If you haven’t already or aren’t aware yet, as a growing SME you should start planning now for the most significant employment law developments.
National Living Wage
This is the increased national minimum wage for workers aged 25 and over. The initial rate was introduced at the beginning of April 2016 and is £7.20 per hour (50p more than the previous rate). You need to be aware that the National Living Wage will increase every year, with the aim of it being 60% of median earnings, and it’s expected to be £9 by 2020!
This development is set to have a major impact on the retail, social care and hospitality sectors, and businesses are already looking at ways to mitigate the cost. Many SMEs are reviewing other benefits such as bonuses, discretionary benefits, lunch vouchers, and implementing staff cuts etc.
Many staff paid at or near the minimum wage will also have lost out financially as a result of changes to tax credits, so securing their agreement to your bonus cuts may be tricky. Ensure you consider carefully how to implement any such changes – staying the right side of the law.
Pensions Auto-Enrolment
Although auto-enrolment has been in force for several years now, its phased introduction means that many smaller employers will only begin contending with it in 2016 and 2017. You can find out your staging date (the date by which you need to have the auto-enrolment scheme up and running) by checking on the Pensions Regulator’s website here but keep in mind that it takes a few months to select a scheme, get it set up and put the employee paperwork in place.
In most cases businesses will need to start planning the process six months before the staging date. In particular, you need to determine which of your staff will need to be automatically enrolled and whether the you want to use a ‘postponement period’ so new staff are not automatically enrolled during their first three months of employment. Initially, the minimum employer contribution will be 1% of ‘qualifying earnings’, but this will also rise over time to 3%.
Zero Hours Contracts
These contracts continue to be controversial but they can be a vital tool to help smaller businesses cope with fluctuating demand. In 2015 new legislation was introduced by the Government stopping the use of exclusivity clauses (e.g. banning an individual from taking on other work) in Zero Hours Contracts. However, the legislation did not give staff any follow up if they were dismissed or punished for taking on other work. The government has now tried to address this and new regulations came into force on 11 January 2016 giving ‘zero hours’ employees the right to bring employment claims if they are dismissed or subjected to a detriment for breaching an exclusivity clause. This looks set to be a developing area of law…
Holiday Pay
Calculating holiday pay ought to be simple but 2014 and 2015 proved this certainly is not the case. Various cases are still working their way through the appeal system in relation to whether voluntary overtime and commission payments need to be included in holiday pay and how this should be calculated. Be sure to keep a careful eye on this and ensure you understand your legal obligations.
Statutory Pay Rates
One minor piece of good news for businesses is that Statutory Maternity Pay will not be increased this year and will remain at its current rate of £139.58 per week (paid for 33 weeks after the employee has received six weeks’ pay at 90 per cent of her weekly earnings).
As an SME, you should also be mindful that reporting requirements on modern slavery (already in force) and the gender pay gap (due later this year), which currently apply to larger businesses, may affect you if you have supplier contracts with bigger organisations, and tyou should expect these issues to play an increasing role in procurement and contract negotiations.
Modern Slavery
The Modern Slavery Act 2015 (section 54) will require some commercial organisations to publish an annual anti-slavery and human trafficking statement. Businesses may need to carry out significant auditing of their global supply chains to fulfil this obligation, and there is the potential to carefully consider introducing policies and practices on the issues involved, as well as implementing training and awareness.
Gender Pay Gap
This is a measure of the difference between the average earnings of men and women within an organisation based on a comparison of what men and women get paid for doing the same job. But there are many different ways of measuring the gender pay gap, and currently no single recognised method. How it is measured can make a big difference to the answer.
The Office of National Statistics measures the gender pay gap by comparing the median hourly earnings of men and women, excluding overtime. The median calculation reflects the mid-point of a range of earnings, and using this method is said to be preferable because there is less distortion by very high or very low earnings than when using a mean average, for example.
Comparisons are usually made between hourly rates as this takes account of the fact that statistically men work more hours on average than women. For the same reason, it is said that bonus and overtime payments should be excluded, although recent reports suggest that bonus payments are likely to be included in the calculation when the regulations are published.
HMRC New Employee Form
The HMRC have published a new starter checklist for new employees starting with organisations who don’t have a P45. This includes information required from the new employee to set them up with the correct tax code and starter declaration on the payroll.
Usually most of this information comes from the employee’s P45, but they’ll have to fill in a ‘new starter checklist’ (which replaced the P46 form) if they don’t have a recent P45.
Information that will be needed is:
• Date of Birth
• Gender
• Full Address
• Start Date
From the employee’s P45;
• Full name
• Leaving date from their last job
• Total pay and tax paid to date for the current tax year
• Student loan deduction status
• National Insurance number
• Existing tax code
This information must be kept in the payroll records for the current year and the 3 following tax years.
If the employee doesn’t have a P45 ask them for this information, or if they left their last job before 6 April 2015.
Important: The P46 form is no longer used.
Get the information by asking your new employee to complete HMRC’s new starter checklist. They’ll need to save it on their computer and open and complete it in Adobe Reader version 9.0 or later. It can be found here.
If you need support with any of the points raised here or have any questions that you’d like answered, please get in touch via phone 01903 688789 or email [email protected], we’re always happy to help.