A number of changes to employment law are expected to come into force in April 2017, with the most significant relating to gender pay gap reporting. April will be a busy month for employment lawyers and HR professionals; we provide a summary of the key changes.
Theresa May is expected to trigger Article 50 on Wednesday 29 March, which will start the formal process of withdrawing the UK from the European Union. The move paves the way for two years of negotiations with the EU, meaning that the UK is expected to exit the EU in March 2019.
As we have mentioned in previous updates, it is not intended that existing employment law will be radically changed once the UK leaves the EU and, at this stage, employment legislation is not up for major reform. The Government will also enact a Great Repeal Bill, which will end the primacy of EU law in the UK. This Bill is expected to incorporate all EU legislation into UK law, after which the Government will decide over a period of time which parts to keep, change or remove.
The biggest issue for the Government to address initially is likely to involve how Brexit will affect EU nationals currently living in the UK and UK nationals currently living in the EU. The Government has not given a firm guarantee about the status of those individuals and much of this will, no doubt, be subject to negotiations on Brexit.
Gender pay gap reporting
The Gender Pay Gap Regulations are set to be introduced on 6 April 2017. They will require large private and voluntary sector employers (ie those with 250 employees or more) in England, Wales and Scotland to take a snapshot of pay and bonuses as at 5 April 2017. They will then have 12 months to publish a report on their own website and a Government website, indicating the differences between the average pay and bonuses of male and female employees, as well as an assessment of male and female employees within each quartile of the organisation. Similar provisions will apply in the public sector, with the regulations coming into force on 31 March and the snapshot date being 31 March as well.
Failure to comply with the Regulations will not lead to any new civil penalties. However, it will be considered an ‘unlawful act’, which falls within the existing enforcement powers of the Equality and Human Rights Commission.
Immigration skills charge
The immigration skills charge is expected to come into force on 6 April. Employers that sponsor skilled workers under Tier 2 of the immigration points-based system will have to pay a levy of £1,000 per certificate of sponsorship per year (£364 for small employers and charities). The levy will apply in relation to each worker under Tier 2, although there are some exemptions to this.
Employers who employ migrant workers under Tier 2 are therefore advised to carry out an audit of their current work force to assess the potential cost of the immigration skills levy.
The apprenticeship levy will be introduced on 6 April. This will require all UK employers in both the private and public sectors that have annual wage bills of more than £3 million to pay 0.5% of their annual wage bill towards the cost of apprenticeship training. This will replace the current system and will enable employers to choose and pay for the apprenticeship training they want.
The Government is introducing a 'levy allowance' of £15,000 per year, which will be subtracted from the 0.5% total, and will provide a top-up of 10% to each employer's levy fund.
While the levy is being introduced in April, payments are set to start in May 2017 and it will be up to employers to notify HM Revenue & Customs each month as to whether they are eligible to pay.
Public sector employers with 250 or more employees will have to meet a target of 2.3% of employees being new-start apprentices from 1 April.
National minimum wage and national living wage
Increases to the national minimum wage and national living wage will take effect on 1 April. The rates from 1 April 2017 will be (figures in brackets show the current rate):
- Workers aged 25 and over: £7.50 (£7.20).
- Workers aged 21 to 24: £7.05 (£6.95).
- Workers aged 18 to 20: £5.60 (£5.55).
- Young workers aged under 19 but above compulsory school age who are not apprentices: £4.05 (£4.00).
- Apprenticeship rate: £3.50 (£3.40).
On 2 April, statutory maternity, paternity, adoption and shared parental pay will increase to £140.98 per week.
Statutory sick pay will also rise to £89.35 per week on 6 April.
Employment tribunal limits
ET limits increase on 6 April. This will include the following changes:
- The maximum compensatory award will increase from £78,962 to £80,541.
- The maximum basic award or statutory redundancy payment will be £14,670 and a week's pay will rise to £489.
- Guarantee pay will increase from £26 to £27 per day.
- The minimum basic award in cases where a dismissal is unfair by virtue of health and safety, employee representative, trade union, or occupational pension trustee reasons will increase from £5,853 to £5,970.
Tax-free childcare scheme
This scheme, which replaces childcare voucher schemes, is set to launch on 28 April. The Government will make a 20% contribution to childcare costs, up to £2,000 per year. It will apply to parents of youngest children first and will be rolled out to all parents by the end of the year.
Salary sacrifice schemes
On 6 April, limits will be introduced on the range of benefits that can be provided under salary sacrifice schemes. Some arrangements will be protected until April 2018 or April 2021.
Reform to the intermediaries rules (IR35) in the public sector
New rules are expected to be introduced on 6 April that will reform the intermediaries rules (IR35) in the public sector. The aim of the rules is to tackle the avoidance of payment of employment taxes by individuals who work through intermediaries.
Under the reform, where a worker is engaged by a public authority through an intermediary (usually the worker's own limited company or personal service company), the public authority will be responsible for deciding if the IR35 rules apply to the engagement. If the IR35 rules apply, the public authority (or agency or other third party paying the intermediary) will be liable for deducting and paying any income tax and national insurance contributions (NICs) to HM Revenue and Customs. It will also become liable to pay employer secondary Class 1 NICs.
If you have any queries on any of these changes, please get in touch with your usual Bond Dickinson contact.