New Statutory Figures & Other Employment Changes

Statutory Figures

The annual increase in compensation limits has just been announced. The limits apply to dismissals, including redundancies, occurring on or after 6^th April 2019.

• £525.00 – the maximum amount of a week’s pay for calculating statutory redundancy pay and the basic award; (up from £508.00);
• £15,750.00 – the maximum statutory redundancy payment or basic award, i.e. 30 weeks (up from £15,240.00);
• £86,444.00 – the maximum compensatory award which can be made for unfair dismissal (up from £83,682.00), or one year’s gross pay whichever is the lower;

These increases mean that the maximum total unfair dismissal award is now £102,194.00, although uplifts can add a further 25%.

Employees may be entitled to receive guarantee payments for up to five days of lay off in any three-month period. The maximum amount of such a statutory guarantee payment will increase to £29.00 (from £28.00) for any one day.

The new rates take effect where the ‘appropriate date’ for the cause of action (such as the date of termination in an unfair dismissal claim) falls on or after 6^th April 2019.

Contracts of Employment and Payslips

New legislation that comes into force from April 2019 will require all employers to (a) provide payslips to all workers, and (b) show hours on payslips where the pay varies by the amount of time worked. This is a new rule for better transparency around pay, and for making matters more straightforward when someone challenges the numbers on their payslip.  The statutory right to receive an itemised payslip will be extended to all workers.  This means not just employees, but also what I would call dependant contractors. This means people who work for you, but do not really fit the category of genuinely self- employed. You should check that payroll providers will be in a position to provide compliant payslip information for those on an hourly rate.

When a payslip is required, it can be provided as a printed or written document, or your employer is at liberty to provide it electronically. However it is provided, the payslip must be provided on or before the employee’s payday.

The legal requirements of the detail on payslips are limited; there are many styles and formats which vary from employer to employer. The law on payslip requires at least the following to be shown (as a minimum):

• Earnings before and after deductions;
• The amounts for deductions which may change from period to period;

Many payslips were minimalist and the change gives the opportunity to go beyond this, so that staff can see how their pay has been calculated. In theory, this should reduce queries to payroll departments because people do not understand how their pay has been worked out.

Employers must review their business and payroll data processes, and check compliance with this new law – amend their processes and configure their payroll operation, to enable the correct hours’ information to be provided. Doing so should better enable employees to identify what they are being paid, and equate that with worked time. It will enable them to better identify if the employer is meeting their minimum pay obligations (National Minimum Wage and National Living Wage) and are not requiring added unpaid work-time.

Statement of Written Terms

From April 2020, it will not just be employees who are entitled to receive a written document setting out their basic terms, because the right will be extended to workers too. This is a new entitlement that should bring clarity for many workers regarding their contractual terms.

Employers currently have two months in which to provide the written particulars (generally known as contracts) to their employees, but this will change to become a “day-one” right instead. This will ensure that both parties are clear about the main contractual terms from the outset of the relationship.

Further, additional details will need to be included in the documentation, such as details of any paid leave (like maternity or paternity leave), the duration and conditions of any probationary period, and information about entitlements to any benefits.

Employers should carry out a full review of contracts, and recruitment and on-boarding processes to ensure that they comply with the new rules on contract content, and that all hiring Managers are aware that contracts will need to be provided on, or before, day one of employment.  We have always advocated supplying such documentation on day one (if not before), so you should consider implementing this in advance of April 2020.  This means issuing contracts and handbooks at the same time, partly because the two go together, but also to avoid it getting forgotten later. The better alternative is to issue the statements with a short covering letter, and the handbook before they start work.

A recent tribunal case (Stefanko & Ors v Maritime Hotel Ltd) ruled that employees who have worked for one month have a right to a Written Statement of Particulars under s1 ERA 1996, where their employment did not last for two months. Yes we know it does not make sense, but is probably legally correct, so yet another reason to implement the new rules about providing contracts sooner rather than later.

The biggest changes for many employers will be what to do with ‘workers’. They will need clear payslips, and to be issued with written ‘contracts’ from next year. This presents two challenges:

• Identifying who these workers are. Falling back on an argument that all contractors are self-employed, so no need to worry, is becoming increasingly difficult in the face of case law, and HMRC attempts to gain as much tax revenue as possible.
• The contracts they receive should be of good quality, i.e. well-written and also reflect the reality of the relationship. The Government backed away from adopting the term ‘dependant contractor’, but this term does better reflect the nature of such people and avoids the nebulous European term of ‘worker status’. I would also call them the ‘not genuinely self employed’

Company Cars

New company car advisory fuel rates have been published took effect from 1 March 2019. HMRC guidance states: ‘You can use the previous rates for up to one month from the date the new rates apply’. The rates only apply to employees using a company car.

The advisory fuel rates for journeys undertaken on or after 1 March 2019 are:

Engine size                   Petrol                LPG                   Diesel

1400cc or less                 11p                     7p                     10p

1401cc – 2000cc             14p                    8p                      11p

Over 2000cc                   21p                  13p                      13p

HMRC guidance states that the rates only apply when you either:

1. reimburse employees for business travel in their company cars, or
2. require employees to repay the cost of fuel used for private travel;

You must not use these rates in any other circumstances.

Pension Contributions

Under auto-enrolment law, minimum pension contributions to both (group) personal pension schemes and trust-based defined contribution (DC) schemes increased from 6 April 2018, and they will increase again from 6 April 2019.

Employers that currently only make the minimum contributions will, therefore, need to be ready for these increases so that the correct employer and employee contributions are paid to the pension schemes from these dates. The increases based upon employees’ “qualifying earnings” (between £6,032 and £46,350 in tax year 2018/19) for most employers will be as follows:

In some cases, employers have decided to use another definition of earnings for auto-enrolment, and have certified their schemes to that effect; the increases will be different to those that only use “qualifying earnings”. For example, for employers that calculate contributions based on gross earnings (not including bonus, overtime or commissions) the increases will be as follows:

You are welcome to raise any concerns with our Consultants, who would be pleased to advise you on any element of the issues arising from this newsletter.