Key elements of the current government legislative timetable proposed for 2019 (and looking ahead to 2020) affecting employment, pensions and mobility law are outlined below. Significant developments are likely with ongoing reforms to the gig economy, scrutiny of gender and other types of pay gaps and a growing emphasis on companies and managers being obliged to take personal responsibility for their conduct.
Legislative developments will take place against the backdrop of Brexit. At the time of writing it is difficult to predict the terms on which the UK will leave the European Union on 29 March and, as this 'final chapter' unfolds, whether there will be any direct or indirect impact on employment rights in the next year or so, either domestically or those derived from Europe.
1 January 2019: New reporting requirements come into effect for accounting periods from 1 January 2019. New regulations require public companies with more than 250 employees to report on the ratio between CEO pay and average staff pay. All companies with more than 250 employees will have to prepare an annual report on the extent of their employee engagement.
Other measures being brought in under the same new regulations include additional reporting on a company’s engagement with its suppliers, customers and others in a business relationship in order to provide further explanation on how the directors have complied with their statutory duties.
Immigration – Doubling of Health Surcharge
8 January 2019: The Home Office doubled the immigration health surcharge, payable by most visa applicants coming to the UK for more than 6 months, to £400 per visa year.
Ethnicity pay gap reporting: response to consultation
11 January 2019: This is when the government consultation on ethnicity pay gap reporting closes. Drawing on the results of earlier reports commissioned by the government, it considers that ethnicity pay gap reporting should be mandatory, and then this, alongside gender pay gap reporting, will provide a more in depth picture of the potential overlapping effects of gender and ethnicity pay gap differences on particular sectors of the population.
Questions to respondents included the type of ethnicity pay information which should be reported, how it can be collected (as there is no legal obligation for individuals to disclose their ethnic group or on employers to collect ethnicity data), whether a narrative with an action plan should be published alongside the data (similar to voluntary narrative for gender pay gap reporting) and whether the threshold for reporting should be 250 or more employees, as for gender pay gap reporting.
Consultation on national minimum wage (NMW) legislation
1 March 2019: This is when the government consultation on certain aspects of NMW legislation closes. It considers whether there should be amendments to so as not to inadvertently penalise employers, namely around "salaried hours work" whereby employers can average out pay over a calculation year for NMW purposes and whether this effectively prevents exploitation of workers. Views are also being sought on whether employers are withdrawing salary sacrifice schemes from low-paid workers in order to avoid non-compliance with the NMW.
29 March 2019: This is the date on which the UK is due to leave the EU. Under proposals in place at the time of writing, all EEA nationals who are resident in the UK prior to 31 December 2020 will be required, between 29 March 2019 and June 2021, to apply for an EEA Settlement Service permission enabling them to remain in the UK and, amongst other things, to continue to work, study, rent property, open bank accounts and travel.
Public sector pay gap reporting
30 March 2019: Second anniversary of gender pay gap reporting deadline for public sector employers (and new snapshot date will be 31 March 2019).
Report on Modern Slavery
March 2019: In summer 2018 the Government launched an independent review which is gathering evidence and seeking views from relevant stakeholders on the operation and effectiveness of, and potential improvements to, provisions in the Modern Slavery Act 2015. It includes consideration of transparency in supply chains and how to ensure compliance and drive up the quality of statements produced by businesses which are in scope, the role of the Independent Anti-Slavery Commissioner and how to ensure their independence. The review will also take into account any significant political, economic, social and technological changes since the Act was passed. A final report is due by the end of March 2019.
National minimum wage payments
1 April 2019: The rates will increase as follows:
- Apprentices: £3.90 an hour (currently £3.70)
- 16-17 year olds: £4.35 an hour (currently £4.20)
- 18-20 year olds: £6.15 an hour (currently £5.90)
- 21-24 year olds: £7.70 an hour currently £7.38)
- National living wage (workers aged 25 and over): £8.21 an hour (currently £7.83)
1 April 2019: Flexible service will be introduced for the armed forces which will allow regular personnel of the armed forces to request to work part time for a temporary period and to temporarily restrict their separation from home base. Flexible service asked for may be refused and operational capability will be come first.
