2018 will see some significant employment law changes coming into force including the development of domestic data protection law, likely reforms to the gig economy following the Taylor review, and continuing impact of gender pay gap reporting requirements.
These will take place against the ongoing uncertainty of Brexit, its impact on employment rights and the role of the European Court of Justice. Although it is unlikely that the UK government will row back from any European-derived employment rights before the UK exits the EU in 2019, there may well be discussions as to what route it might take, during the course of the coming year.
Article 50 was triggered on 29 March 2017, so beginning the withdrawal process of the UK leaving Europe. Predicting likely developments this year is tricky, and will depend on the nature and extent of Brexit negotiations between the UK and the EU. The impact on immigration policy is discussed separately below.
Corporate governance reform
BEIS published a Green Paper on corporate governance reform in November 2016. The Financial Reporting Council (FRC) then announced that it would consult in Autumn 2017 about changes to the UK Corporate Governance Code to take account of the issues raised in the Green Paper. The government’s response to the Green Paper (published in August 2017) identified a number of proposals for reform which it intends to take forward including executive pay, strengthening the employee, customer and supplier voice, and corporate governance in large privately-held businesses.
The government intends to lay draft secondary legislation before Parliament where required by March 2018. The current intention is to bring the reforms into effect by June 2018, to apply to company reporting years commencing on or after that date.
The government has indicated that it intends to take a non-legislative approach to improving gender and ethnic diversity on UK boards of directors and the FRC published measures to address board diversity consultation within its consultation of proposed revisions to the UK Corporate Governance Code and Guidance on Board Effectiveness on 5 December 2017. The FRC consultation ends on 28 February 2018. A final version of the Code is expected in early summer 2018, to apply to accounting periods beginning on or after 1 January 2019.
The Data Protection Bill, which is currently being debated in Parliament, will replace the Data Protection Act 1998 (DPA) in the UK to provide a comprehensive legal framework for data protection supplemented by the General Data Protection Regulation (GDPR) until the UK leaves the EU.
It is expected to be in force by 25 May 2018 when the GDPR, the aim of which is to strengthen and harmonise data protection laws across the EU, comes into force. Employers will be required to comply with new rules governing the processing of personal data, including those relating to consent, transparency and access rights from 25 May 2018.
The government has not yet responded to the long anticipated Taylor review on the implications of the gig economy on both worker rights and responsibilities and on employer freedoms and obligations, or made any policy announcements as a result of it.
On 20 November 2017, the House of Commons Work and Pensions and BEIS Select Committees published a report (accompanied by draft legislation), encouraging the government to build on and enact many of the Taylor Review recommendations. The issue of employment status will also continue to be in the limelight with various cases to be heard during the year.
Gender pay gap reporting
Private organisations with 250 employees or more must publish their first gender pay gap report by 4 April 2018. Large public sector employers must report by 30 March 2018. Employers will need to use data from 2016/17 for the first reports which will require median and mean information relating to employee pay and bonus pay to be published, together with details of the number of men and women in each quartile of the organisation’s pay distribution.
To date more about 530 organisations have published their gender pay gap data and some of the results have been reported in the press. There appears to be a wide variation in pay rates between men and women, across a variety of sectors and while some organisations have applied a (legally) minimalist approach, others have included voluntary narratives on the government website. It will be interesting to see both the steps taken to remedy or justify gaps, and the progress made during the coming reporting year.
Research by the Financial Times using organisations’ data already submitted to the government’s website suggests that some employers are likely to have made inaccurate calculations. It found that 1 in 20 of the companies that had submitted their data reported having no mean or median gender pay gap, which appears highly unlikely.
Last month the Equality and Human Rights Commission published a consultation on proposals to use their enforcement powers to take action against employers who do not comply with the requirement to publish their gender pay gap data. Consultation on the draft policy for businesses and representative bodies is open until 2 February.
National minimum wage payments
The rates will increase from 1 April 2018 as follows.
Statutory maternity pay, paternity pay, adoption pay, shared parental pay
Weekly payments will increase to £145.18 (from the current rate of £140.98) from 6 April 2018.
Statutory sick pay
Weekly payments will increase to £92.05 (from the current rate of £89.35) from 6 April 2018.
Tax on termination payments
From 6 April 2018 there will be changes to the taxation of termination payments under the Income Tax (Earnings and Pensions) Act 2003. All payments in lieu of notice will be treated as earnings (subject to tax and NICs) so that the distinction between the tax treatment of contractual and non-contractual pay in lieu of notice payments will fall away.
All payments for injury to feelings will also fall outside the tax exemption for injury payments from 6 April 2018, except where the injury amounts to a psychiatric injury or other recognised medical condition. Foreign service relief for UK resident employees (except in relation to seafarers), which permits certain employees who have worked abroad for extended periods to qualify for full or partial relief from taxation on termination payments), will be abolished.
Looking ahead, the current exemption from NICs on termination payments up to the current threshold of £30,000 will remain. Currently NICs are also not payable where such payments exceed £30,000. The government proposes to change this by requiring employers (but not employees) to pay class 1A employer NICs to be payable on payments above £30,000. However the implementation of this requirement has been postponed until April 2019.
