In April 2020, a raft of employment law reforms is due to come into force. Below is an overview of the reforms and the necessary steps required for your business:
Changes in IR35
New IR35 rules mean that from 6 April 2020, medium to large sized businesses in the private sector will be deemed responsible for deciding whether contractors who use a personal service company will fall within IR35. To help with this, you can use the Government’s own Check Employment Status Tool. If the end-user business falls closest to the personal service company (PSC) in the contractual chain, then it is then responsible for deducting the relevant tax and NICs at sources through PAYE and paying the employer NICs. Read more from us on IR35 here.
Holiday pay calculations
The reference period which calculates holiday pay for certain workers is changing. If a worker has variable pay either because of not having normal working hours or having pay that varies with the amount of work done or the time taken for the work, then the reference period will change from 12 to 52 weeks. Where the worker is engaged for less than 52 weeks, then the reference period will default to the number of weeks that worker has been engaged. Ensure your internal policies are in-line with this change ready for the new calculation model on 6 April 2020.
Termination payments taxation
The delayed reform that was first due to come into force in 2018, is finally due to be enacted on 6 April 2020. It means employer class 1A national insurance contributions (NICs) will now become payable on termination payments over £30,000. These are currently only subject to income tax. Termination payments will remain exempt from employee NICs. It is important to factor these changes into the cost when negotiating settlements with departing employees.
As of April, written statements of particulars of employment must be extended to all workers. They must also be given on the first day of work, with certain enhanced content. The statement will have to include the ‘principal statement’ particulars in addition to certain existing ‘supplementary statement’ particulars. New particulars, relating to paid leave, working time, benefits and probationary periods should also be added to the statement in the future. This will mean identifying workers that will require the relevant contracts in time for 6 April 2020.
Agency workers get improved rights
Agency workers will have the right to the same conditions as those in direct employment of the employer. The provision exempting agency workers from right-to-pay parity until 12 weeks of service – the “Swedish derogation” – will be repealed on 6 April 2020. Agency workers must be notified by agencies of this fact – informing them of their new rights. A “Key Facts” statement must also be provided to agency workers before they start placements. This statement should set out core information on the proposed placement.
Parental bereavement leave
Employees suffering the loss of a child under 18 years of age will be entitled, from April 2020, to two weeks’ statutory leave. This can be taken within 56 days of the death. This will be a separate right that does not affect other forms of leave, e.g. dependant emergency leave. To accommodate this change, consider putting in place a relevant bereavement policy that outlines the right as well as including other forms of available support.