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Workplace Pension Contributions

On 6th April 2018, and again on 6th April 2019, the rate for the minimum contribution to Workplace Pensions from both employees and employers is increasing.

All employers, with employees in a work place pension scheme, must take action to ensure at least the minimum amounts are being paid into their pension scheme.

This applies to you whether you set up a pension scheme for automatic enrolment or you decided to use an existing scheme.

If you’re using a defined benefits pension scheme then the increases do not apply.

Up to 5th April 2018
Employer minimum contribution 1%
Employee minimum contribution 1%
Total minimum contribution 2%

6th April 2018 – 5th April 2019
Employer minimum contribution 2%
Employee minimum contribution 3%
Total minimum contribution 5%

6th April 2019 – onwards
Employer minimum contribution 3%
Employee minimum contribution 5%
Total minimum contribution 8%

As an employer you can make the decision to move straight to the 6th April 2019 minimum rates from April 2018 if you wish to eliminate the need to make two changes.

By law a total minimum amount of contributions must be paid into the scheme.  You as the employer must make a minimum contribution towards this amount and your employee must make up the difference.  If you decide to cover the total minimum contribution required, your employee won’t need to pay anything.

This is not a change to pension scheme rules which requires legislative communications but we would recommend as good practice that you advise your employees in advance of the expected change to prepare them for the increase in their own pension contributions and your own pension provider should be able to help with this. With the contribution rate for employees tripling this will have a material impact on net pay for many.

If you offer a salary sacrifice we would advise you review communications issued and seek advice from your pension provider regarding any changes you may need to share with your employees.

There are also changes coming for the Auto Enrolment threshold rates:

  • Earnings trigger is to remain at £10,000 per annum.
  • Lower qualifying earnings will rise from £5,876 to £6,032 per annum.
  • Upper qualifying earnings will increase from £45,000 to £46,350 per annum.

In addition, ensure your contracts of employment and/or employee handbook reflect your new contribution rates and we can help with this.

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Fixed Term Contracts – Failing to Renew Can Prove Costly

Fixed term contracts can be effective when used properly and fairly, for example if a business has a specific project that has a limited time period then a fixed term contract would be a good option but it’s important to be mindful of the risks involved when it comes to terminating a fixed term contract.

Employees who are on a fixed term contract have the same legal rights as permanent staff.  There is also the Fixed Term Employees (Prevention of Less Favourable Treatment) Regulations 2002 to take into account when considering terminating an employee.  So it is not as straight forward as simply terminating once the contract has reached its end date and failing to take into account the risks involved can prove very costly.

When an employee is nearing the end of a fixed term contract take the following points into consideration:

  1. The need to understand, if any, what notice provisions are included in the contract.  Once you know this, you can determine when to start discussing terminating or renewing the contract with the employee.  Depending on how the contract of employment is written, some fixed term contracts may expire automatically on the expiry date or completion of a task but this would need to be specified in the contract.
  2. If there is a requirement to serve notice before the expiry date, failing to do so may entitle the employee to a payment in lieu of notice or an extension to the contract.
  3. If looking to terminate the contract early (with the exception of a gross misconduct dismissal) then it’s important to have a break clause otherwise this could prove costly as the employee may be able to make a claim for loss of earnings for the remainder of the term.
  4. By law, the non-renewal of a fixed-term contract amounts to a dismissal. Even where employment continues past the end of the term, there may still be a dismissal if the terms and conditions are different from the original contract, even if the employee has accepted the new terms.
  5. If an employee has two or more years’ continuous service you can only terminate if you can show one of the five potentially fair reasons for dismissal (conduct, capability, redundancy, illegality/contravention of statutory duty or some other substantial reason).
  6. If using redundancy for the reason for non-renewal consideration will need to be given to the pool for redundancy as well as the availability of alternative employment.  The employee may also be entitled to a statutory redundancy payment.
  7. If a fixed term contract has been used to cover the absence of a permanent employee, the fixed term employee will not be made redundant upon the return of the permanent employee.  In this case you would need to rely on the ‘some other substantial reason’ (SOSR).