Private sector gender pay gap reporting
4 April 2019: Second anniversary of gender pay gap reporting deadline for private sector employers with 250 or more employees (and new snapshot date will be 5 April 2019). There is likely to be increased scrutiny both within businesses and externally on progress made to narrow any gender pay gap.
Increase to rates of statutory maternity, paternity, adoption, shared parental pay and sick pay
6 or 7 April 2019: Weekly payments of statutory maternity pay, paternity pay, adoption pay and shared parental pay will increase to £148.68 (from the current rate of £145.18) or 90% of average earnings if lower. Weekly payments of statutory sick pay will increase to £94.25 (from the current rate of £92.05).
6 April 2019: From this date all workers will have the right to an itemised pay statement and to enforce that right at an employment tribunal. Where a worker is paid on an hourly rate basis the itemised payslip must show the number of hours paid for with different figures provided where an employee is paid a different rate of pay for different types of work. This reflects the government's commitment in its response to the Taylor Review of Modern Working Practices that employers provide itemised payslips to all workers, not just employees. The right does not apply to wages or salary paid in respect of a period of work before this date.
Increased financial penalties for employers
6 April 2019: Since April 2014, an employer which loses an employment tribunal claim may be ordered to pay a financial penalty where it is found to have breached any of the worker's rights to which the claim relates and that breach has "one or more aggravating features", even if a financial award has not been made against it. Currently, the maximum penalty for an aggravated breach of employment law is £5,000. From 6 April this is due to quadruple to £20,000.
2019 New Visa Year
6 April 2019: The new visa year will bring a raft of changes to the non-EEA visa system. Whilst these have not been disclosed yet they are likely to include the removal of the resident labour market test (the complex advertising requirements which apply to Tier 2 General visas) and the annual cap for many new hires under the Tier 2 General route. Both changes will simplify and free up this visa route which will be well received by employers looking to sponsor skilled non-EEA workers. The Home Office has also stated that it intends to review and amend the Tier 1 Investor route as well as the Tier 1 Entrepreneur visa route. Sponsorship salary levels and visa fees are likely to increase at this time for the year ahead.
Senior Managers and Certification Regime (SMCR)
9 December 2019: Following the new framework of individual accountability in the financial sector brought into force for all dual-regulated FCA and PRA firms, insurers, reinsurers and managing agents the Senior Managers Regime will also be rolled out for all other FCA regulated firms on 9 December 2019. Any firms affected who are not compliant by that date could face enforcement action. For further details see July 2018's Law at Work. Details of Taylor Wessing's free online tool which enables firms to determine what category of firm they fall into for the purposes of SMCR - Limited Scope, Core or Enhanced - and the extent to which the regime applies to them. Find out more about our SMCR tool.
2019 looks like it will be another busy year for pensions and there are some key changes for which employers need to prepare.
We have written about auto enrolment in many previous editions of Law at Work. For example, our article of January 2018 gives a little more detail around these sometimes complex obligations on all employers.
A key change for 2019 is in relation to the minimum contributions that must be paid to a defined contribution ('DC') pension scheme. This includes those being paid to a personal pension arrangement (single or group) that is being used for auto enrolment.
For those employers that pay contributions by reference to an employee's qualifying earnings, on and from 6 April 2019:
- the current 2% minimum contribution that an employer has to pay will increase to 3%; and
- the minimum total contribution will increase from the current 5% to 8%.
(NB: there are other ways in which a DC scheme can satisfy the auto enrolment requirements, which involve different types of earnings and contribution structures.)
These changes should be communicated to workers and payroll systems will need to be adjusted to incorporate them.
The Government has also confirmed, for the 2019/20 tax year, that:
- the earnings trigger (the amount a worker has to earn before they have to be auto enrolled) will remain at £10,000; and
- the qualifying earnings band (the earnings band to which the minimum contribution percentages are applied) will increase from £6,032 to £6,136 for the lower end and from £46,350 to £50,000 for the upper end.
Again, payroll systems will need to be adjusted to accommodate these changes.
Auto enrolment is an ongoing requirement and not always straightforward to apply (for example, making sure staff are auto enrolled when they need to be, especially where earnings fluctuate and the obligations are triggered at different times). Employers should also remember their obligation to re-enrol every three years, where someone has opted out.