Immigration will remain a fast moving area in 2018. We await a new Immigration Bill in the first half of 2018, which should provide further clarity in relation to the rules governing European nationals’ right to continue to live and work in the UK following Brexit. We hope it will also give details about the rules governing the basis on which European nationals will be able to move to the UK following Brexit, details of which have not yet been released.
Towards the end of the year the Home Office intends to roll out a new streamlined online system to process applications for temporary visas or the newly proposed “settled worker status” visas for European nationals who have been in the UK for five or more years exercising European treaty rights.
There have as yet been no announcements of significant changes for non-European national visa routes. We wait to see whether the government will act on their manifesto commitment to increase the annual Tier 2 skills levy of up to £1000 applying to sponsoring employers in this category to a maximum of £2,000 a year.
We also, particularly with the decrease in net European migration and pressure on recruitment for skilled roles in some sectors, expect to see continued pressure on the monthly “restricted certificate” limit which applies to overseas hires under Tier 2 General. This pressure has led to the first ever rejection of applications for an allocation under this route at the start of 2018.
Audit and compliance checks along with ensuring compliance with right to work rules will remain a hot topic over the next 12 months.
…and developments which may take place in 2018
Although caste is not currently a protected characteristic in the Equality Act 2010, case law has confirmed that it may be covered by race discrimination where the two are closely aligned. In March 2017 the government commenced consultation on this issue. The consultation closed on 18 September 2017 and we are still awaiting responses.
Back in December 2015, following Nicola Thorp being sent home from her role as a receptionist for wearing shoes that were too low, a petition calling for the law to be changed to make it illegal to require women to wear high heels at work was signed by over 150,000 people, and prompted an investigation by the Women and Equalities Committee.
Their report concluded that the government should review this area of the law; that more effective remedies should be available against employers who breach the law, including injunctions against potentially discriminatory dress codes; and that detailed guidance and awareness campaigns targeted at employers and workers should be developed.
The government published its response to the Committees’ report and recommendations in April 2017 and although it rejected any recommendations that would require legislative change it has said that it will instead issue new guidance on what is and is not acceptable to demand of a worker. This is expected in 2018.
Parental bereavement leave
Currently there is no legal right to time off work for parents if their child dies. However, a Private Members bill, which has the government’s support, could change this if it becomes law. The Bill proposes a statutory minimum amount of parental bereavement leave and pay. It will cover all dependent children under the age of 18 and still-born children after 24 weeks.
What’s coming up for pensions in 2018 ?
2017 was another busy year for pensions with various significant pensions cases and legal developments, and 2018 looks like being the same. Just some of the key issues are set out below.
As mentioned above, employers will need to consider their compliance obligations in relation to the new rules for processing data. In a HR context, this includes looking at the provision of employee benefits of which pensions (especially given auto-enrolment) will form a part. Employers should consider how their pension arrangements are set up and their data protection compliance obligations in that regard. Indeed, if an employer has its own pension scheme set up under trust with its own trustees then special considerations apply and the full weight of compliance will fall on the shoulders of those trustees too. We already have much experience in helping clients prepare for the GDPR in this context, so if you would like more information or help on that, please do not hesitate to contact our pensions team.
On auto-enrolment, at the end of 2017, the government published its much anticipated review. Whilst some of its key proposals are not due to be implemented until mid 2020’s, there are other aspects of the auto-enrolment framework which will change this year (for example in relation to contributions – see Pensions auto-enrolment: proper compliance is key as the Pensions Regulator has a busy year of enforcement activity ) which employers will need to incorporate into their payroll arrangements where appropriate. It is worth re-iterating that the auto-enrolment requirements apply immediately to new employers from 1 October 2017 so they will need to ensure they have compliant arrangements set up from the outset.
Defined Benefit Pension Schemes
Defined benefit pension schemes (which can be very expensive to fund) have remained in the public eye. The government produced a Green Paper last year looking at the sustainability and security of such schemes and has promised a White Paper on this in the early part of this year. With much Press attention being on high profile cases, including Carillion, the collapse of Monarch Airlines and the struggles of Toys R Us (the last two of which have defined benefit schemes which have come under the scrutiny of the Work and Pensions Committee), it will be important to consider what emerges in that White Paper – in particular whether or not the government will entertain any change to the Pensions Regulator’s powers where there is a corporate transaction and a defined benefit pension scheme involved, and to understand how this might impact commercial activity.
And so much more…
The government is also proposing to introduce a new way of dealing with a debt that arises when an employer leaves a multi employer pension scheme that is in deficit. This may provide a helpful easement in this area.
Some key pensions cases are also in the pipeline this year. The Pensions Regulator has certain ‘anti-avoidance’ powers by which it can require employers to provide financial support or make contributions to an underfunded pension arrangement. One such case, Box Clever (contested by the parties in question) is due to be heard in the Upper Tribunal and it is the first time a hearing of its kind will be taking place (other ‘anti-avoidance’ proceedings have settled before reaching this point or otherwise dealt with procedural matters).
Cases also in the pipeline include those relating to the revaluation that applies to pensions in deferment and in payment under a pension scheme and what index should be used for that purpose. There is also a significant legal action being brought about whether or not guaranteed minimum pensions provided under occupational pension schemes need to be equalised.