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Employment law: 2016 changes

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23rd Mar 2016
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Every April we see a number of new employment laws released or changes published. Toni Trevett, director of CompleteHR, outlines the key employment law changes for 2016 so far and examines their impact on businesses.

National Living Wage

The National Living Wage (NLW) will be implemented through the National Minimum Wage Regulations. The first NLW is to be set at £7.20 and will apply to workers aged 25 and over from April 2016.

This is not to be confused with the Living Wage. Whereas the NLW is a statutory entitlement, its rate effectively set by the government, the voluntary Living Wage is maintained by campaign group the Living Wage Foundation. The Living Wage rate is currently £7.85 per hour and £9.15 in London. More than 1,500 employers voluntarily choose to pay the Living Wage.

The government has also confirmed the increases to the national minimum wage rates in October 2016: the rate for workers aged 21 to 24 is to increase from £6.70 to £6.95 an hour. The rate for those aged 25 and over (the NLW) will not increase in October 2016, but all of the rates will then be uprated in parallel from April 2017.

National minimum wage penalties

Penalties for non-payment of the national minimum wage will increase from 1 April 2016. Employers paying below the minimum wage currently face a fine equal to 100% of the underpayment owed to each worker, but this will double to 200% of the arrears owed if the debt is not cleared within 14 days.

The maximum penalty will remain at £20,000 per worker (previously the entire fine was capped at £20,000). The enforcement rule is the same for non-payment of the NLW.

Apprenticeship levy

Draft legislation has been published which would require employers to pay an annual apprenticeship levy. HMRC’s draft legislation provides that employers who pay employer’s national insurance contributions (NICs) will have to pay 0.5% of their total NIC bill each tax year (less an allowance of £15,000).

In practice, this means that employers who pay over £3m in employer’s NICs in any given tax year would be caught by the new measures.

The draft, which is part of the Finance Bill 2016, is currently subject to comment and the levy is expected to apply from 6 April 2017.

The draft legislation has generally proved unpopular among employers, with some referring to it as a ‘payroll tax’. In any event, as the rules are slightly different to existing NIC legislation, employers can also expect to pay compliance costs to ensure that those who operate the payroll are aware of the rules before they come into force.

NI apprentice contributions abolished

As part of the government’s drive to encourage employers to create more apprenticeships for young people, from 6 April 2016, employers will not pay employer national insurance contributions for apprentices under 25.

Single-tier state pension

A new state pension scheme will be introduced, ending contracting-out. The single-tier state pension will be introduced from 6 April 2016, replacing the previous basic state pension and additional state pension.

Employers providing pension schemes will no longer be able to contract out of the state pension and receive a national insurance rebate. This means that, where an employer provides a previously contracted-out scheme, its employer and employee national insurance contribution liability will increase.

Employers should ensure that employees are aware that there may be an impact on their pay packet and that they understand the reasons for this.

Gender pay gap reporting

From April 2018 companies employing 250+ employees in the private and voluntary sector in England, Wales and Scotland will have to publish required comparison data for male and female earnings.

From April 2017 they will need to calculate and publish the mean and median gender pay gap, along with the distribution of men and women in the four salary quartiles, then on analysing the pay data between April 2016 and April 2017 publish the bonus pay gap as well as the number of men and women with bonuses. Explanation can be given if any disparities arise.

Shared Parental Leave extension

The government will launch a consultation in May 2016 on how to implement its commitment to extend Shared Parental Leave and pay to working grandparents.

The consultation will also cover options for streamlining the system, including simplifying the eligibility requirements and notification system, and will explore the potential to make better use of digital technology.

Modern Slavery Act

With effect from 31 March 2016 Section 54 of the Modern Slavery Act requires commercial organisations providing goods or services that have a minimum total turnover of £36m per year to prepare a slavery and human trafficking statement for each financial year.

Employers with a financial year end on or after 31 March 2016 must publish a statement under the transparency provision; if the financial year end date is between 29 October 2015 and 30 March 2016 there is no need to publish a statement for that financial year.

