Payroll: What 2020 could look like
Samantha Mann summarises some of the key changes planned in payroll for April 2020 and considers how the recent general election outcome could impact on their delivery.
With an overwhelming majority, it would appear that the new government should be able to deliver whatever policies it has in mind. However, if 2019 has taught us anything it is that anything can (and does) happen in politics.
Minimum wage increase
One thing we do know is that official minimum wage rates will rise from April 2020.
In an announcement on the final day of 2019, the government said the national living wage for over-25s would increase from £8.21 an hour to £8.72 from the start of April.
Pay rates will also rise across all other age groups, including by 6.5% for 21-24-year-olds to £8.20, by 4.9% to £6.45 for 18-20-year-olds, by 4.6% to £4.55 for under-18s and 6.4% to £4.15 for apprentices.
Source: HM Treasury
Since the announcement was made to extend the off-payroll working reforms to the private sector from 6 April 2020, HMRC has worked with stakeholders to bring about improvements to the CEST tool (Check Employment Status for Tax) and the latest iteration was published alongside updated guidance towards the end of November.
Opinions will continue to be divided as to the effectiveness of this tool. However, CIPP members who, along with other stakeholders, fed into the changes made to CEST were of the opinion that under test conditions it seemed easier to use and clearer in the reasons for the determination outcome.
The true test of the CEST tool will come now that it has been rolled out for widespread use.
Director of labour market enforcement (DLME)
The interim DLME, Matthew Taylor, has recently published his call for evidence to feed into the 2020-21 strategy.
Whilst the government has yet to respond to the 2019-2020 strategy, this call for evidence will focus on four areas that are at high risk of low compliance:
- Hand car washes
- Social care
The Call for Evidence is open for evidence and comments from 16 December 2019 to 24 January 2020: shorter than the normal period of consultation.
Matthew Taylor has made clear that this work will not focus on the proposal for a Single Enforcement Body for Employment Rights, as per the recent BEIS consultation. Instead, the paper focuses on the high-risk areas (as above) before going on to ask about the risk of non-compliance in other sectors, particularly with a view to hearing about improvements that may have been made to the protection of workers rights.
It concludes by looking at about future trends and emerging issues such as IR35/off-payroll reforms, umbrella and supply chain challenges and the growth of online apps for recruitment agencies.
Comments and evidence should be submitted to [email protected].
Holiday pay has been a subject that has featured in many employment tribunals in recent years and was also a subject of discussion in the recent BEIS consultation on the idea of creating a single enforcement body (SEB).
We await the outcome of the SEB consultation which, in addition to bringing together the Employment Agency Standards Inspectorate (EAS), the Gangmasters and Labour Abuse Authority (GLAA) and HMRC national minimum wage, also aims to improve the provision of state protection of vulnerable workers. It aims to do so with the enforcement of holiday pay (which currently relies upon the determination of the employee to seek a remedy through an employment tribunal) and the payment of statutory sick pay (SSP), which is currently managed by HMRC.
In the meantime, and as a result of much lobbying and the Matthew Taylor review, the reference period for calculating holiday pay is to be extended from 12 weeks to 52 weeks, where the employee has been employed for 52 weeks. Where the employee has been in employment for fewer than 52 weeks, the reference period will be the number of weeks that the employee has been employed. The aim is to provide a more accurate reflection of average pay for the purposes of holiday pay.
The employment rights (employment particulars and paid annual leave) (amendment) regulations 2018 will bring this change into force as from 6 April 2020.
Working back over the 52 weeks, where a week saw no payment because the employee did not work, the preceding week of work and pay should be used. Once the 52-week reference period comes in to force, the maximum period that the employer should go back will be 104 weeks, before the beginning of the period of leave.
Day one employment rights
The employment rights regulations that bring in the 52-week reference period for annual leave calculations will also bring into force a day-one right to written particulars of employment.
Currently, the written statement of particulars of employment is required to be provided to employees within two months of the employment start date for employees who have worked for more than one month.
From 6 April, the written statement of particulars will be extended to all workers, which will include those sometimes referred to as ‘Limb B’ workers, for example workers in the gig economy.
The BEIS Impact Assessment which was published alongside the regulations gives a requirement to include:
- How long a job is expected to last, or the end date of a fixed-term contract
- How much notice an employer and worker are required to give to terminate the agreement
- Whether a worker is eligible for sick leave and pay
- Other types of paid leave eg maternity leave and paternity leave – whether the worker is eligible and where to find more details on the employer’s policy
- The duration and conditions of any probationary period
- All remuneration – not just pay but contributions in cash or kind eg vouchers and lunch
- Additional mandatory contents to be required in a written statement
- Which specific days and times workers are required to work
This is in addition to the information that is currently mandated to be provided within the written statement of employment particulars. Full details of which can be found on gov.uk.
Readiness for change
Today I’ve taken a canter through just a small number of the changes that are heading our way from April 2020.
As ever on the subject of pay, reward and employment conditions, there is always more to come. Not least the much-anticipated publication of the government’s response to the employment status consultation which considered the variance between employment rights and tax status – two key areas that all of the above have in common.