Employment Law Watch : Employment & Labor Lawyer & Attorney : Reed Smith Law Firm

Flexible Working and right to request time off to train

Confusingly, the right to request to work flexibly to care for children will not now be extended to parents with children under 18 from 6 April 2011 as had previously been proposed. The Government recently announced in The Plan for Growth, published alongside the budget on 23 March 2011, that it will no longer be implementing this change. The right therefore continues to apply only to parents of children under 17 (or 18 for a disabled child). BIS will soon be consulting on the extension of flexible working rights to all employees, as well as the design of a new flexible system of shared parental leave which the Government intends to be introduced from 2015.   Furthermore, as announced in November 2010, the Government will not be extending the right to request time off to train to companies with fewer than 250 employees, as had originally been planned. The right still applies in the case of larger companies. 

Watch out for the Government’s forthcoming consultation paper on the new flexible system of shared parental leave and extension of flexible working rights. As regards your flexible working and training policies, change back any amendments made in anticipation of the aborted change to the right to flexible working and the right to request time off to train.

Paternity Leave

Parents and adoptive parents of babies born (or notified of a match for adoption) on or after 3 April 2011 will be able to take advantage of the new right to Additional Paternity Leave introduced by the Additional Paternity Leave Regulations 2010 (for further information see our client alert Paternity Leave). The new right will entitle eligible employees (usually fathers) to take up to 26 weeks’ paternity leave. The leave can be taken any time from 20 weeks from the date of birth / placement for adoption up until one year after that date. The Government announced in September last year that Additional Paternity Leave was an “interim measure” and, as mentioned above, it now intends to consult on more ambitious plans to formulate a system of flexible shared parental leave, to be introduced in 2015.

Review and update your family, paternity, maternity and adoption policies. If you operate an enhanced maternity pay policy, consider whether you should extend this to cover paternity leave. Watch out for our forthcoming client alert dealing with this issue

Increasing Rates

As from 11 April 2011, statutory maternity, paternity and adoption pay are set to increase from £124.88 to £128.73 per week, with the weekly earnings threshold increasing from £97 to £102.

Default Retirement Age

5 April 2011 will be the last date on which employers will be able to issue a notice of retirement under the current retirement rules. On 6 April 2011, the transitional provisions under the Employment Equality (Repeal of Retirement Age Provisions) Regulations 2011 will come into force. These Regulations will implement the Government’s plans to abolish the default retirement age of 65 as from 1 October 2011 and the associated retirement procedure, including the right to request working beyond retirement. For more information see our client alert Phasing out the UK default retirement age.

Make an urgent review of your personnel files to consider whether to serve last minute retirement notices before 6 April on any employee who has reached 65 (or normal retirement age if lower) or who will do so before 1 October 2011. 

Equality Act 2010

Most of the provisions of the Equality Act 2010 came into force on 1 October 2010. However, there were a number of provisions which were left undecided. The following provisions will now come into force in early April:

• positive action in recruitment and promotion (section 159) (6 April);
• public sector equality duties (section 149) (5 April);
• the new Statutory Codes on Equal Pay and Employment issued by the Equality and Human Rights Commission (6 April).

The Government has recently announced that the combined discrimination provisions (section 140) will not now be brought into force at all. It will also be consulting on whether to revoke the provisions relating to harassment by third parties (section 40).

In December 2010 the Government announced that it would work with private sector employers to introduce voluntary (rather than mandatory) measures to provide gender pay gap information (section 78). 

Finally, ECHR guidance on matters to be taken into account in determining questions relating to the definition of disability is expected to come into force on 1 May 2011.

Familiarise yourself with the new Statutory Codes. Consider if the positive action provisions can be useful to you in your organisations’ recruitment and promotion plans. Consider implementing the recommendations in the EHRC's Code on Equal Pay as regards the voluntary measures your organisation might put in place to measure and share information on men’s and women’s pay.