The statement must set out the steps the organisation has taken during the financial year to ensure that slavery and human trafficking is not taking place in any of its supply chains or in its own business, or that the organisation has taken no such steps.

The government has published guidance for businesses affected by the requirement which can be found on the gov.uk website.

Zero hours contracts

The Exclusivity Terms in Zero Hours Contracts (Redress) Regulations 2015 came into effect on 11 January 2016.

The regulations provide protection for people working under zero hours contracts. Although it was unlawful to impose exclusivity terms preventing people from working anywhere else last year, employees are now protected from detriment and dismissal if they have breached an exclusivity clause preventing them from working elsewhere.

No minimum service will be required to claim an employment tribunal.

Repayment of public sector exit payments

Possibly due to take effect from 1 April are the Repayment of Public Sector Exit Payments Regulations 2016. The aim is to cap public sector exit payments at £95,000.

The regulations are also intended to prevent public sector employees receiving large payouts on leaving their jobs, only to return to a public sector role a short time later.

This will apply to employees with annual salaries of £80,000 or more and will require them to repay some or all of their exit payment if they return to public sector employment within 12 months of their exit.

Employment tribunals – employers who fail to pay

The government has confirmed that it expects section 150 of the Small Business, Enterprise and Employment Act 2015 to come into force from April 2016. Section 150 amends the Employment Tribunals Act 1996 to enable financial penalties to be imposed on employers who fail to pay either an employment tribunal financial award or an ACAS conciliated settlement sum.

Contained in the new sections 37A-37Q of the Employment Tribunals Act 1996, an enforcement officer will first issue a 'warning notice' to the respondent employer if any awards or settlements remain unpaid. If the monies still remain unpaid, the employer will normally be issued with a ‘penalty notice’ under which they will be subject to a financial penalty of 50% of the outstanding unpaid amount, subject to a minimum of £100 and a maximum of £5,000.

If the full sum and the penalty are paid within 14 days, the penalty is reduced by 50%. The money is payable to the Secretary of State, not to the employee. However, the aim is that more claimant employees will receive the employment tribunal award owed to them because of the financial consequence to the employer of non-payment.

The new provision will not apply to privately-negotiated settlement agreements.

There are also provisions limiting the number of postponement requests that can be made by parties to an employment tribunal claim to two requests unless there are exceptional circumstances. In addition, any requests made within seven days of the hearing, or at the hearing, will only be granted in exceptional circumstances.

Employment tribunal compensatory award cap increase

The maximum employment tribunal compensatory award cap for an unfair dismissal will increase from £78,335 to £78,962.

As before, the cap on the compensatory award is the lower of the compensatory award cap or 52 weeks' pay (based on the claimant's gross salary prior to their dismissal but excluding pension contributions, benefits in kind and discretionary bonuses).

Discrimination claims, dismissals for whistle blowing or related to certain health and safety reasons remain uncapped. A ‘week's pay’ will increase from £475 to £479. This is used for calculating statutory redundancy payments and employment tribunal basic awards.

The weekly rate of statutory sick pay will remain at £88.45 and the weekly flat rate of statutory maternity, paternity, adoption and shared parental pay will remain at £139.58 for 2016-17.

Psychoactive Substances Act

The Psychoactive Substances Act 2016, which received royal assent on 28 January, is expected to come into force on 6 April 2016.

The act prohibits the production, distribution, sale and supply of all psychoactive substances (‘legal highs’), with the exception of those in everyday use such as medicines, alcohol, cigarettes and caffeine. 

Employers need to make sure any drug and alcohol misuse policies are appropriately worded as well as disciplinary rules. While you are at it, it may be worth considering if your smoking policy is up to date as well, particularly in reference to your view of e-cigarettes.

Volunteering leave

Finally BIS has published a departmental plan for 2015 to 2020 confirming the government's intention to allow employees of public employers and large private employers to take three days volunteering leave each year. The plan does not confirm a timescale for introducing this right nor whether the leave will be paid.

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By Just saying
24th Mar 2016 11:54

2016 Employment Changes

Thanks for a very helpful summary.

 

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