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Updated calculator on calculating holiday entitlement

The Government has published a revised holiday entitlement calculator, intended as a temporary replacement while the original calculator “undergoes maintenance”, to enable workers to calculate the minimum statutory annual leave they should receive based on their time in employment. The calculator is accompanied by online guidance for employers on how to calculate statutory holiday entitlement for workers on different types of contract and a similar downloadable guide on calculating statutory holiday entitlement for workers. The guidance states that for those workers who do not have a regular working pattern, holiday entitlement should generally be calculated in weeks.

This guidance does not cover the calculation of holiday pay, only holiday entitlement.
 

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Who can be a salaried member

The salaried member legislation can apply to certain members of a Limited Liability Partnership (LLP). This can happen where HMRC consider that a member of an LLP is not a risk-taking partner and can be re-classified as a salaried member.

Prior to 2014, all individual members of an LLP were taxed as if they were a self-employed partner. The salaried member legislation introduced new provisions that require certain individual members of an LLP be effectively treated as employees for tax purposes.

The legislation includes a three-part test to see if LLP members should be taxed as salaried members. If all three parts apply, then the member will be considered a salaried member.

In a simplified format they are:

  • Condition A: a member’s regular payments from the LLP have the characteristics of a “disguised salary” i.e. at least 80% of the member's pay is fixed or if variable do not vary in line with actual profits and losses of the LLP.
  • Condition B: a member has no significant influence over the affairs of the LLP.
  • Condition C: a member’s capital stake in the business is less than 25% of their expected reward package.

As long as an LLP member is able to demonstrate that at least one of the three conditions does not apply to their circumstances, they will continue to enjoy the status of a self-employed partner. HMRC’s internal manuals include a number of examples to help clarify how these rules are applied in practice.

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Lump sums paid in continuing employment

A lump sum payment can sometimes be made in lieu of all or part of an employee’s salary, wage, commission or other amounts to which they are entitled by virtue of their employment. Under these circumstances, the lump sum payments are taxable as earnings. The lump sums are referred to in the legislation as ‘substituted remuneration’ to mean that one form of remuneration has been substituted for another.

A number of cases have illustrated this opinion. One of these cases, Bolam v Muller set the principle that a lump sum paid was remuneration for services to be rendered and was taxable as earnings. The Judge, Atkinson J in this 1947 case stated that:

'It seems to me so plain. It is obvious… that the bonuses he would have received if they had been paid under the agreement would have been profits from his employment, and the mere fact that they agree on another form of remuneration does not alter its character.'

The same principle also applies where the earnings given up is a benefit in kind.

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What does the Queen’s Speech mean for employment law?

The Queen’s Speech 2019 outlined several Brexit-related Bills, including an Immigration and Social Security Co-ordination (EU Withdrawal) Bill, designed to end free movement within the UK after Brexit and to lay the foundation for a new, modern and global immigration system. The Bill will also reaffirm the government’s commitment to the right to remain for resident EU citizens “who have built their lives here in the UK”. The main elements of the Bill are:

  • Ending the free movement of EU citizens under UK law
  • The power to align the treatment of EU citizens arriving after January 2021 with non-EU citizens, and to maintain the treatment of EU citizens resident in the UK before exit day
  • Clarifying the immigration status of Irish citizens in the UK once the free movement rules are removed from UK law
  • Confirming the deadline for applications to be made under the EU Settlement Scheme
  • Giving EU citizens and their family members who apply a right of appeal against EU Settlement Scheme decisions.

Should the UK leave the EU without a deal, EU citizens moving to the UK after Brexit and on or before 31 December 2020 will be able to apply for a temporary immigration status, called European Temporary Leave to Remain, which will carry them into the new skills-based immigration system from 2021.