Bribery Act 2010

This Act was intended to come into force on 6 April 2011 but has now been delayed until three months after the Government’s guidance on the Act has been published. The Act introduces a new corporate offence of failing to prevent bribery by individuals acting on behalf of an organisation. Employers will need to ensure that there are “adequate procedures” in place so they can prevent bribery and corruption. The Guidance will help employers understand what amounts to “adequate procedures” under the terms of the Act. The Guidance was published on 30March 2011 and the Act is now expected to come into force on 1 July 2011.

Read up on the implications of the Bribery Act by referring to our client alert on the Act and our latest client alert on the Guidance.

Tax on Termination Payments

On 6 April 2011, the Income Tax (Pay As You Earn) (Amendment) Regulations 2011 come into force. The Regulations concern the deduction of tax from the payment made to a departing employee after the issue of their P45. Currently, tax on such post-termination payments is deducted at basic rate only using the “BR” tax code. From 6 April, employees will be required to deduct tax at the full applicable rate, whether basic, higher or additional, using the new “OT” tax code. A last minute exception to these proposed changes has been announced in relation to employee shares, options and other securities under Part 7 of the Income Tax (Earnings and Pensions) Act 2003. 

Any employers considering the timing of any imminent dismissals should consider whether it may be better to enter into any compromise agreement or other termination agreement before the end of this tax year. This will not change the actual amount of tax due but will have cash flow advantages for employees on higher rates of tax. As regards payments to be made after 6 April, employers should consider whether it may be better to make the entire payment before the issue of the P45. HR and payroll operators should be made aware of the change so they can apply the OT code if necessary and so that the payment is not automatically delayed until after the issue of the P45. Watch out for our client alert on this change which will be published shortly.

Small employers and start ups

The Government announced in The Plan for Growth, published along with the Budget on 23 March 2011, that small employers (ones with less than 10 employees) and start ups will be exempt from all new domestic employment law changes coming into force over the next 3 years, effective from 1 April 2011. No particular detail was given on this but we wonder whether this will apply to changes which would be advantageous to such employers?

Watch out for more announcements on this change.

Statutory maternity pay – reduction in small employer’s relief     

Small employers can recover all of their statutory maternity pay from HM Revenue & Customs. They are also entitled to an additional compensatory amount which is equivalent to 4.5% of the statutory payment made and which relates to the NICs they have paid. As from 6 April 2011 the additional compensatory amount for small employers will reduce from 4.5% to 3%. A small employer, for these purposes, is one whose total Class 1 NICs is at or below a set annual threshold in the qualifying tax year. This is currently set at £45,000.

Financial Services Bill

Introduced in the House of Commons after the Queen’s Speech in November, the Financial Services Bill could become law before the forthcoming General Election. This Bill is a direct consequence of the banking crisis, providing for the statutory regulation of pay in the financial and banking sectors. It requires the Financial Services Authority (“FSA”) to regulate financial sector remuneration to promote effective risk management and compliance with international standards. It proposes enhanced pay disclosure and powers for the FSA to prohibit specific types of remuneration, make contract terms void if they are in breach and provides for the claw-back of payments made under void terms. These changes are intended to apply to certain contracts already in force, as well as future contracts.

For more information, view the Bill.

Additional Paternity Leave and Pay

Proposed to apply in respect of children due or born after 3 April 2011, fathers (or co-adopters of a child) will be able to take up to 26 weeks’ paternity leave once the mother has returned to work. The leave must not be taken earlier than 20 weeks after the birth of the child (or placement for adoption). Statutory Paternity Pay will be paid for the balance of the period which the mother would have remained on maternity leave and at the same rate as SMP. The Conservative Party have indicated their commitment to extend paternity leave and may even extend it further by allowing both parents to take time off simultaneously. Employers should update their policies if and when firm proposals for legislation are known (hopefully by summer 2010).

For more information, access the public consultation papers.

