If you haven’t already started planning, now is the time.
As a growing SME, you should be aware of some of the most significant employment law developments affecting UK businesses. Many of these changes carry financial, legal and operational risks if not handled correctly.
Below, we outline the key areas you should be preparing for.
National Living Wage
The National Living Wage applies to workers aged 25 and over. It was introduced in April 2016 at a rate of £7.20 per hour, which was 50p higher than the previous minimum wage.
Importantly, this rate is set to increase every year. The government’s aim is for it to reach 60% of median earnings, with expectations that it could rise to £9 per hour by 2020.
This change has had a significant impact on sectors such as:
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Retail
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Social care
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Hospitality
As a result, many SMEs are reviewing costs by reducing bonuses, cutting discretionary benefits, or restructuring staffing levels.
It’s also worth noting that many lower-paid workers have lost income due to changes in tax credits. This may make negotiations around bonus reductions more challenging. Any changes must be handled carefully to ensure you remain compliant with employment law.
Pensions Auto-Enrolment
Although auto-enrolment has been in place for several years, many smaller employers only began dealing with it during 2016 and 2017 due to phased implementation.
Your staging date is the deadline by which your pension scheme must be live. It’s important to remember that selecting a provider, setting up the scheme and preparing employee communications can take several months.
In most cases, planning should begin at least six months before your staging date.
You will also need to:
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Identify which employees must be enrolled
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Decide whether to use a postponement period for new starters
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Budget for employer contributions
The minimum employer contribution starts at 1% of qualifying earnings, rising gradually to 3%.
Zero Hours Contracts
Zero hours contracts remain controversial, but they can be useful for managing fluctuating demand.
In 2015, legislation banned exclusivity clauses, meaning employees could not be prevented from taking other work. However, this did not originally protect workers from being penalised for doing so.
New regulations introduced in January 2016 now allow zero hours employees to bring claims if they are dismissed or disadvantaged for breaching an exclusivity clause.
This is an evolving area of employment law and should be monitored closely.
Holiday Pay
Holiday pay calculations have become increasingly complex.
Recent cases have raised questions around whether voluntary overtime and commission should be included when calculating holiday pay. Many of these cases are still working their way through the courts.
Employers should ensure they understand their current obligations and stay alert to further legal developments.
Statutory Pay Rates
There is some good news for employers.
Statutory Maternity Pay remains unchanged at £139.58 per week, payable for 33 weeks following the initial six weeks paid at 90% of average earnings.
Modern Slavery Reporting
The Modern Slavery Act 2015 requires certain organisations to publish an annual statement outlining how they prevent slavery and human trafficking within their supply chains.
While this currently applies to larger organisations, SMEs may still be affected if they supply goods or services to those businesses. As a result, auditing supply chains, implementing policies and providing training may become increasingly important.
Gender Pay Gap Reporting
Gender pay gap reporting measures the difference in average earnings between men and women within an organisation.
There is currently no single agreed calculation method. However, the Office for National Statistics uses median hourly earnings, excluding overtime, as this reduces distortion from extreme values.
Bonus payments may also be included in future reporting requirements, so this is another area SMEs should keep under review.
HMRC New Employee Starter Checklist
HMRC has introduced a new starter checklist for employees who do not have a P45.
This checklist replaces the old P46 form and ensures new employees are placed on the correct tax code.
Information required includes:
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Date of birth
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Gender
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Full address
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Start date
Where available, details from a P45 should also be collected, including:
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National Insurance number
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Tax code
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Pay and tax to date
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Student loan status
This information must be retained for the current tax year and the following three tax years.
Need Support or Advice?
Employment law can be complex, and getting it wrong can be costly.
If you’d like support with any of the areas above or have questions about how these changes affect your business, please get in touch.
📞 Call us on 01903 688789
📧 Email: makeithappen@mbsmih.com
We’re always happy to help.