Your Timeline to FY19/20’s Legislation Changes

By Alan Gregory | 5th February 2019 | 23 min read

Regardless of the size of your organisation, legislative compliance should always be at the forefront of your operations. Not just because it is law, but because maintaining compliancy is viewed as best practice and can go a long way in protecting your organisation and your employees. What’s more, the penalties for non-compliance can be severe and unforgiving, and no one wants to be faced with a hefty fine. Our article outlines the upcoming legislative changes for 2019/2020. Some are amendments to existing law, others are entirely new Acts in themselves.

1st January 2019 | Executive Pay Gap Reporting

To kick off the New Year, the Executive Pay Gap Reporting legislation came into effect. Regulations made under the Companies Act 2006 now require companies with over 250 UK employees to produce an annual report on the pay gap between their average UK worker and their Chief Executive. The purpose of the new reporting legislation is to improve transparency across big businesses within the UK. The Chief Executive of the Investment Association (IA), Chris Cummings, said that it comes as a result of “investors demanding greater director accountability and transparency on executive remuneration” and that “pay ratios will shine a spotlight on what executives are being paid compared with their workforce, and investors will expect boards to articulate why the ratio is right for the company and how directors are fulfilling their duties”. The government believes that those who are highest paid in an organisation should provide justification for why this is, based on company performance and financial results, to explain the gap between their Executive’s pay check and that of their average UK worker.

The first Executive Pay Gap Reports are due in 2020.

30th March 2019 | Gender Pay Gap Reporting (Public Sector)

As of the 30th March, Gender Pay Gap Reporting within the Public Sector will be due. The Public Sector pertains to ‘specified public authorities’ with over 250 employees, which includes government departments, the Armed Forces, the NHS and state schools. The law was implemented on 31st March 2017, and each eligible organisation has up to twelve months to publish their findings based on data gathered as of the 31st March each annum. The requirements for the reports, under the Equality Act 2010 (Specific Duties and Public Authorities) Regulations 2017, are predominantly the same as those applied to private and voluntary sector organisations of the same size.

To form the basis of your Gender Pay Gap Report, you need to carry out six calculations, and the results of these have to be published on the organisation’s (employer’s) website and the relevant government website within 12 months. Where applicable, the results of the report must be confirmed by an appropriate party, such as the Chief Executive of the organisation.

The calculations are as follows:

  • Average Gender Pay Gap as a mean average,
  • Average Gender Pay Gap as a median average,
  • Average Bonus Gender Pay Gap as a mean average,
  • Average Bonus Gender Pay Gap as a median average,
  • Proportion of males receiving a Bonus Payment and proportion of females receiving a Bonus Payment,
  • Proportion of males and females when divided into four groups ordered from lowest to highest pay.

It is important to note that Gender Pay Gap Reporting is a different requirement to carrying out and Equal Pay Audit. An Equal Pay Audit addresses the pay differences between men and women who carry out the same job role, similar job roles or work of equal value. It’s against the law to pay people unequally based on their gender.

Comparatively, the Gender Pay Gap Report shows the differences in average pay across all men and women within a workforce, regardless of their job role. If the results indicate that there is a particularly high Gender Pay Gap, it suggests that there are a number of issues to be dealt with, and the individual six calculations may go a long way in identifying what those issues are.

1st April 2019 | National Minimum Wage and National Living Wage

Chancellor Philip Hammond announced the increases to National Minimum Wage and National Living Wage in the 2018 Budget, and they are take effect as of 1st April 2019. The amendments are as follows:

  • Workers aged 25+ are legally entitled to a minimum of £8.21 per hour – this is now recognised as the National Living Wage.
  • Workers aged 21-24 are entitled to £7.70 per hour.
  • The Development Rate for workers aged 18-20 is now £6.15 an hour.
  • The Young Workers rate for workers aged 16-17 is now £4.35 per hour.
  • The Apprentice Rate (workers under the age of 19 or in the first year of their Apprenticeship) are entitled to a minimum of £3.90 per hour.

The National Minimum Wage and National Living Wage experiences marginal increases each April, to align with inflation and the rising costs of living.

4th April 2019 | Gender Pay Gap Reporting (Private and Voluntary Sector)

As of the 4th April each financial year, Gender Pay Gap Reporting for the private and voluntary sectors is due. Similar to public sector reporting, it applies to employers in England, Wales and Scotland with 250 or more employees. The reporting requires the information on differences in pay and bonuses between men and women across the workforce to be published within 12 months. The information gathered is based on a ‘snapshot’ date of 5th April each year, and the legislation falls under the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017. The first set of reports were published in April 2018, and the second set are due on the organisation’s and the relevant government website no later than 4th April 2019.

Provisions under the Northern Irish Employment Act mirror those set out for England, Scotland and Wales, however they also include fines of up to £5,000 for non-compliance, alongside a requirement to report on disability and ethnicity pay gaps also.

6th April 2019 | Good Work Plan: Employer Penalties for Breaches

The Government’s ‘Good Work Plan’ was published in December 2018 and made a commitment to increase penalties for employers that repeatedly breach employment law obligations. Under this restructure, it enables Tribunals the power to impose a £5,000 ‘Aggravated Breach’ penalty on employers who lose their Tribunal cases. From 6th April 2019, the maximum limit on these penalties will rise to £20,000.

6th April 2019 | Payslip Changes

Two important changes to the Employment Rights Act 1996 will come into force 6th April 2019 and affect payslip information. They are as follows:

Employers must now include the total number of hours an employee has worked where the pay varies according to the number of hours worked, e.g. under variable hours or zero hours contracts.

Payslips must now be given to ‘workers’, not just employees.

