The summer months already seem far behind us as we look back at the highlights of Q3. We hope the update is insightful and helpful, and as always, please do not hesitate to get in touch if you require further guidance and support.
Holidays for Zero Hours Workers
In a recent Supreme Court judgement, a worker on zero hours was confirmed to have the same entitlement to holiday benefits as full time colleagues. ACAS guidance has been rewritten and the payment of 12.07% in lieu of holidays for part year workers has now been removed.
The Supreme Court concluded that under the Working Time Regulations, the holiday entitlement for a part-year worker under a permanent contract should not be pro-rated. Therefore, where individuals have a number of unpaid non-working weeks during the leave year, for whatever reason, the calculation of their holiday entitlement is to be made using the “Calendar Week Method” (not the percentage method).
The Calendar Week Method means that an individual who is employed for a whole year but only works one week in that year at a total payment of £100, would be entitled to £560 holiday pay. This relates to the regulations requiring that individuals receive 5.6 weeks paid holiday. It has been commented that in this situation the result is absurd, but the Supreme Court has found that it was Parliament’s intention that the Calendar Week Method should apply to those workers with no normal working hours. This decision is still recent and we expect there to be further legal discussions on this developing area.
Exclusivity Clause extension
The UK government introduced regulations to prevent employers from including exclusivity clauses in zero-hour contracts in 2015 and has now made the decision to extend the ban on exclusivity clauses to workers and employees who earn less than the Lower Earnings Limit (LEL).
Employers who still have contracts in place which include rolled up holiday pay, or incorporate exclusivity clauses for those on casual contracts or receiving low pay, should now review and renegotiate those contracts in order to comply with legislation.
On 22 September, the Living Wage Foundation brought forward the announcement of the “real Living Wage” (voluntary rate) increase in light of the cost of living crisis. The announced increase was 10.1%, the largest increase in its history, bringing the new UK rate to £10.90 per hour (£11.95 in London). The National Living Wage (NLW) rate in the UK is £1.40 per hour more than the national minimum wage for those 23 years of age and over. This is £2,730 more per year based on a 37.5 hour week. Living Wage employers are asked to pay employees the increased rate as soon as they are able, but no later than 14 May 2023.
It has not yet been announced how much the NLW will be increased by from April 2023, however, in light of the situation many people in low paid roles are experiencing, some organisations are considering whether to increase rates from the NLW. Others are signing up for the voluntary real Living Wage and paying their employees this higher rate. This is both positive for the employees and for the reputation of the employer, something which can be useful in recruitment and retention in the current competitive employment environment.
The “real Living Wage” is calculated independently by the Resolution Foundation based on a core “basket of goods and services” that people in the UK believe is necessary to meet every day needs.
The Department for Business, Energy & Industrial Strategy (BEIS) has updated its guidance document in relation to calculating minimum wage. The update has added a new section related to the “gig economy” and “Platform based workers”. These workers typically work as couriers, food delivery people or in taxi work, however others can be included. The guidance helps to assess what counts as working time for the purposes of minimum wage.
Revised Right to Work Checks from 1 October 2022
Adjustments to Right to Work checks put in place during the pandemic ended on 30 September 2022. From 1 October 2022 employers must either make a manual check of original documents in person, or use the Home Office’s online checking service, or perform a check using identification Document Validation Technology (IDVT) through the services of an identity services provider.
The suspension of employees has long been a sensitive subject and one which can create or contribute to the risk of constructive dismissal claims if used too widely and without proper consideration of alternatives in cases of investigation. Once appropriate considerations of alternatives have been made and the decision to suspend has been reached, it is not enough to state that suspension is not punitive. Employees should be appropriately supported by their employers including having the reason for any suspension explained and regular contact being maintained during the period of suspension. If you have any concerns about the suitability of using suspension and the management of any period of suspension, please don’t hesitate to get in touch and talk it through with us.
Employment Status – Government Response to Consultation
As part of the 2018 Good Work Plan the previous UK government committed to legislation to provide further clarity in relation to employment status. This was welcome given the difficulties organisations have in this area, not least the differences between the tests for the purposes of tax and employment status. However, there is yet to be any legislative reform and the UK government has indicated that the current framework for rights which covers employees, workers and self-employed individuals, provides the right balance for the UK labour market.
Along with the new guidance on calculating the minimum wage noted above, the UK Government have introduced non-statutory employment status guidance (see New guidance on employment status). The legal position is not changed by this and the guidance indicates that that only a court or tribunal can make a final decision on employment status for employment rights purposes. Therefore, when reviewing the employment status of individuals in their organisations, employers should continue to consider: terms and conditions, individual financial risk, integration into the organisation, provision of equipment, exclusivity and terms of payment.
Casual agreements, commonly referred to as zero-hours contracts, do not dictate employment status., equally, contractors and consultants who are often considered self-employed, could qualify for employment rights dependant on the various points noted.
Many organisations have spent considerable time and money dealing with the changes to IR35 rules since the changes introduced to the public sector in 2017 and the private sector in 2021. In the Chancellor’s “mini budget”, it was announced that these changes would be repealed, with this change coming into effect on 6 April 2023. We are awaiting further details from the UK government, but we would recommend organisations continue with current procedures as it is likely the current rules will apply up until the date of change. It is important to remember that the IR35 rules will still exist and for sole traders or contracts not working through a personal service company (PSC), the organisations using their services will remain responsible for reviewing their tax status. Failure to do this could result in tax liabilities in addition to other employment rights such as holiday pay and auto-enrolment pension.
Neonatal Leave and Pay & Carer’s Leave
Although the UK government previously committed to introducing statutory neonatal leave and pay, and Carer’s Leave, this was not included in the Queen’s Speech in June.
It is expected that once in law, neonatal leave will be available from day one of employment for parents of babies admitted to hospital up to the age of 28 days, and who have a continuous stay of 7 full days or more. Parents would then have the right to take an additional week of leave for every week their baby remains in neonatal care up to a maximum of 12 weeks. Where employees have a minimum of 26 weeks’ service and earn above the minimum pay threshold, will also be entitled to receive statutory pay for the period.
The UK government has confirmed their intention to bring forward legislation to introduce up to one week’s unpaid leave for carers in order to ensure there is greater flexibility for carers providing care during normal working hours. This is intended to be introduced as a day one right for employees, when parliamentary time allows.
Revocation and Reform Bill
At the time of the Brexit Agreement the government enshrined EU Laws into UK Law and we were advised that due to the potential implications for the Trade Agreement with the EU, it was unlikely we would see much change to any employment law for the foreseeable future. However, the Retained EU Law (Revocation and Reform) Bill was introduced to Parliament on 22 September 2022. It remains to be seen what will change, but this bill could remove long-established employment rights and protections in the UK. Unless the UK government takes specific steps to preserve them, the Working Time Regulations 1998, Agency Workers Regulations 2010 and TUPE may be affected, amongst others. We will be keeping an eye on what the government will choose to revoke, retain or replace, and how that will affect employers.