On 1st October 2016, Prime Minister Theresa May commissioned Matthew Taylor to provide an ‘Independent Review of Employment Practices in the Modern Economy’. The outcome was the Taylor Report, published in July 2017 and, consequently, the government’s response was the Good Work Plan which set out proposals for a number of changes in employment law. We will start to see these become law from April 2020.
These will affect every employer and UK SMEs need to ensure they are ready and prepared. Here are some of the key changes that are likely to have the biggest impacts on SMEs:
Written Statement of Terms
The current legislation requires employers to provide a written statement of terms to employees within two months of their start date. From April 2020 this will change, and the written statements will become a day-one right, which means that employees will need to be issued with the statement on their first day (or before).
In addition, the right to a written statement will be extended to ‘workers’, not just employees. A worker is generally someone who works on an ad-hoc basis as-and-when required, but can turn down work if they are not available. Workers have some, but not all, employment rights, such as the right to paid holiday.
The legislation (Employment Rights Act 1996) already sets out what must be provided in the written statement. From April 2020 this will be extended to include information about training and probationary periods.
SMEs that don't currently provide this information on day one (very often this information is contained in the written contract of employment) will need to implement new procedures to meet this new day-one right.
This is a positive change as it should help provide more clarity, prevent misunderstanding and possibly disputes that can arise due to a lack of written terms. It's best to go beyond the legal requirements and issue a full contract of employment and ideally issue this at the point the offer of employment is made.
Holiday Pay – Variable Pay
There's also a change around calculation for holiday pay for those who have variable pay. Variable pay will include anyone who has variable hours, such as those on a zero hours contract, who work regular additional hours or those who work voluntary or compulsory overtime. Variable pay will also include those who have other regular payments including regular allowances or bonuses.
Currently, where an employee has variable pay, their holiday pay should be the average of their earnings over the 12 working weeks preceding the holiday. The rationale is that when someone goes on holiday, they should be paid the same as if they were at work.
The changes for April 2020 will extend this reference period from 12 weeks to 52 weeks. This would seem sensible as it will iron out any seasonal variations and be a ‘better average’. The downside will be the need to monitor and keep records in order to calculate holiday pay.
Further changes – although no date has been confirmed yet – will also include:
Continuity of employment
By continuous employment, we mean the length of time an employee has worked for their employer without a break. Continuity of employment is important as many employment rights are based on length of service. For example (and this is not a full list), an employee generally needs two years’ service before they have the right to claim unfair dismissal – though there are exceptions to this – or two years’ service before they will qualify for statutory redundancy pay and statutory notice period will increase after 2 years. Continuity can generally be broken when there is a one-week (Sunday to Sunday) break between two Contracts of Employments.
Future changes will mean that continuity of employment will be broken after 4-weeks.
SMEs need to be aware of this change so that they do not unwittingly miscalculate continuity of employment. The situation may arise where an employee leaves and then asks to return to their previous position. If continuity is broken, then the employer has less potential liability for a period of time. If continuity is maintained, then it is as if the employee never left.
There will be a new right to allow all employees and workers with varying hours and shift patterns (including agency and zero hours workers) to formally request a more fixed working pattern after 26 weeks of work. It is anticipated that this will mirror the flexible working process.
5 Employment Status
The report recommends changes to legislation to streamline the employment status tests, so they are the same for employment and tax purposes (HMRC). This will also help employers avoid misclassifying employees or workers as self-employed. It is suggested that the new test will focus more on control, or how much control the company has over how the individual performs in their role.
Over time there will be more changes as a consequence of the Taylor Report and the Good Work Plan. Any new employment law or regulation creates additional burden for businesses, especially small businesses who don't have a HR department or in-house expertise to manage these changes. If unsure, it's always best to take some professional advice in these areas and look at how any changes can be managed through improved processes, systems or automation.
About the Author
Paula Fisher is the founder of Your HR Space, an online HR management platform. Specialising in employee relations and employment law, Paula is also author of 'HR for SMEs – A Practical Guide', a culmination of her 20 years of experience working with SMEs, providing no-nonsense, commercial HR support.