Work It: HK Employment - September update
Following several recent cases concerning holiday pay calculation, we now have the first English Employment Tribunal decision on whether purely voluntary overtime pay needs to be included. The decision is not binding on other Tribunals but it confirms the approach Tribunals are likely to take.
The answer is, as anticipated, that overtime pay does need to be included in the calculation of holiday pay if it is part of the individual's normal remuneration. So, if a worker carries out overtime regularly, it should be included in the calculation whereas it does not need to be included if a worker carries out overtime very rarely.
However, because these rules come from EU law, this only applies to the four weeks of annual leave guaranteed under EU law (which are deemed to be taken first in each holiday year). Voluntary overtime pay does not need to be factored into holiday pay for the remaining 1.6 weeks' leave required under UK law or any further contractual holiday entitlement (unless there is a specific provision in the employment contract requiring this).
In the meantime, British Gas has appealed against a previous ruling that commission payments need to be factored into holiday pay in the same way. The appeal was heard by the Court of Appeal in July and judgment is awaited. If the appeal is unsuccessful (as many anticipate) and the case is finally resolved, it may provide some helpful practical guidance on how to calculate holiday pay when commission needs to be factored in.
If you would like to discuss how your business should address holiday pay issues, please contact Jane Amphlett or your usual Employment team contact.
“Automatic enrolment” is the legal requirement that every employer in the UK must put most of its workers into a pension arrangement and contribute towards it. All employers must automatically enrol these workers from their “staging date” into a pension arrangement meeting prescribed minimum quality requirements with staging dates running between 2012 and 2017. All these workers need to be automatically enrolled, whether or not they are interested in a pension, although they can opt out after the event.
Some useful tips you may not know about automatic enrolment:
- Every three years, employers must re-enrol any eligible jobholders who previously opted-out of active membership – no matter how unpopular this is with those employees! So, if you automatically enrolled your workforce in 2014, your date to re-enrol is coming around again soon
- Employers must automatically enrol workers “working” or “ordinarily working” in the UK. Of course, this means that visiting overseas employees and secondees are generally included within this. However, if the international employees are already participating in a scheme in their home country, or offshore, it may be possible for that scheme to be used as their automatic enrolment scheme
- Employers are under restrictions not to encourage opting out of automatic enrolment, including a prohibition on offering any financial inducement to employees. Therefore problems can often arise if anything is offered as an alternative to automatic enrolment, such as would be the case if the pension is part of a flexible benefit scheme
- Employers can postpone the date on which they enrol an eligible jobholder by up to 3 months – this can prove useful for aligning payroll arrangements and for those such as secondees or temporary staff who will be employed for fewer than three months! However, you should remember that employees can “opt in” in that period, so a scheme has to be ready to admit these employees if they choose to join
- There are a number of helpful exemptions to automatic enrolment of employees, including in respect of those employees who have obtained certain tax protections for their existing pensions. The logic of this is that contributing to an automatic enrolment pension means the employee losing the tax protection and gaining a very significant tax bill for existing pension schemes. Excluding these employees is an option (rather than compulsory) for the employer and it can be difficult to implement because the protections are personal and rarely form part of HR records.
The Government has confirmed that the new system of apprenticeship training, funded by a levy on employers with an annual payroll bill of £3million or more, will go ahead next spring, despite calls from business groups to delay implementation in order for the details to be worked out more fully. The Government has also released more details of the funding arrangements, including:
- How the annual £15,000 allowance (which can be offset against liability to pay the levy) can be shared between connected employers
- Details of government funding which will be provided for employers training younger apprentices or those with particular learning needs.
Participating employers will be able to access funds in their digital accounts to pay for apprenticeship training from May 2017. Further guidance on the scheme will be published later this year.
If you would like more detail about the scheme, please click here for our briefing note.
New whistleblowing rules for certain financial services businesses will be applied from 7 September 2016. Whistleblowing remains a key concern for many businesses, particularly in heavily regulated sectors. We have carried out a survey on businesses' approach to whistleblowing, the results of which will be launched later this month. Click here to request a copy of the report.
From October 2016, the National Minimum Wage will increase to:
- £6.95 per hour for 21 to 24-year-olds
- £5.55 per hour for 18 to 20 year-olds
- £4.00 per hour for 16 to 17-year-olds
- £3.40 per hour for apprentices.
The higher National Living Wage which applies to workers aged 25 and over will remain at £7.20 per hour until next April. Our in-depth guide to the National Living Wage is available here.
Gender pay gap reporting regulations: the final regulations, which were due to be published and come into force in October 2016, are now likely to be delayed until next April. The timetable is otherwise expected to remain the same, with the first reports due in April 2018.
Data protection: The EU-US Privacy Shield, which replaced the Safe Harbor scheme for the transfer of personal data from the EEA to the US after the ECJ ruled that Safe Harbor did not provide adequate privacy protection, is now in operation. The Information Commissioner has published useful guidance on how the new scheme works.
The Government is consulting on proposals to alter the tax treatment of some benefits in kind provided via salary sacrifice. Childcare vouchers, pension contributions, pensions advice and cycle-to-work schemes will not be affected. The changes are expected from April 2017.
Taxation of termination payments: The Government is consulting on significant changes to the taxation of termination payments, including taxing non-contractual PILONs, removal of foreign service relief and clarification on the taxation of payments for injury to feelings. The consultation is open until 5 October 2016 and can be found here. The changes are expected to come into force in April 2018.
International mobility seminar 2 November 2016: We are holding a seminar at 6.00pm on 2 November 2016 looking at the key practical aspects of bringing international talent to the UK, with contributions from our employment, immigration and tax specialists. With international assignments increasingly common, we will look at what options businesses have and the pitfalls they need to avoid. For more information or to reserve your place, please click here.
Launching soon – our HR Breakfast Clubs
This autumn, we will be launching our HR Breakfast Network roundtable discussion series. The first event will be focused on the Retail and Leisure sector.
These quarterly roundtable breakfasts will create a network for those responsible for staffing/HR matters in particular sectors to discuss key current workforce issues. The aim is to connect attendees with ideas, knowledge and people who can share and discuss their views. The breakfasts will take place at our offices in London Bridge, hosted by the employment team.
In the lead up to each breakfast, we will propose some hot topics to discuss, and participants will also have the opportunity to suggest topics.
Please click here for more information or to request a place.
In the news
As part of Howard Kennedy's is sponsorship of the Employer of the Year at the National Business Awards, Jane Amphlett, our Head of Employment and Irena Molloy, our HR Director took part in a judging day alongside Tracey Gray, an independent Leadership Consultant. The winner will be announced in November
If you would like to discuss any employment-related issues, please contact our Head of Employment, Jane Amphlett or your usual contact in the team.
This newsletter is for general information only and is not a binding offer to provide legal services. Nothing in this newsletter constitutes advice, nor does the transmission of any information or materials create any contractual relationship or retainer. Individual circumstances vary and you must instruct us formally if you would like us to assist you with a specific legal issue. We disclaim all liability and responsibility arising from any reliance placed on any materials in our newsletter by any recipient of our newsletter or by anyone who may be informed of its contents.