This coming year looks to be another busy one with more significant employment law changes coming into force and we have highlighted some of the key changes, which range from the introduction of gender pay gap reporting to the introduction of an apprenticeship levy for large employers.
Trade union balloting
The Trade Union Act 2016 requires a vote for industrial action to have at least 50% turnout of those eligible to vote, and that the majority vote in favour. Where the strike will affect "important public services", then at least 40% of eligible voters will need to vote in favour of action. The Act is not yet in force, however, draft statutory instruments have now been published and it is likely that the new laws will come into force on 1 March 2017.
Apprenticeship levy on large employers introduced
From 6 April 2017 the current apprenticeship system will be replaced by a requirement for all employers with an annual payroll of £3 million or more to pay a 0.5% levy on their total pay bill. They will be able to access levied amounts (and a government top-up of 10% if they spend their entire levy) to pay for apprenticeships in England from accredited training providers. Smaller organisations not required to pay the levy will also be able to receive funding for accredited apprenticeships by contributing 10% towards the cost of an apprenticeship, with the Government paying the remaining amount.
Restrictions on salary sacrifice schemes
From 6 April 2017 some salary sacrifice schemes will no longer continue to offer the same savings on tax and National Insurance contributions. Exempt from this will be schemes related to pension savings (including pensions advice), childcare, cycle-to-work and ultra-low emission cars. Schemes in place prior to April 2017 will be protected until April 2018.
Gender pay gap reporting
New gender pay gap regulations which are due to come into force on 6 April 2017 mean that private and voluntary sector organisations employing 250 or more people on 5 April 2017 must publish the details of their gender pay gap by 4 April 2018. Employers will need to use data from 2016/17 for the first reports which will require median and mean information relating to employee pay and bonus pay to be published, together with details of the number of men and women in each quartile of the organisation's pay distribution.
It is likely that reporting requirements for public-sector employers will closely emulate private-sector timelines and requirements.
The Modern Slavery Act 2015 requires certain organisations to produce and publish an annual statement setting out the steps taken to ensure that no form of modern slavery exists anywhere in its business or its supply chain. The aim is to encourage organisations to take responsibility for not only their own use of labour but also the use of labour in the organisations that supply goods and services to them. The intention is that in doing so, this will raise standards across the board.
The Act applies to all commercial organisations producing goods or services that do business in the UK and have an annual global turnover of over £36 million. Those organisations covered by the Act must produce their first statement within six months of the end of the first financial year. For example, companies whose financial year end was on 31 December 2016 will have until 30 June 2017 to produce their first statement.
For more information about the Modern Slavery Act and how we can help your organisation do visit our website and complete our interactive online assessment tool, or view our recent article in December's Law at Work.
National living wage changes
The national living wage for employees aged 25 or over will rise from £7.20 an hour to £7.50 an hour from April 2017.
IR35 in the public sector
From 6 April 2017, a new duty will require tax and national insurance contributions (NICs) to be deducted on all payments made by public sector organisations to workers supplied by personal service companies on short-term assignments. This is because such payments will be treated as payments of employment income upon which either the engager or third-party intermediary will be required to account for tax. It is possible that similar changes may follow in the private sector.
Public sector exit payments restricted
We had expected restrictions on public-sector exit payments to have come into force in 2016, and, although still anticipated, an implementation date has not yet been confirmed. The effect would be a cap of £95,000 on the pre-tax value of exit payments made to most public sector workers for loss of employment. This would include any redundancy pay, voluntary exit payments or other payments made due to loss of employment. The principle of clawback would then apply if any such affected employees also earn £80,000 or more. They would be required to repay exit payments if they return to any public-sector role within 12 months.
The recently published Green Paper considers what changes might be appropriate in the corporate governance regime to help ensure that the economy works for everyone, especially in light of the recent negative publicity generated by large private companies such as BHS and Sports Direct. It considers options for increasing shareholder influence over executive pay in quoted companies is aligned to long-term performance, it gives greater voice to employees and consumers in the boardroom and considers whether features of governance standards for listed companies should be extended to the largest privately-held companies. Further details are in our recent article.
We expect significant changes to the UK immigration rules in 2017, not least to provide clarity on the future rules governing European nationals' right to continue to live and work in the UK following Brexit. Whilst we wait for those changes, there will also be changes to non-European national visa routes. Amongst other things, from 6 April 2017 the £200 annual immigration health surcharge will be expanded to include Tier 2 Intra Company Transfer applicants. We also await confirmation of the date for the introduction of the £1,000 per year Tier 2 skills levy applying to sponsoring employers in this category. On a more positive note, in Tier 2 ICT the prior service requirement will be removed for certain applicants and the high earner threshold will be lowered.
2017 looks set to be another busy year for pensions. Of particular interest to employers is likely to be the forthcoming review of auto enrolment, announced in early December 2016 by the Parliamentary Under Secretary of State for Pensions Richard Harrington. He has confirmed that this review will include:
- looking at the existing coverage of auto enrolment and considering the needs of those not currently benefiting from it – for example, those with multiple jobs who do not meet the current criteria for auto enrolment in any of them and how the self-employed can be helped to save for their retirement.
- considering if the technical operation of the legislation is working as intended and whether or not there are any policies which disproportionately affect different types of employers or could be further simplified.
The Government has also announced that, for auto enrolment purposes, it intends that for the year 2017/18, the earnings trigger will be frozen at £10,000, and the qualifying earnings bands will be £45,000 for the upper limit and £5,876 for the lower limit.
Another key area of interest for employers with final salary pension arrangements will be the much awaited Government Green Paper on defined benefit pension schemes which is due to be published in the early part of this year. It will be interesting to see whether or not the Green Paper will include any of the recommendations in a Work and Pensions Committee report on defined benefit pension schemes (published at the end of last year) which include the so-called 'nuclear deterrent' proposal to give the Pensions Regulator powers to impose very heavy fines on employers avoiding their pension scheme liabilities.
The Pension Protection Fund (PPF) levy is one of the ways the PPF funds PPF compensation payable to scheme members that transfer to it and is generally payable by all defined benefit pension schemes whose members could become eligible to receive PPF compensation in certain circumstances. The PPF published provisional rules for the calculation of the levy for the 17/18 year last December and is due to publish the final rules by 31 March 2017. The PPF has very strict deadlines in relation to matters in connection with the levy which are set out in this document. In particular, if employers wish to reduce the PPF levy payable by their pension schemes by putting in place or re-certifying appropriate contingent assets in relation to those schemes then they will need to act soon to ensure that the PPF deadlines in this regard are met (the deadline for contingent asset certificates to be submitted to the PPF is midnight 31 March 2017). Taylor Wessing's Pensions Group has ample experience of dealing with these issues and the requirements. Please contact Mark Smith for further information.
...and looking ahead to 2018
The government has plans to extend shared parental leave and pay to working grandparents by 2018. However the consultation initially proposed for May 2016 on how to implement its commitment to extend shared parental leave and pay to working grandparents, and to simplify the eligibility requirements and notification system was delayed until after the EU referendum. The government has yet to provide further consultation dates.
Tax on termination payments
From 6 April 2018 the government is committed to simplifying the tax and NICs treatment of termination payments. All payments in lieu of notice will be treated as earnings (subject to tax and NICs). While the exemption from income tax and NICs for termination payments up to the current threshold of £30,000 will remain, employer NICs will be payable on payments above £30,000.
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.