New Workers’ Rights and a Consultation on Salary Sacrifice Announced
With the news dominated by Brexit, two important Government announcements on the rights of workers have gone somewhat under the radar.
The first of these announcements relates to new workplace legislation, intended to provide greater clarity for both employers and employees regarding their rights and obligations. The changes are part of a wider Government initiative labelled the ‘Good Work Plan’, which outlines its plans for the future of the UK labour market.
The new rules, which came into force on 17th December, are designed to narrow the gap between the rights of those in traditional employment and those on alternative types of contract.
In brief the legislation covers the following areas:
- Workers will now be entitled to written details of their rights under a contract on their first day in the job – this includes their rights to sick leave and eligibility for sick pay, along with details of other types of paid leave including maternity and paternity leave.
- The Agency Workers Regulations 2010 states that workers employed in the same role for more than 12 weeks must be given equal pay and the same conditions as permanent employees. However, a loophole known as the Swedish derogation currently allows staff employed by an agency, and then hired out to an organisation, to be paid less. This new legislation closes this loophole so that agency staff gain the same rights as temporary or permanent workers employed directly.
- Fines that can be applied by employment tribunals where it can be proven that employers have shown ‘malice, spite or gross oversight’ in relation to workers’ rights have been increased from £5,000 to £20,000.
- Workers that do not have regular working hours previously had their entitlement to holiday pay calculated based on the amount of work they had done in the last 12 weeks. For seasonal workers, this was often viewed as unfair. The new legislation moves to a 52 week reference period that should make these calculations more representative.
- Employees in organisations with 50 or more staff have a legal right to be informed and consulted about issues affecting the organisation. They also have a right to ask for a formal agreement outlining the consultation process to be provided. Previously, 10% of staff were required to ask for this formal arrangement, but this has now been reduced to 2%.
The Government has also stated that employment status tests will be tightened, with a view to improving clarity and reflecting the diverse nature of modern working relationships. To find out more visit Gov.co.uk
Salary Sacrifice Confusion
The second announcement is for a consultation to be held on the rules surrounding the National Minimum Wage and the way that salary sacrifice schemes operate.
The first part of this relates specifically to how the minimum wage is calculated for employees who are paid a salary rather than an hourly rate, and the reference period that is used as the basis for this. The intention of the consultation is to discover how effective the existing rules are in preventing worker exploitation.
The second part of the consultation looks at salary sacrifice arrangements and how these are applied where workers are on relatively low pay.
In general terms, salary sacrifice deductions that result in a worker’s pay being less than the National Minimum Wage are not allowed and can result in a fine.
There are, however, exemptions to this rule, including one which states that where the employee voluntarily agrees to a deduction in return for goods or services, even if it does take their pay below the legal minimum, this is allowed.
This part of the consultation has been set up to seek views on whether those on lower pay are being disadvantaged by not being offered salary sacrifice arrangements that meet these criteria, when those earning more are benefiting from them.
As a note of caution, there are cases where organisations have been fined for making deductions that would, at face value, appear to meet the above exemptions and professional advice should be sought when considering such a scheme. It is also worth noting that the accepted interpretation of the exemptions does not include car salary sacrifice schemes. It is hoped that as part of the consultation process clarification on exactly what is and is not in scope of the exemptions can be provided.
To find out more and to take part in the consultation visit Gov.co.uk