In order to reduce the risks it’s important to have clearly written clauses within a fixed term contract and to monitor the operation of a fixed term contract.  It’s good practice to diarise the expiry dates of fixed term contracts so that decisions can be made in good time as to whether a contract is to be renewed or terminated.

For help and guidance on fixed term contracts speak to us at Solve.

Employer Right to Work Checks
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EAT confirms Uber drivers are workers

It has been confirmed by the Employment Appeal Tribunal that the drivers for the transport company Uber are not ‘self-employed’ and are in fact workers by the Company.  Uber operates a digital platform to provide transport services, whereby, drivers sign up online and are connected with customers through a mobile phone app.  Uber had argued that it is no different to the ‘traditional’ cab company and they acted as the ‘agent’ for the drivers and not the employer and maintained that they did not control when and how drivers work.

According to Uber, their guidelines for drivers as to how work should be done are ‘recommendations’ and not obligations, they also argued that there is no obligation on the drivers to perform work for instance they were not obliged to switch on the app or accept driving jobs once the app is switched on as well as the drivers bearing the financial risk of the transaction, Uber can choose to absorb the loss if a customer refuses to pay, but is not obliged to do so.

The EAT rejected these submissions and upheld the decision of the employment tribunal that the drivers are engaged as workers by the company, when the drivers were driving, they are a worker and that is their working time

The reality of the situation was that the drivers are subject to significant control by the business.

It was less certain that the drivers were workers when the app was on and they were waiting for a job to be allocated (as they could in theory be working for multiple companies during this time).  However, the EAT accepted that the tribunal was entitled to decide that the drivers were also working during this period particularly because there was an obligation on drivers to accept 80% of the jobs offered whilst the app is on.  The decision suggests that, whether an individual is a worker during these interim periods will depend on the particular facts of the case and the operating model used by each organisation.

What does this mean for me?

Whether an individual is self-employed or is a worker is fundamental, as worker is entitled to various employment-related benefits such as paid holidays, rest breaks, the national minimum/living wage, auto-enrolled to a qualifying pension scheme, and not to be detrimentally treated for whistleblowing.

This Judgment is very clear, what a Company says in their documents will not determine the status of an individual and in fact the starting point is the reality of that working arrangements.  An Employment Tribunal will look at what you do, the rules and requirements you impose, and the arrangements you have in place, these are some key attributes that will determine the status of your workers / contractors.

If you are at all concerned about the status of those you engage, you should take advice on the reality of the entire relationship.

Employment Law
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FAQ’s on Employment Status

Employment Law

You may have heard the term employment status on the news at the end of October 2016 in relation to Uber drivers.  This has prompted many business owners to think about the status of the people they engage.

1.     What is Employment Status?

  • Employment status looks at the nature of the relationship between an employer and the people that work for that company / provide services to that company.
  • Employment status looks at how bound and obliged the 2 parties are to each other and defines the employment status accordingly.

 

2.     What are the key categories?

The key categories when looking at employment status are:

  • Self employed
  • Workers
  • Employees

The Uber drivers were found to be ‘workers’ and not self employed

 

3.     Why is Employment Status important ?

Employment status is important because it determines employment rights

(Self-employed have the least rights, employees have the most rights)

  • Independent contractors – the truly self-employed have very few rights in relation to their work; for example, they have no entitlement to be paid minimum wage, holiday pay or sick pay.
  • Workers have various employment rights such as the right to minimum wage, paid holiday, appropriate daily rest breaks,
  • Employees have all the employment rights that workers have but have some additional protections including (subject to length of service) the right to: bring an unfair dismissal claim; request flexible working; statutory maternity pay; redundancy pay; and to a minimum notice period.

The HMRC website has an employment status indicator that you can use to look at how the Inland Revenue view employment status with respect to the paying of taxes.

