Are you ready for 2020 Employment Law Changes?
Last week we looked at some of the Good Work Plan 2020 Employment Law Changes. This week is part two and we’re covering:
- Changes to holiday pay calculations;
- Amendments to Agency Worker rules;
- IR35; and
- Changes to taxation for termination payments above £30,000.
Changes to Holiday Pay Calculations
From 6 April 2020, the holiday pay reference period will be lengthened from 12 to 52 weeks. These new regulations take effect to ensure workers undertaking seasonal work or with atypical working hours receive their entitled paid holiday.
The current regulations provide for the holiday reference period of 12 weeks. From 6 April it will increase to 52 weeks or if the worker has been employed less than that period, the reference period will be for the length of time they have been employed.
It is anticipated that the 52-week reference period will work in much the same way as the 12-week reference period. Employers will count back over the last 52 weeks that a worker worked and received pay, excluding weeks where the worker did not work or receive pay.
Where there are fewer than 52 weeks of pay information, the employer would have to include as many whole weeks of pay information as are available.
Amendments to Agency Worker Rules
The 2020 Employment Law changes will mean that after 12 weeks agency workers will be entitled to the same rate of pay as their permanent counterparts. Agency workers who are considered to be employees will be protected from unfair dismissal or suffering a detriment if the reasons are related to asserting rights associated with The Agency Worker Regulations.
All agency workers will be entitled to a key information document that more clearly sets out their employment relationships and terms and conditions with their agency.
We’re in no doubt that the new IR35 Regulations bring uncertainty for many. ‘The Intermediaries Legislation’ or ‘Off-Payroll Legislation’ has been in force since 2000. It was created to take away the tax advantages of individuals providing services through a limited company who are not strictly in business of their own account, and people have struggled. It is intended to address ‘disguised employees’. That is people who are essentially providing work for one client and whose working practices are essentially a traditional employee.
If you are a company that procures contractors to work on projects, you’ll need to be sure you are engaging in the correct way. Responsibility for determining a workers tax status will now rest with YOU as end client (or closest party to the contractor, for example, a recruitment agency). If you are found to be engaging contractors incorrectly you will become liable for any unpaid tax, where previously the liability rested with the contractor.
HRMC have revised their test of employment status to aid companies with this.
Changes to taxation for termination payments above £30,000
The National Insurance contributions Bill will affect businesses that structure termination payments to reduce the tax and NICs liability.
The Bill introduces a new 13.8% Class 1A Employer National Insurance Contributions charge to any part of a termination award or payment from a sporting testimonial, that are already income tax liable.
Any income derived from termination awards or sporting testimonials will remain free from employee NICs.
Certain forms of termination awards are currently exempt from employee and employer NICs and the first £30,000 is free from income tax. The new rules affect the treatment of termination awards in excess of £30,000.
This measure is intended to bring clarity to the taxation of termination payments by clarifying that all pay in lieu of notice, rather than just contractual pay in lieu of notice, are taxable earnings.
Termination and redundancy compensation payment remain unchanged. The £30,000 threshold ensures that no statutory redundancy pay on its own will be affected.
Our LaunchPad HR team can help you with any questions you may have relating to the changes and their implementation.
We are also supporting Claire Rolston with her FREE Employment Law update seminar on 3 March 2020.