Looking specifically at employment law, the reform agenda was modest as the Speech included only one Bill. The Employment (Allocation of Tips) Bill will make sure that tips are kept in full by, or distributed fairly and transparently to, “those who work hard to earn them”.  The main elements of the Bill are:

  • A legal obligation on employers to pass on all tips, gratuities and service charges to workers without any deductions
  • A legal obligation on employers to distribute tips in a fair and transparent manner, where employers have control or significant influence over the distribution of tips
  • The requirement for an employer to follow a statutory Code of Practice when distributing tips – the Code will set out the principles of fair and transparent distribution of tips.

The government did, however, also confirm that it would continue to deliver on the commitments set out in the Good Work Plan, ensuring that UK employment practices keep pace with modern ways of working. In this regard, it committed to:

  • Increasing fairness and flexibility in the labour market by stopping employers and workers experiencing significantly different outcomes from flexible forms of working
  • Strengthening workers’ ability to get redress for poor treatment, including by improving the enforcement system
  • Increasing transparency and clarity for workers and employers, taking account of modern working relationships
  • Giving better support to working families and taking further steps to promote workplace participation for all
  • Increasing the national living wage (NLW) to two-thirds of median hourly earnings and lowering the age threshold for those who qualify from 25 to 21 within the next five years, with further details to be set out at the next Budget (due to be delivered on 6 November 2019 if the UK leaves the EU with a deal).
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National Living/Minimum Wage entitlement

A reminder that the current National Minimum Wage (NMW) and National Living Wage (NLW) rates came into effect on 1 April 2019. The NLW is the minimum hourly rate that must be paid to those aged 25 or over. The current rate for the NLW is £8.21.

The hourly rate of the NMW (for 21-24 year olds) is £7.70. The rates for 18-20 year olds are £6.15 and the rate for workers above the school leaving age but under 18 is £4.35. Finally. the NMW rate for apprentices is £3.90. The rates are updated every April.

It is important that you ensure that you have used these rates since April 2019 as there are significant penalties for employers who are found to have paid workers less than they are entitled to by law. If you have underpaid an employee, you must pay any arrears immediately. There are penalties for non-payment of up to 200% of the amount owed, unless the arrears are paid within 14 days. The maximum fine for non-payment can be up to £20,000 per employee.

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Immigration rights of EEA citizens in the event of a no-deal Brexit

The Government has now announced the revised transitional arrangements that will apply in the event of a no-deal Brexit to EU, EEA and Swiss citizens and their close family members arriving in the UK after Brexit, replacing those set out in a January 2019 policy paper issued under the previous Prime Minister, Theresa May. The Government’s new policy paper means that law-abiding EU, EEA and Swiss citizens arriving in the UK after a no-deal Brexit and before the end of 2020 will be able to enter, live, work and study as they do now. The new transitional arrangements provide that:

  • There will be a transition period from the date of Brexit until 31 December 2020, during which time EU, EEA and Swiss citizens who move to the UK will be able to apply for a three-year temporary immigration status, to be called European Temporary Leave to Remain (Euro TLR). Although applications will be voluntary, EU, EEA and Swiss citizens will need to apply for Euro TLR if they wish to remain in the UK beyond 31 December 2020.
  • Applications made under the new Euro TLR scheme will be free of charge and will be made after arrival in the UK. It will involve a simple online process and identity, security and criminality checks. Successful applicants will be given a digital status, granting them three years’ leave to remain in the UK, running from the date the leave is granted.
  • EU, EEA and Swiss citizens wishing to stay in the UK after their Euro TLR expires will need to make a further application under the UK’s future new points-based immigration system (to be based on skills) which is due to be implemented from January 2021. This is likely to mean that low-skilled workers may need to leave their jobs and the UK when their three years’ Euro TLR expires if they do not meet the requisite criteria to have a right to remain in the UK under the new immigration system.
  • Any EU, EEA and Swiss citizens who move to the UK after Brexit and do not apply for Euro TLR will need to leave the UK by 31 December 2020, unless they have applied for and obtained an immigration status under the new immigration system by that date. Otherwise, they will be here unlawfully and will be liable to enforcement action, detention and removal as an immigration offender.
  • Time spent in the UK with Euro TLR status will count towards settlement.
  • Employers will not be required to distinguish between EU, EEA and Swiss citizens who arrive before and after Brexit until the new immigration system is introduced from January 2021. This means that right to work checks for employers will remain the same until January 2021, so EU, EEA and Swiss citizens can start work by providing a passport or ID card until this date, or they can use their digital status granted under the Euro TLR scheme to prove their right to work via the Home Office’s digital status checking service. Employers will not be required to make retrospective right to work checks of EU, EEA and Swiss citizens who start work before 1 January 2021, but anyone employed after this date will need to show that they have a valid UK immigration status.