 

4.     Surely if I agree with someone that they are self-employed and they are happy with that, then that is okay

  • That might sound okay and work out okay at the start of the relationship, however if the person is truly a worker or truly an employee attaching the label of self-employed to them doesn’t make them self-employed.
  • Furthermore it is always a good idea to look at a relationship – not when things are going well – but when things are not going so well. For instance when you want to part company with the person – if they are not self-employed then parting company with them may not be as easy as it would be if they were truly self employed
  • When determining employment status a  court will look at the reality of the situation – they will look at what happens in practice
  • A court will look at the detail of the relationship with a fine tooth comb

 

5.     How do I work out what someone’s employment status is?

To work out someone’s employment status there are many different tests but here are a few key areas to look at:

  • One of the most important things to consider is ‘mutuality of obligation’ – does mutuality of obligation exist between the company and the person?  If there is mutuality of obligation then that points towards the person being an employee. If there is a lack of mutuality of obligation then that points towards the employment relationship being looser and therefore the person could very well be a worker or self-employed.
  • It is worth looking at control also. How much control do you have over the person?
  • In the Uber case the court looked at the amount of control the employer had over the drivers. The court looked at the substance of the relationship between employer and driver – not the language of the documentation issued to the drivers – again just because you call someone self-employed does not make them so
  • The Uber situation isn’t new law – it was a case of applying old law to a set of modern circumstances.

 

6.      So once I have worked out employment status for each person then I don’t need to bother checking it again?

  • That is a very good question.   It is worth being aware that some employment relationships develop over time and can mutate/change into something different. For instance – someone may start off as a casual worker but over time there becomes a mutuality of obligation that makes them move from being a casual worker to actually being an employee.

For more information and advice please visit out Employment Law section or simply Contact us

Employer Right to Work Checks
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GDPR – Key Information for Employers

The UK’s Data protection rules are set to dramatically change with the introduction of the EU’s General Data Protection Regulation (GDPR) on 25th May 2018.  The new regulations will involve significant changes to how organisations process data.  The new restrictions being brought mean that there will greater penalties for failing to meet data protection regulations.  The introduction of GDPR will have a serious impact on employers in terms of how personal data is processed and stored for not just employees but also for contractors and job applicants.

Don’t let Brexit allow you to think that GDPR won’t apply to the UK as we will still be in the EU when the new legislation comes into force and it is likely that the UK Government will adopt the same or similar legislation when we do eventually leave the EU.

Breaching the law could subject a company to significant fines of up to €20 million, or 4% of an organisations’ global annual turnover, whichever is higher.

The major changes that GDPR will have on HR information are:

1.     Data protection by design and default – A new approach to data that will require organisations to embed privacy considerations in both operational and strategic HR. Employers need to ensure that only personal data necessary for each specific purpose is processed. This includes ensuring that:

  • only the minimum amount of personal data is collected and processed for a specific purpose;
  • the extent of processing is limited to that necessary for each purpose;
  • personal data is stored for no longer than necessary; and
  • access to the data is restricted to that necessary for each purpose.

2.     Processing by consent – Many employers process employee personal data based on consent. This approach has been increasingly criticised, as the validity of employee consent is questionable due to the imbalance of power in an employment relationship. Under GDPR consent must be “freely given, informed, specific and explicit”. Where an employer obtains consent in a written declaration that also concerns other matters, the request for consent must be presented in a manner that is clearly distinguishable from the other matters, in an intelligible and easily accessible form, using clear and plain language. This means that broad consents in employment contracts to process employee data will not be valid. Further, the requirement that consent be freely given means that valid consent will generally be difficult to obtain in the employment context due to the imbalance of power.

3.     Legal basis for processing – There will be a greater focus on the legal basis for processing personal data under the GDPR. As processing employee data on the basis of consent will be problematic, employers will need to rely on other grounds, including that processing is necessary for:

  • compliance with a legal obligation;
  • the performance of a contract; or
  • the purposes of the legitimate interests of the employer or a third party.

If an employee objects to processing based on legitimate interests, the employer cannot process the data unless it shows that its legitimate interests are sufficiently compelling to override the interests or rights of the employee, or that the purpose of processing is to establish or defend legal claims. The right to object could cause significant delay and disruption in the context of disciplinary or grievance procedures, redundancies, terminations of employment or business sales.