The Pensions Regulator continues to be very active in seeking to ensure proper compliance with auto enrolment and in taking enforcement action where necessary (our January 2018 article highlights some of the penalties that can apply when things go wrong).
If you need any assistance with complying with your auto enrolment obligations, please do get in touch with our Pensions team that has much expertise in the area.
Other possible key pensions developments
Employers should be monitoring Brexit-related issues for their effects on their pension schemes - particularly defined benefit pension schemes – including the scheme's investments. This is part of good general ongoing governance of the scheme but if any employers would like some specific advice on this please contact us.
Aside from that, on other issues, the government has already said it is likely there will be a Pensions Bill in the summer of 2019. That may include:
- how defined benefit pension schemes may be consolidated, where certain conditions are satisfied, so that the employer no longer has any responsibility to run or fund their scheme
- new enhanced powers for the Pensions Regulator in relation to the issuing of civil and criminal fines and gathering evidence
- new key measures on corporate transactions where a defined benefit pension scheme is involved - so for example, the scheme employer having to provide, in certain circumstances, a 'declaration of intent' which sets out the implications of the transaction for the scheme and how any risks will be mitigated
- a new type of pensions vehicle called a collective DC scheme which may be available as an alternative to a 'pure' DC or defined benefit pension arrangement
- possible changes to the Pensions Ombudsman's jurisdiction. There is currently a consultation exploring, amongst other things, whether to allow an employer to make a complaint or refer a dispute to the Pensions Ombudsman on behalf of itself (for example, where an employer chooses a group personal pension arrangement for its employees and experiences mismanagement by the provider).
There are also a number of notable pensions cases which are expected to be decided this year. Many of these are relevant only if an employer has an occupational pension scheme and particularly if it is defined benefit; for such employers and schemes these cases could be significant (for example, a further hearing is anticipated in connection with the landmark ruling in the Lloyds case last year about equalising guaranteed minimum pension benefits, which employers (and trustees) will need to look out for, as part of considering how this issue affects their scheme).
......and looking ahead to 2020
Gig economy and the Good Work Plan
From April 2020, all workers (not just employees) will be entitled to a statement of terms and particulars on day one of their contract, and pay between assignments (or 'Swedish derogation') contracts for agency workers will be banned.
It is not clear when the other proposals will be introduced, but the Plan also sets out the government's intention to clarify the tests for employment and worker status and to remove one-sided flexibility by creating a new right for workers to request a more stable contract.
Read more about the detail of the Good Work Plan.
Parental bereavement leave and pay
New rights for bereaved parents are expected to come into effect in April 2020. Under the new legislation employed parents who lose a child under the age of 18 or suffer a stillbirth from 24 weeks of pregnancy will be entitled to two weeks' leave and, if they qualify, to statutory bereavement pay. Those covered will include not just legal parents but those who, for example, are legal guardians or have court orders giving them day-to-day responsibility for the care of a child. Further details can be found in November 2018's Law at Work.
Termination payments on termination of employment
From 6 April 2020 all termination payments subject to income tax on amounts in excess of the £30,000 tax free threshold will also be subject to class 1A NICs (employer liability only). The government confirmed that the £30,000 exemption will remain and that the whole termination payment will be outside the scope of employee NICs.
Off-payroll working in the private sector
Mirroring what is now the position in the public sector, from April 2020, individuals working through their own limited companies will no longer be responsible for determining whether or not IR35 applies. Instead, will be for the engaging company to decide whether the individual would be considered an employee for tax purposes and deduct PAYE and employee NICs at source and pay employer NICs. This will potentially affect levels of income paid to individuals, bringing them into employment for tax purposes. It will fall to the negotiation of contracts and the commercial bargaining positon of the parties as to who will take the burden of increased tax liability, particularly the employer NICs charge. Further details can be found in November 2018's Law at Work.
EU member states have until 30 July 2020 to implement a revised Posting of Workers directive which will entitle workers posted to another EU country the same rate of pay and working conditions as those employed locally (rather than any basic statutory minimum payments). This will include entitlement to any bonuses and allowances. The amended directive will also limit a worker's length of assignment to 12 months, with the possibility of a six month extension. After this time the host country's labour laws would apply.
Given the timings, the new legislation is likely to take effect during the UK's Brexit transition period which ends on 31 December 2020.