What small businesses can expect in employment law in 2019 and beyond

Here we summarise the key developments in employment law for small and medium sized businesses in 2019 and beyond.

Pension Contributions.  From 6th April 2019, the minimum contributions that employers must pay into their staff’s pension scheme, increases from the current rate of 2% of the employee’s total earnings to 3% of the employee’s total earnings.

The National Living Wage, which is the minimum hourly rate that applies to workers aged 25 years and over increases from £7.83 to £8.21 from 1st April 2019.  The National Minimum Wage rates also increase on this date as follows:

  • from £7.38 to £7.70 for 21-24 year olds
  • from £5.90 to £6.15 for 18-20 year olds
  • from £4.20 to £4.35 for 16-17 year olds; and
  • from £3.70 to £3.90 for apprentices aged under 19 or in the first year of their apprenticeship.

UK small businesses are naturally concerned about the implications of Brexit.  The current position is that 29 March 2019 is “Exit Day”. On the Brexit cut-off date, which is currently expected to be 29 March 2019 (unless extended), the UK leaves the EU. Assuming the Withdrawal Agreement is enacted by the UK Parliament, the UK will then enter a transition period which lasts until the end of December 2020.  Freedom of movement will continue during the transition period.  EU citizens who are already resident up until the end of the transition period will be eligible for permanent settled status in the UK once they have been resident in the UK for five years.  Whilst employers may wish to provide support, it is for individuals rather than employers to apply for settled status.  Individuals are also responsible for the cost of the application.  Whilst the impact of Brexit on immigration is potentially very high, the impact on employment law is less immediately obvious.  The Government has published technical guidance on worker status, which shall apply in the event of a “no deal” Brexit.  The notice advises that, with some minor exceptions, any changes to employment legislation in the event of a no-deal Brexit will be solely linguistic, simply to reflect the fact that the UK is leaving the EU. The Government has confirmed there will be no change to substantive employment rights of workers in the event of a “no deal” Brexit. In its recent publication on modern working practices, the Government has stated that it will not only maintain workers’ rights as the UK leaves the EU, but enhance them.

Employment status in the “gig economy” There have been a number of recent legal rulings finding that individuals who are categorised by businesses as self-employed contractors are, in reality, workers or employees who are entitled to minimum worker benefits, such as the National Minimum Wage, statutory paid holiday and sick pay.  The trend has been for more and more individuals working for businesses, where the work they do is largely controlled by the business but they do not enjoy employee or workers’ rights, to be recognised by the tribunals as workers.  Unfortunately, determining the employment status of individuals is a complex task for businesses.  There have been calls to simply the law in this area. 

In 2016, the Government commissioned an independent report on modern working practices and the employment status of contractors working within the “gig economy”. The Government finished consulting with businesses and other interested parties on this report in June 2018. We have now received the Government’s response to the consultations. On the back of this, the Government has introduced draft legislation to Parliament.  The new legislation, which is scheduled to come into force in April 2020, includes:

  • closing a loophole by repealing the Swedish derogation – which currently allows agency workers to be employed on cheaper rates than permanent counterparts
  • extending the right to a day one written statement of rights to workers, going further to include detail on rights such as eligibility for sick leave and pay and details of other types of paid leave, such as maternity and paternity leave
  • increasing the maximum employment tribunal fines for employers who are demonstrated to have shown malice, spite or gross oversight from £5,000 to £20,000
  • extending the holiday pay reference period from 12 to 52 weeks, ensuring those in seasonal or atypical roles get the paid time off they are entitled to
  • lowering the threshold required for a request to set up Information and Consultation arrangements from 10% to 2%

Additional proposals set out in the Government’s response, for which the Government has not yet introduced legislation or a timetable of reforms include:

  • Empowering the Employment Agency Standards Inspectorate to monitor the role of the umbrella companies and to ensure that agency workers are receiving adequate pay without inappropriate deductions being made.
  • Introducing a new single labour market enforcement agency to support workers and advise them of their rights.
  • Clarifying the employment status test and aligning the employment status frameworks for employment and tax purposes in order to reduce any differences between the two systems.
  • Introducing a right for “zero hour” or “casual hour” workers to request a more predictable and stable working pattern after 26 weeks of service.
  • Extending the time required to break a period of continuous service between contracts from one clear week to four clear weeks to make it easier for employees to access their statutory rights, which are based on length of service.
  • Prohibiting deductions from staff tips.

To clarify, there are no plans to end the use of “zero hour” contracts.  The Government has made clear that it recognises the varied ways of working, wants to ensure the workforce remains flexible, but whilst guaranteeing key protections for workers which the above proposals and legislation is designed to address.  

Payslip changes.  As part of the Government’s recommendations in its response to the Taylor Review, two important changes will be introduced from 6 April 2019, which affects pay slip information from that date, as follows:

  • Employers must include the total number of hours worked where the pay varies according the hours worked, for example under variable hours or zero hours’ contracts.
  • Payslips must be given to ‘workers’ and not just employees.

The Parental Bereavement (Leave and Pay) Act is expected to take effect in 2020.  This legislation creates a new right to two weeks’ bereavement leave and pay for employees whose child dies below the age of 18, or whose child is stillborn.

Tribunal fees.  The Supreme Court abolished Employment Tribunal fees in July 2017 but did not rule out the possibility of the Government reintroducing tribunal fees in the future, provided that the reintroduced fees are set at a lower level, including a fee exemption for those that cannot afford to pay a fee.  According to Government figures, since fees were abolished, the number of individual claims has increased by 64%.  In October 2018, the Ministry of Justice indicated that plans for the reintroduction of employment tribunal fees were in development, although there is no date as yet for the reintroduction of fees.