government published its White Paper on the Great Repeal Bill. The Great Repeal Bill will:
- Repeal the European Communities Act 1972 (which gives supremacy to EU law and EU institutions) on 'Brexit day' (the day the UK finally leaves the European Union, most likely in March 2019);
- Convert EU law as it stands on Brexit day into UK law;
- Create powers for secondary legislation to be made (meaning legislation by Ministers that may not always require the approval of Parliament) to enable corrections to laws that would otherwise no longer operate appropriately.
UK courts will be able to look to treaty provisions to interpret EU laws that are preserved but there will be no requirement to take into account ECJ rulings which are made after Brexit day.
However, very significantly, the Bill will also provide that case law of the European Court of Justice (ECJ) established before Brexit day will be given the same status as the decisions of the UK Supreme Court. This means that pre-Brexit day ECJ rulings cannot be overturned or interpreted differently by lower UK courts or tribunals even after Brexit day. Only in rare cases does the Supreme Court depart from another decision of the Supreme Court, and the Government expects that the Supreme Court would use its power to depart from previous ECJ case law very sparingly. Without this, or a change in legislation, pre-Brexit day ECJ case law will continue to be binding.
For employers this is particularly relevant when it comes to ECJ rulings over what is included in holiday pay, such as in Williams and others v British Airways plc and Lock v British Gas Trading Ltd, which the UK courts have had to follow when interpreting UK law on holiday pay.
April is a very busy month for HR professionals this year, but please do not hesitate to contact us for further information and advice.