Law surrounding payslips is addressed in the Payment of Wages Act 1991, which grants all employees the right to a payslip and outlines what should be included within. Under the new legislation, employers will be required to provide employees who are paid according to ‘time worked’, details of the number of hours that they are being paid for on their payslip.

If you are an employee of an organisation, you automatically receive the right to a payslip. However, employer’s aren’t obligated to provide payslips if you are: a contractor, freelancer, in the police service, a merchant seaman or a master crew or crew member working in share fishing.

6th April 2019 | Tax on Termination Payments

After being delayed from April 2018, the government’s plans to make any part of a termination payment over £30,000 subject to employer NICs is intended to become law on the 6th April 2019.

Taxation of Class 1 NICs and Income Tax for employers on a proportion of all termination payments came into effect in April 2018. Alongside this, Class 1A NIC employer charges for termination payments greater than £30,000 and on sporting testimonials over the £100,000 lifetime exemption had also been due to be included. However, due to delays in legislation, these are not due to come into effect until April 2020.

6th April 2020 | Good Work Plan: Agency Workers

Resulting from the findings of the Taylor Review and findings from independent research conducted by BEIS, the government has made a commitment to abolish what had become known as the ‘Swedish derogation’ in the rules that governed the use of agency workers. This refers to a type of contract where agency workers do not have to be paid in between their shifts, for example, an agency worker may only be offered two shifts per week and they would not be paid between this time. To amend this, the government is bringing forward legislation to repeal the Swedish derogation and ban the use of this style of contract to withhold the equal pay rights of agency workers.

The report states that Matthew Taylor identified that “those who work intermittently for the same employer can find it difficult to gain or access some rights because they may struggle to build up continuous service”. At present, a gap of one week in employment with the same employer can break the time accrued that counts to continuous service, putting the employee right back at square one. The government has put forward in the Good Work Plan that they will implement legislation to extend this break to four weeks, which will allow more agency workers to gain access to the employment rights that they deserve.

6th April 2020 | Good Work Plan: Annual Leave

The Good Work Plan made a commitment to improve the current Holiday Pay arrangements for seasonal workers, who tend to lose out on these rights as a result of the way entitlement is currently calculated. To amend this, the government is lengthening the reference period for determining an average week’s pay from 12 weeks to 52 weeks.

6th April 2020 | Good Work Plan: Statement of Terms

The Taylor Review identified an element of what has now been termed ‘One-Sided Flexibility’ within the set up of contracts for agency workers, with a minority of employers abusing the current system to transfer a majority of risk to the individual, rather than the organisation. This not only jeopardises worker’s financial security, but also their personal wellbeing. Examples of ‘One-Sided Flexibility’ were given, such as employers cancelling shifts at short notice, or sending staff home when customer demand is low.

As a result, the government is implementing legislative measures to ensure that agency employees are able to request a more predictable and stable contract, by providing them the right to request a more fixed working pattern from their employer after 26 weeks of service. The government believes that this right should be available to both employees and workers.

April 2020 | Extension of IR35 to Private Sector

On 29th October 2018, Chancellor Philip Hammond announced in the Budget that current IR35 tax legislation would be extended to the private sector in April 2020. This change was previously expected to come into effect in April 2019, following earlier consultations in 2018, however it was not to be.

The new rules are intended to reduce tax avoidance for off-payroll contractors working through Personal Service Companies (PSCs) who avoid paying National Insurance Contributions. The Treasury has said that without reform, high levels of non-compliance could cost HM Revenue and Customs £1.2bn per year by 2023. A similar overhaul in the public sector on ‘synthetic’ self-employed, whereby public sector employers have been responsible for deciding whether IR35 legislation applies, and for deducting NICs and tax from contractor’s fees paid through PSCs when it doesn’t, has raised an extra £410m in taxes since 2017, according to HMRC estimates.

2020 | Parental Bereavement Provision

In October 2017, the government confirmed its backing for the Parental Bereavement (Leave and Pay) Bill, on the 13th September 2018, it received the royal stamp of approval and became enshrined in law as the Parental Bereavement (Leave and Pay) Act. This legislation is the first of it’s kind in the UK and is due to come into force in 2020.

The premise of the new legislation is to support those who are affected by childhood mortality, and Business Minister Kelly Tolhurst hailed the new rights as an “important milestone which so many have campaigned for”.

The law entitles any employee who loses a child under the age of 18, or suffers a stillbirth from the 24th week of pregnancy, to two weeks unpaid leave. This is a right from the very first day of their employment, irrespective of service time. If the employee has completed a minimum of 26 weeks’ service at the organisation, their leave will be paid at the statutory rate.

Employed parents are already entitled to take a reasonable amount of unpaid leave to deal with an emergency involving a dependant, including dealing with a death, as a day one right. However, this new legislation goes a long way to improving the legal rights of bereaved parents within the UK.

Currently On Hold | Grandparental Leave

In 2015, David Cameron’s government put forward a landmark proposal to introduce grandparental leave as an extension to Shared Parental Leave (SPL), however it has currently been put on hold. This decision has been made due to the present government carrying out an evaluation of the current SPL legislation, the analysis of which is expected to be published in early 2019.

As you can see, there’s a lot of legislative changes to manage throughout FY19/20, particularly at the beginning of the new financial year. To make sure you’re ready, why not take a look at our Integrated HR and Payroll solution, which will allow you to thoroughly prepare for the upcoming amendments. What’s more, we offer a bespoke system, which allows you to mould our software to your organisation’s requirements. If you’d like to find out more, call our team on 0344 815 5656 or alternatively, you can book your free one to one demonstration here.