There will also be some new border controls to make it harder for serious criminals to enter the UK.

EU, EEA and Swiss citizens are their family members who are already living in the UK before Brexit still have until at least 31 December 2020 to apply to the EU Settlement Scheme for settled or pre-settled status.

Irish citizens’ rights are unaffected by the new arrangements, and they can continue to come to the UK after Brexit to live and work.

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Government to end free movement if a no-deal Brexit

If the UK leaves the EU without a deal in place on 31 October 2019, EU, EEA and Swiss citizens (and their family members) who are living in the UK by this date will still be eligible to apply for settled or pre-settled status under the EU Settlement Scheme and they will have until 31 December 2020 to do so.

Under Theresa May’s Government, in the event of a no-deal Brexit, temporary transitional arrangements were to be put in place for those EU, EEA and Swiss citizens arriving in the UK after exit day but on or before 31 December 2020. Under those transitional arrangements, EU, EEA and Swiss citizens would be able to come to the UK for up to three months to visit, work or study without applying for a visa. However, those who wished to stay in the UK for more than three months, would need to apply to the Home Office for the new status of “European Temporary Leave to Remain” (ETLR) and they would need to apply within three months of entry. ETLR was to be valid for a maximum of three years and would allow work and study, but it would not lead to indefinite leave to remain in the UK. A new immigration system would then take effect from 1 January 2021. Irish citizens do not need to obtain settled status and would not need to apply for ETLR.

However, the new administration, under new Prime Minister Boris Johnson, has now stated that the UK is leaving the EU on 31 October 2019 come what may, and that free movement will end immediately if the UK leaves without a deal. In the event of a no-deal Brexit, it is therefore seeking to introduce a new immigration system to take effect immediately from exit day, abandoning the proposed ETLR arrangements set out above. With only just over two months to go until exit day, there is no indication yet about what the requirements of this new immigration system will be. The Home Office has said that the new plans are being developed and will be announced shortly. In the meantime, it has confirmed that EU, EEA and Swiss citizens will still be able to come to the UK on holiday and for short trips, but what will change is the arrangements for them to come to the UK for longer periods of time and for work and study. 

As a precaution, if you currently employ any EU, EEA and Swiss citizens who have not yet applied for settled or pre-settled status, you should advise them to do so before 31 October 2019, particularly if they intend to travel outside the UK after that date, so as to reduce possible difficulties in verifying their UK immigration status on re-entry. At the same time, in the event of a no-deal Brexit, any EU, EEA or Swiss citizens proposing to relocate to the UK for work after 31 October 2019 should not assume they will be able to do so without prior immigration permission. This means UK businesses currently have no idea whether they can recruit EU, EEA and Swiss citizens for vacancies with a start date after exit day. Finally, it is also not now clear how right to work checks are to be made on EU, EEA and Swiss citizens immediately after exit day in the event of a no deal. 

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The importance of a written contract

The importance of having a written contract when deciding employment status should not be understated. Failing to make proper provision for written contracts can mean relying on oral agreements, which are obviously much harder to prove. Having a written contract can provide certainty to both parties and help avoid disputes or at the very least make it easier to handle any disputes that arise.

