UK: Need To Know: Recent And Upcoming Changes To The UK's Employment Law Landscape

New legislation due to come into force in April 2017 requiring employers to publish details of their average pay for men and women

New Gender Pay Gap Reporting obligations are expected to come into force in April 2017. The regulations apply to employers with 250 or more UK employees (which is assessed by each employing entity, so affiliates in a group are not aggregated). The Regulations impose an obligation on employers to analyse and publish details of the salary and bonus paid to their female when compared with their male staff.

The final regulations have not yet been published but the current draft regulations require large employers to publish:

  • Overall gender pay gap figures using both the mean and median average hourly pay in the month of April each year. The figures are to be set out in four pay bands, described as 'quartiles'. It is not yet clear whether these quartiles will be set by splitting the total pay range into equal quarters or by dividing the overall number of employees into four equally numbered groups.
  • The difference between men and women's mean bonus pay over a 12-month period.
  • The proportion of male and female employees who received a bonus in the same 12-month period.

Note that pay information is taken on a "snapshot" basis for the month of April in each year, whereas bonus information (which includes LTIPs and the value of shares granted) covers payments made in the previous 12 months. The information needs to be published on the employer's website and a government website within 12 months (i.e. by April 2018), and must remain publicly available for 3 years. There is currently no requirement for employers to have the information audited before publication.

In respect of enforcement, there are no sanctions for non-compliance. However, the government has stated that it intends to run periodic checks to monitor compliance and may name and shame non-complying employers. Pressure groups are also expected to take an interest.

Action Points

We expect the new rules to be finalized shortly, meaning that the first data grab will need to take place this coming April, 2017. Obtaining, analyzing and presenting the pay information all present challenges and we strongly recommend that impacted employers prepare now. Key actions are:

  • Who will "own" the process (HR, Legal, Compliance, etc.)?
  • How will the pay and benefits information be obtained and who will prepare the mean and median hourly pay calculations.
  • How will data gaps and grey areas be addressed, and is there scope to ensure a consistent approach with other employers in the sector?
  • Looking at previous years data, can we forecast the likely outcome of an analysis in 2017? If there is a significant pay gap between men and women, can steps be taken to reduce the gap or, perhaps more likely, to prepare a statement explain the differences in pay and explaining what general steps the employer is taking to promote diversity. Although not mandatory, the government guidance strongly encourages employers to provide a "narrative" explaining the results and setting them in context.

First Shared Parental Leave Discrimination Claim

Paying shared parental pay only to mothers is gender discrimination against men

In the first Tribunal decision on the UK's new shared parental leave regime (where men and women can broadly share 12 months' leave between them), an employment tribunal has found that an employer's policy of paying enhanced shared parental leave pay only to its female workers amounted to sex discrimination against men. It has been reported that as a consequence, the employer has cut its parental pay back to statutory minimum levels as the cost of levelling up shared parental pay for both genders was prohibitive.

The case was unusual in several respects:

  • By the time the matter came to trial, the employer had admitted that the policy indirectly discriminated against men.
  • The risk of challenge here was higher because both parents worked for the same employer, and the employer provided women on parental leave with full pay for 6 months' leave.
  • The difference in pay between men and women was under a single enhanced shared parental pay policy. The more common scenario would be for an employer to provide the same shared parental pay to men and women, but potentially to offer women only enhanced maternity pay. This is still open to challenge, but the difference is then somewhat less obvious (see more below).

However, in our view, employers who differentiate between pay levels for those on maternity leave and those on shared parental leave are also potentially open to a discrimination claim from male employees. In a 2013 case (Shuter v Ford Motor Company Ltd, ET) a Tribunal held that providing above-statutory maternity pay for women but not enhanced shared parental pay to men who take off the same period of leave was potentially indirect discrimination. However, in that case, Ford successful defended the claim, on the basis the difference was justified because women were under-represented in its workforce, and the policy achieved the goal of retaining them post-maternity leave.

Snell v Network Rail Infrastructure Limited 2016, ET (Scotland)

Changes on the Horizon

The Government is undertaking a consultation into levels of protection for contractors and other casual workers (the so-called "gig economy"). A number of challenges are underway by "self-employed" contractors against "disruptive" tech companies such as Deliveroo, and there has been an initial Court ruling that contractors may qualify for "worker" benefits and protections.

The government has announced it is considering making unpaid internships unlawful, which is expected to be confirmed as part of the next Parliament, in Spring 2017.

A new tax free childcare scheme will be introduced from early in 2017 (date to be confirmed). This will replace the existing childcare vouchers scheme administered by employers, and will allow relevant employees to reclaim up to 20% of childcare costs directly from the state (subject to their earnings and to an overall cap of £2,000 on the amount claimed).

Employees will still be able to join the current employer childcare vouchers scheme until April 2018, and remain in it for as long as they remain with that employer. This is worthwhile promoting to employees, as it is a retention tool and also has cost savings for employers. It also worth noting that the new tax free childcare scheme will not be open to certain employees, for example families where one parent does not work, or either parent earns over £100,000/year, and these employees are better off remaining in the current childcare vouchers scheme for as long as they can.

In data protection, the Government has announced that the EU General Data Protection Regulation will still take effect in May 2018, whether or not Brexit still takes place, and that post-Brexit the Government will ensure "a high level of protection for members of the public". This suggests the UK's data protection rules will not deviate significantly from the EU, which of course remains the practical reality if the UK wishes to either remain in the wider European Economic Area or wants to be approved for transfers of data from the EU.

The Government's Autumn budget published on 23 November confirmed changes to the rules on the following:

Taxation of employment termination payments, expected from April 2018:

  • The distinction between contractual and non-contractual payment in lieu of notice (PILON) will be removed. This will mean that all PILONS will be subject to income tax and social security ("NICs").
  • Employer NICs (currently 13.8%) will have to paid on sums in excess of £30,000 (they are currently only subject to income tax).
  • Foreign service relief (i.e. tax relief to account for time spent abroad during employment) will generally be abolished.
  • Contributions towards the employee's legal fees will continue to be treated outside the tax regime on termination payments.

Although the Government had proposed that all payments on termination relating to bonuses would be subject to income tax and NICs, regardless of whether there was a contractual entitlement to those payments, this appears to have been dropped.

Salary Sacrifice, expected from April 2017:

  • All benefits provided through salary sacrifice will cease to benefit from tax and NICs relief other than pension contributions, childcare benefits, cycles/cyclist's safety equipment and ultra-low emission cars.
  • Existing arrangements will be protected until April 2018, save for cars, accommodation and school fees, which will be protected until April 2021.

Employee Shareholder Status (ESS), from 1 December 2016:

  • ESS will be closed to new users, as soon as possible. This was a special category of worker, under which the employee gave up certain key employment rights, such as those relating to unfair dismissal in return for certain tax advantages on a shareholding in their employer.
  • The ESS was not widely taken up, which may be the reason for it now being abolished. ESS arrangements entered into before 1 December 2016 will however not be affected.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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