Default Retirement Age

Following on from the Government’s paper “Building a society for all ages” last year, the Government has asked for further evidence on how the default retirement age of 65 (“DRA”) works in practice and the impact on business on raising or removing the DRA, as well as how associated costs could be mitigated. The review of the DRA was scheduled to take place in 2011 but has been brought forward as a result of the comments made by the High Court in the Heyday decision last year. There seems to be a strong possibility that the DRA will be raised or removed altogether in the near future.

For more information, view the Government’s call for evidence.

“Fit” Notes

New “fit” notes will replace the old “sick” note system from Spring 2010 (expected under the Social Security (Medical Evidence) and Statutory Sick Pay (Medical Evidence) Amendment Regulations 2010). The “fit” notes will help employers by giving more information on the employee’s medical condition. GPs will have the opportunity to state if the employee is fit for work (or for some work) and whether adjustments (such as a phased return to work) would be beneficial. It may still be advisable, however, to obtain specialist medical reports where there is a possibility that the employee suffers from a disability. 

For more information, view the Government’s press release.

Time off to train

Employees working for employers with 250 or more employees will have a new right to request unpaid time off for work to undertake study or training. This new right will come into force on 6 April 2010 and will apply to employees with six months’ service (see the Apprenticeships, Skills, Children and Learning Act 2009).

For more information, view the Government’s guidance.

Safeguarding Vulnerable Groups Act 2006

As from November 2010, anyone wishing to work in a “regulated activity” with children or vulnerable adults will need to register with the Independent Safeguarding Authority (“ISA”). An opportunity to register early will be available from July 2010.

For more information, view the Government’s guidance.

Whistleblowers

There is a possibility that in relation to all whistleblowing claims brought on or after 6 April 2010, the relevant Employment Tribunal will be able to pass on to regulators information relating to that claim (providing the Claimant consents). The Government consulted on this last year and, although there has been no announcement as regards the outcome of that consultation, the Government has previously indicated 6 April 2010 as a possible date for the new regime to come into force.

For more information, view the Government’s consultation papers.

Bank Payroll Tax

In the 2009 Pre-Budget Report, the Chancellor announced a new one-off Bank Payroll Tax (“BPT”) payable by banks and other providers of financial services in respect of bonus awards to employees exceeding £25,000. The BPT will be charged at the rate of 50 per cent on any such bonuses awarded between 12.30 pm on 9 December 2009 (when the new charge was announced) and 5 April 2010 (the end of the current UK tax year). However, the Government is already considering extending this period until the Financial Services Bill 2010, which is expected to provide a new framework for the conduct of banks and similar institutions, comes into force.

The purpose of the BPT is to discourage banks from awarding bonuses which are deemed to be excessive and inappropriate during a recession which is largely perceived to have been caused by bankers. It is a tax on banks and other financial institutions and does not affect the tax position of employees.

The BPT will apply to banks, building societies and a number of other organisations within the financial services sector. It will be charged at the rate of 50 per cent on any payments and benefits exceeding £25,000 (other than excluded remuneration) to employees who are involved in certain types of financial activities (broadly, activities which require authorisation from the Financial Services Authority). 

The BPT is intended to apply to remuneration with the character of a “bonus”, but not to regular payments of salary. This is reflected in the concept of “excluded remuneration” which is outside the scope of the BPT. Excluded remuneration comprises: (1) regular salary, wages or benefits (which do not vary by reference to performance or similar considerations), (2) payments and benefits made or provided in accordance with contractual obligations entered into prior to 12.30 on 9 December 2009, and (3) awards of shares under an approved share incentive plan or grants of share options under an SAYE option scheme. 

The BPT will become due and payable on 31 August 2010 and will not be allowable as a deduction for corporation tax purposes. There are also record keeping and other reporting requirements. A failure to comply with the BPT regime will give rise to penalties.

 And finally ….. for 2012

There will be an extra Bank Holiday on Tuesday 5 June 2012 to celebrate the Queen’s Diamond Jubilee. This will involve moving the late May Bank Holiday to Monday 4 June and adding an extra Bank Holiday on Tuesday 5 June to give a long weekend of celebration (except of course those studying for exams!!).