4.     Information for employees and job applicants  – Under the GDPR, employers will be required to provide more detailed information than under the Data Protection Act 1998 to employees and job applicants about the processing of their personal data. Under GDPR, information that employers must provide includes:

  • the identity and contact details of the employer as a data controller;
  • the data protection officer’s (DPO) contact details (if the organisation has a DPO);
  • the purposes for which the data will be processed and the legal bases for processing, including, if relevant, the legitimate interests relied on;
  • the categories of personal data to be processed;
  • the recipients of the data;
  • any transfer of the data outside the European Economic Area (EEA);
  • the period of storage;
  • the rights of data subjects, including the right to access, rectify and require erasure of data, the ability to withdraw consent or to object to processing, and the right to lodge a complaint with the supervisory authority;
  • the consequences for the data subject of failing to provide data necessary to enter into a contract; and
  • the existence of any automated decision-making and profiling, and the consequences for the data subject.

Employers must provide the information at the point of data collection. Where an employer wishes to process existing data for a new purpose, it must inform employees or job applicants of that further processing.

5.     Data subject access requests – Employees have an existing right under the Data Protection Act 1998 to obtain from their employer (or former employer):

  • confirmation as to whether or not their personal data is being processed;
  • information on their data, including the purpose of processing, categories of data collected and the recipients of such data; and
  • a copy of the data being processed.

Under the GDPR, employers must provide the requested information within one month of the request (three months in the case of complex requests), and free of charge unless the request is manifestly unfounded or excessive. The GDPR places much more rigorous obligations on employers to ensure that there are systems in place to ensure that they comply with access rights, with particular emphasis placed on the clarity, transparency and accessibility of such systems.

6.     Accountability principle – One of the biggest changes under the GDPR is the new principle of accountability; the GDPR requires employers to demonstrate compliance with the data protection principles. This will mean enhanced obligations for employers, including a requirement to keep extensive internal records of data processing operations, which must be produced to the supervisory authority for inspection on request. Employers should create a data register to meet their record-keeping requirements. This should be an up-to-date written record containing information about all personal data processed by the organisation, including:

7.     Automated decision-making  – Employees have a right under the GDPR not to be subject to a decision made solely by automated processing where that decision significantly affects them. This includes decisions based on profiling (any form of automated processing to evaluate certain personal aspects of individuals, in particular to analyse or predict indicators such as their performance at work, health, personal preferences, reliability and behaviour). The GDPR requirements regarding automated decision-making mean that employers should incorporate human intervention into automated processes that significantly affect employees unless they are relying on an exception to the rule.

GDPR will become law on 25 May 2018 and that is a “hard deadline”. Organisations will need to be 100% compliant from day one.

Accountability needs to be entrenched in an organisation, requiring a cultural and organisational shift and for companies to take a proactive, methodical and answerable approach toward compliance.

For more information on how to comply with GDPR please speak to us at Solve.

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EAT confirms that regular voluntary overtime should be included in Holiday Pay

The Employment Appeal Tribunal (EAT) upheld the decision of Employment Tribunals that payments for voluntary overtime should be included in holiday pay if they are regular enough to constitute ’normal pay’.  The Employment Tribunal accepted that employees could “drop on and off the rotas to suit themselves whether day by day, week by week, month by month or permanently” and additional work was “almost entirely at the whim of the employee, with no right to enforce work on the part of the employer”.

In the case of Dudley Metropolitan Borough Council v Willetts and others, an Employment Tribunal decided that out of hour’s standby pay, call out allowance, voluntary overtime and travel allowance linked to those elements should be included within holiday pay calculations.  The 56 council workers argued that their holiday pay should have included, payments for voluntary overtime.  The tribunal stressed that “normal pay” must be included in holiday pay and concluded that the council workers’ voluntary overtime payments are sufficiently regular to constitute “normal pay”.

The EAT confirmed that, where the pattern of work extends for a sufficient period of time on a recurring basis to justify the description “normal”, voluntary overtime pay must be included in holiday pay, however, each case must be decided on its own merits, and it is up to individual Employment Tribunals to determine whether or not the overtime payments are sufficiently “regular and settled” to require inclusion in holiday pay.

The impact of the decision will be felt by all employers who operate overtime payments and approaches to calculating holiday may need to be reassessed once again.  The individual circumstances that apply to your workforce and your business will ultimately govern what approach is best for you, therefore before making any decisions as to the risks you face, take advice on what it might mean for you and your staff.