HMRC manuals say that where there is a written contract, the Courts will decide employment status based on the written contractual terms and on the factual matrix that existed when the contract was made. Generally, the Courts will not refer to evidence other than the written contract (for example, they will not refer what the parties did in practice).

Exceptions to this are where:

  • the contract is not comprehensive (other terms and conditions then have to be established from other evidence),
  • one or more of the written terms have been varied by agreement,
  • one or more of the written terms are a sham.

In contrast, where there is no comprehensive written contract, the Courts regard employment status as a question of fact or a mixed question of fact and law. The Courts will not disturb a Tribunal decision based on fact unless they think it is perverse.

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Pregnant women and new parents to get enhanced redundancy protections

The government has published its response to its January 2019 consultation on “pregnancy and maternity discrimination: extending redundancy protection for women and new parents” and has confirmed that it will now take action to address such discrimination.

As the law currently stands, employees who are placed at risk of redundancy when they are absent on maternity, adoption or shared parental leave have an absolute right to be offered a suitable alternative vacancy, where one is available, in priority to other employees who are also at risk of redundancy. They do not need to apply for the vacancy, nor must they undertake a competitive interview process. However, this protection does not currently apply to pregnant employees who have not yet started their maternity leave, nor does it apply to those who have recently returned to work from maternity, adoption or shared parental leave. 

The government has now stated that it will:

  • Ensure the redundancy protection period applies from the point the employee informs the employer that she is pregnant, whether orally or in writing
  • Extend the redundancy protection period for six months once a new mother has returned to work (and it is expected this period will start immediately once maternity leave is finished, notwithstanding any additional leave which may immediately follow)
  • Extend the redundancy protection into a period of return to work for those taking adoption leave, following the same approach being provided for those returning from maternity leave, i.e. protection for six months
  • Extend the redundancy protection into a period of return to work for those taking shared parental leave, taking account of the following key principles and issues: (a) the key objective of the policy is to protect pregnant women and new mothers from discrimination; (b) the practical and legal differences between shared parental leave and maternity leave mean that it will require a different approach; (c) the period of extended protection should be proportionate to the amount of leave and the threat of discrimination; (d) a mother should be no worse off if she curtails her maternity leave and then takes a period of shared parental leave; and (e) the solution should not create any disincentives to take shared parental leave. The government will therefore consult further on the design of this protection over the coming months
  • Establish a taskforce of employer and family representative groups to make recommendations on what improvements can be made to the information available to employers and families on pregnancy and maternity discrimination. It will also develop an action plan on what steps the government and other organisations can take to make it easier for pregnant women and new mothers to stay in work.
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Lowest paid to be eligible for sick pay

A new consultation launched jointly by the Department for Work and Pensions and the Department of Health and Social Care, is seeking views on different ways in which both the Government and employers can take action to reduce ill health-related job loss.

The consultation is examining a number of specific proposals including:

  • Reforming Statutory Sick Pay (SSP) so that it is better enforced, more flexible and covers the lowest paid employees. This would extend SSP protection to around 2 million low-paid employees.
  • Offering more support to employees with health issues affecting their work.
  • Refining occupational health provision especially for small employers and self-employed people.
  • Improving employers’ and self-employed people’s access to good advice and support.

The consultation is also examining how a rebate of SSP for SMEs could better help support small businesses, who effectively manage employees on sickness absence and help get them back to work. For example, changing shift patterns for employees can have a big effect.

Research has shown, that each year more than 100,000 people leave their job following a period of sickness absence lasting at least 4 weeks. The longer an employee is out of work on sickness leave, the less likely they are to return to employment and this can also result in further health deterioration.

Work and Pensions Secretary Amber Rudd said:

'I want Britain to be an environment where disabled people and those with health conditions can thrive, not just survive – not only in work but every area of their lives. Good work is good for our mental and physical health, and by working closely with employers we can help prevent the loss of talent when people unnecessarily leave the workplace.'

The consultation is open for comment until 7 October 2019 and it will be interesting to see what new proposals will be put forward.