April 2017 Employment Law Changes

April 2017 Employment Law Changes

Published: 24 April 2017

April 2017 Employment Law Changes

The month of April is usually an important and busy time for new employment law legislation and this month is no exception.  There are a number of significant changes which will have an impact upon employers who may need to plan and reorganise internal procedures in order to adapt to the new regulations and legislation. Employees should also be aware of the changes as they will have an impact upon their general employment rights.  The effect of some of the changes are considered below.

Gender Pay Gap Reporting Rules

This is perhaps one of the most significant changes to employment law legislation and has a major impact upon large businesses.  The Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 will come into force on 6 April 2017. 

The regulations place an obligation upon businesses who employ over 250 employees to report data about gender pay gaps within the business, including bonus payments.    Employers will also be under an obligation to publish the report on the company’s website and upload the data to a government website.

When considering who counts as an employee, a wider definition is used from the Equality Act 2010, which means that workers, as well as some self-employed people and agency workers are included. 

Employers are required to carry out six calculations, which should be confirmed by an appropriate person, such as a Chief Executive.  The following calculations must be published on the company’s website:

1.     Average gender pay gap as a mean average;

2.     Average gender pay gap as a median average;

3.     Average bonus gender pay gap as a mean average; and

4.     Average bonus gender pay gap as a median average.

5.     The proportion of males receiving a bonus payment and the proportion of females receiving a bonus payment.

6.     The proportion of males and females, when divided into four groups, ordered from the lowest to the highest pay.

It is debatable as to how organisations will be monitored in order to comply with the regulations and there is no requirement for employers to distinguish pay gaps by age group or to identify differences in pay between employees with children and those without.  In addition, there are currently no civil penalties for non-compliance and neither is there an obligation for employers to take action to close any pay gaps identified. 

Whilst this is a step in the right direction towards greater pay accountability by UK employers, there are concerns that the figures published under the regulations may mask underlying issues and distort the challenges faced by mothers in the workplace who currently represent the widest gender pay gap group.

Immigration Skills Charge

The Immigration Skills Charge Regulations will come into force on 6 April 2017.  The legislation has been introduced as part of the government’s drive to compel employers to engage British workers and to reduce Britain’s reliance upon migrant workers. 

The charges will apply to employers who recruit Tier 2 skilled workers from outside the European Economic Area (EEA) and as the Tier 2 visa is initially issued for a 3 year period, this means the usual immigration cost for such an application will increase by £3,000. There are a few key points to consider as outlined below.

-       The employer will be required to pay an immigration skills charge of £1,000.00 per person per year of the sponsorship.

-       Employers must pay the charge upfront at the point that a certificate of sponsorship (CoS) is assigned to an individual.

-       Exemptions apply to Tier 4 students switching to Tier 2, PHD students and the individual’s family (dependants).

-       The charge does not apply to a CoS assigned to individuals before 6 April 2017 or to existing Tier 2 workers already in the UK before 6 April 2017 who extend their stay or change job or employer.

-       The funds raised from the charge will be used to address the skills gap in the domestic workforce.

-       A reduced rate of £364.00 will apply to small businesses and charities.

There have been significant concerns raised by the British Medical Association (BMA) and the Royal College of Nursing (RCN), who previously wrote to the Home Secretary raising serious concerns due to the fact that both the National Health Service and health and social organisations were included in the list of employers liable to pay the charge.  Data has indicated that £3.5 million would be taken out of the NHS budget if the charge was applied to the 3,602 doctors who were granted Tier 2  visas, during  the August 2014 to August 2015 period.

The effect of the charge could potentially stifle growth or expansion of UK businesses who very much rely upon recruiting individuals of a specific skill set which cannot be found in the UK.  The charge is therefore, effectively deterring UK businesses from recruiting talented individuals from overseas.

Apprenticeship Levy

The Apprenticeship Levy is the government’s initiative to fund three million places for apprentices by 2020 which is to be paid by larger employers in the private and public sector. The levy is set to raise £3 billion a year to help fund the initiative.

The levy will apply to employers who have a pay bill of more than £3 million and it will be paid into HMRC’s central treasury pot via PAYE returns on a monthly basis.  The levy is set at 0.5% of an employers pay bill and each employer will have an annual allowance of £15,000.00 to offset against the levy. The allowance may be allocated between all of the company’s PAYE schemes or any of the company’s connected companies or charities. 

All businesses who pay the levy will be able to access their contribution in their online digital apprenticeship service account which is used to pay for apprenticeship training and assessment in England. The government also pays a 10% top up to the employer contribution.

Employers should be aware that the funds will expire 18 months after they appear in the account, unless they are spent on training, which is an encouragement for businesses to utilise the funds appropriately.

The levy has received a mixed reaction with some business groups concerned that it will damage the quality of apprenticeships and others arguing that any potential to increase training and create more jobs can only be a good thing.

The Apprenticeship Levy will cause an additional cost burden for large employers and it is also important for employers to ensure that they have “qualifying” apprenticeship schemes in place in order to access the funding arising from the levy.

The levy does however, provide some benefits for small businesses who will still have access to the funding via the digital apprenticeship service, despite not having to contribute to it.  Small business will also benefit from unused levy funds which have gone beyond the 18 month expiry date.

By 2020 it is anticipated that all employers will be able to use the digital service to pay for training and assessment for apprenticeships.

Increase in Tribunal Compensation Limits

Under the Employment Rights (Increase of Limits) Order 2017, there will be an increase in compensation limits and minimum awards to take effect from 6 April 2017.  Some of the key changes are outlined below.

·         The maximum compensatory award in unfair dismissal cases will increase from £78,962.00 to £80,541.00.  Cases will still be subject to the additional limit of 52 weeks’ pay, meaning that the maximum compensation award will be the lower of the two figures (subject to the usual exceptions, for example in cases involving whistleblowing, where there is no cap on compensation). 

·         The maximum limit on a week’s pay, for calculating statutory redundancy payments, will increase from £479.00 to £489.00. 

·         A guaranteed payment in circumstances of temporary layoffs or short term working will increase from £26.00 to £27.00 per day.

·         The minimum basic award for certain unfair dismissals, such as dismissals for reason of health and safety duties, trade union membership and activities or occupational pension trustee reasons, will increase from £5,853.00 to £5,970.00. 

It is important to note that the increase in awards will only apply where a dismissal takes place on or after 6 April 2017.  In the event that the dismissal was effected before 6 April 2017, the old limits will apply. 

The above areas are only a small snapshot of some of the new employment law changes.  It is important that employers are fully aware of any changes which may have an impact on their business activities in order to ensure full compliance with the new rules and regulations.   

Any further guidance or information relating to the above matters may be obtained by contacting Amanda Hodgson on 020 7632 1435 or email amanda@fletcherday.co.uk.

By Amanda Hodgson, Employment Partner