New changes to employment law are scheduled for the coming years. This blog post is a quick-fire overview of the scheduled changes most relevant for owners and managers of SMEs.
Updated 16th March 2021 by Matthew Ainscough, Head of Employment Law at Taylor & Emmet Solicitors. See our post on employment law updates in 2021 to find out about newer updates.
2020 employment law changes
Here are the employment law changes that happened in 2020:
Living and minimum wage increases
In April 2020, the national living wage for people over the age of 25 increased by 6.2% from £8.21 to £8.72. The national minimum wage also increased by 6.5% for people aged 21-24 (from £7.70 to £8.20 an hour). Apprentices receive £4.15 an hour, an increase of 25p per hour (a 6.4% increase).
Learn more: National Minimum Wage and Living Wage Increases
Again, since April 2020, employers are under a legal obligation to provide a ‘written statement’ to new employees and workers before their employment begins or on their first day. This will likely reinforce obligations employers already have - but which many (especially those who own smaller businesses with few employees) do not take up - to issue new employees and workers with a written contract within a maximum of eight weeks.
Changes to agency workers (Swedish derogation)
If you regularly use agency workers then please note that from April 6, agency workers won't be able to opt out of the right to receive equal pay, which becomes available after 12 weeks by entering into a contract of employment with the agency (known as a Swedish derogation agreement).
Those who already work under a Swedish derogation contract must, no later than 30 April 2020, be given a written statement informing them that they are entitled to the equal pay provisions contained in the Agency Worker Regulations 2010. If you use agency workers, this may increase costs.
Related article: What is the difference between a worker and an employee?
Parental bereavement leave
The Parental Bereavement (Leave and Pay) Act 2018 came into force on April 6th, 2020. Under this law, parents who lose a child under the age of 18 are entitled to 2 weeks’ leave as a day-one right from the start of employment; the leave will also be available for parents who suffer a stillbirth after 24 weeks' pregnancy. This leave can be taken in one or two-week blocks and is available for the first year after a child’s death. Employees are entitled to separate bereavement leave for each child lost.
Holiday pay reference period
For employers who hire employees on variable hours contracts, the holiday pay reference period rose from 12 weeks to 52 weeks in April. For employees who have worked at a company for less than 52 weeks, the holiday pay reference period will be however many weeks they have worked. For those who have worked 52 weeks or more, however, the amount of holiday an employee is entitled to – both in terms of days/hours of holiday and amount paid – will need to be calculated according to the average number of hours they worked per day for the previous 52 weeks.
Learn more: Holiday management changes for variable hours employees
Migrant salary threshold to drop
It was announced in 2020 that the salary threshold for skilled migrant workers coming to work in the UK will drop from £30,000 to £25,600, following Britain’s exit from the EU. Also, the government has announced they will be introducing a points-based immigration system for awarding visas. Some business owners are worried that this system will make recruitment much more difficult, as the pool of potential employees for roles will be greatly reduced.
Increase on employer National Insurance Contributions on termination payments over £30,000
You may be aware that when you are agreeing a settlement payment with an employee, you can make a tax-free payment up to £30,000 (provided it is a genuine compensation payment and is not a payment in lieu of notice, or a contractual payment such as a bonus or holiday pay etc.). Therefore, please note that the rules for income tax and employer national insurance contributions will be aligned so that employer contributions of 13.8% will become payable on termination payments above £30,000. Currently, only income tax is payable on sums in excess of £30,000.
Learn more: How will the National Insurance hike affect small businesses?
IR35 regulation extending to private sector
Note: The IR35 update has been postponed until April 2021 due to the coronavirus pandemic and lockdown. Read more about the IR35 update here.
From April 6th 2021, some SMEs will need to decide the employee status of self-employed or contracted workers. This is in order to stop contractors who are effectively treated as employees not paying the same amount of tax as they would as registered employees with the company. This may also affect businesses, who would need to pay National Insurance contributions on any self-employed or contracted workers who count as employees.
Businesses that hire less than 50 employees will not be affected by the upcoming changes to IR35, unless they have an annual turnover of more than £10.2 million or a balance sheet total of more than £5.1 million.
Learn more: IR35 update: the importance of determining employment status
Potential employment law changes
There are a number of other employment law changes currently in discussion that may come into effect in 2020. These include changes for:
Requests for flexible working
Employers may have to start accepting employees requests for flexible working by default - unless the employer has ‘good reason’ to reject the request. This proposal hasn’t been fully detailed yet, so what constitutes flexible working and good reasons for rejection of the request are not yet clear. However, employers should prepare themselves for accommodating more flexible working arrangements.
Read our guide to flexible working for employers to find out more about how to make flexible working work for your business.
The government may introduce a new law on neonatal leave and pay for working parents with premature or sick babies. Neonatal leave would allow new parents (mothers, fathers and partners) to receive one week of paid leave for each week that their baby is in hospital.
Read more from the myhrtoolkit blog
How will changes to variable hours legislation affect employers?
Written by Kate Taylor
Kate is a Content Marketing Executive for myhrtoolkit. She is interested in SaaS platforms, automation tools for making HR easier, and strategies for keeping employees engaged.