28 Jan 2020 11:47 AM

A raft of employment law reforms are due to come into force in April 2020. The following is a brief summary of some of these changes.

Agency workers

From 6 April 2020, all agency workers will have a right to the same pay as direct employees after 12 weeks of service. 

The current exceptions allowing differences in pay will no longer be permitted.

This means that costs associated with agency workers may increase to mirror the pay of permanent employees for longer assignments.

Settlement agreements

Termination payments are tax free up to a limit of £30,000 if they meet certain criteria. These payments are then subject to income tax only on amounts over the threshold (and no other taxes).

From 6 April 2020 termination payments over the £30,000 threshold will become subject to class 1A employer National Insurance contributions in addition to income tax.

Contracts

From 6 April 2020, all workers (not just employees) will have a “day one” right to receive a statement setting out the terms of their employment either before they begin work or on the day that they start.

The new rules require additional information to be provided in the statement which includes:

  • referring to working days and hours (and, where this varies, how this will be determined);
  • training entitlement; paid leave (such as family-related leave); and

other benefits not already mentioned.

Holiday pay

From 6 April 2020, the reference period for determining an average week’s earnings for holiday pay calculation purposes will increase from 12 weeks to 52 weeks (or, if the worker has been employed for fewer than 52 weeks, the number of complete weeks for which the worker has been engaged). 

This is intended to ensure that workers who do not have a regular working pattern throughout the year are not disadvantaged by having to take their holiday at a quiet time when their weekly pay may be lower.

National Minimum Wage

The National Minimum Wage rates for April 2020 were delayed due to the budget being cancelled.

These have now been announced and the new rates are as follows:

  • for ages 25 and above, £8.72 (increase of 6.2%)
  • for ages 21-24, £8.20 (increase of 6.2%)
  • for ages 18-20, £6.45 (increase of 4.9%)
  • for under 18s, £4.55 (increase of 4.5%)

for apprentices, £4.15 (increase of 6.4%). 

IR35

Do you engage workers by contracting with personal service companies (PSCs)?

In line with the public sector, from 6 April 2020, if you are a ‘medium’ and ‘large’ private company (including charities) you will need to determine whether the PSC arrangement amounts to “disguised employment”.

Currently it is down to the PSC to determine the status of the individual (and to be responsible for tax and national insurance contributions if they get it wrong). However, this responsibility shifts to the end-user who will need to determine whether, but for the PSC, the individual would be employed for tax purposes.

Where it is determined that the worker is deemed an employee then tax and National Insurance contributions should be accounted through PAYE.

Assessments should be made as soon as possible and an appeal process established to enable determinations to be challenged.

For further information or if you have any questions, please contact us