Employment law update: Clyde & Co

Written by
Emily Sexton-Brown

28 Apr 2016

28 Apr 2016 • by Emily Sexton-Brown

What is your name, job title and company?

Chris Holme, Partner, Clyde & Co

What are the top 3 employment law issues right now?

Gender Pay

After a long wait, the draft rules on Gender Pay reporting have been published. Gender Pay gap reporting was previously voluntary but the new rules will mean that companies employing over 250 employees will have to publish i) mean and median overall pay for each gender, ii) average bonus payments for men and women; and iii) numbers of men and women in each salary quartile.

Affected employers will need to capture this data in April 2017 (with the bonus information being taken from the 12 months prior to April 2017) and it will need to be published on the company's website and reported to the Government by April 2018. The new rules do not contain any sanctions for failure to comply but rely on companies being "named and shamed". 

Flexibility and family rights

Although no new laws have been passed relating to flexibility and family rights, these issues remain at the top of the list of HR concerns. Awareness of Shared Parental Leave rights is growing slowly but we think that gradually more employees will share leave with their partners. The Government has proposed that grandparents should be permitted to share leave after the birth or adoption of a child. Although the regulations have not been published, together with the existing right of any employee to work flexibly, this means that soon employers will no longer be able to predict which of their employees is likely to want to take leave or work part-time. 

Holiday pay

For employees with normal working hours, holiday pay used to be calculated on the basis of their basic pay only. However, a series of cases have challenged this, arguing that other elements of an employee's remuneration should be taken into consideration when calculating holiday pay. The cases deal with an employee's EU statutory holiday of 4 weeks (and not the UK statutory allowance of 1.6 weeks, or any contractual entitlement, over and above this).  In one case, the EAT stated that non-guaranteed overtime payments should be included in holiday pay calculations. Now, in another recent case (Lock v British Gas), the EAT has stated that commission payments should be taken into account when calculating holiday pay.  In essence, the trend of the cases to date suggests that any payment that is part of an employee's "normal remuneration" should be included when calculating the amount of holiday pay that an employee should be paid for their EU holiday leave. These cases, and this trend, remain subject to further appeal and consideration by the courts.

How would you advise employers to tackle the issues you mention above?

Gender Pay: Although having to report by April 2018 makes gender pay reporting seem quite a distant prospect, because employers have to take a snapshot of their data in April 2017 (with bonuses being measured over the 12 months prior to that), it would be sensible for employers to take advice and carry out an audit, to identify any problem areas now.

Flexibility and family rights: employers should ensure that their flexible working policies are up to date, and they should revisit and review the enhanced provision they provide (if any) to those on family friendly leave.

Holiday pay: employers should conduct an audit to see whether they may have any exposure in relation to the current trend of cases, and take advice in relation to this.

Are there any upcoming employment law updates that employers need to be mindful of?

Wage increases: the National Minimum Wage is currently £6.70 per hour for those aged 21 and over. From 1 April 2016, all workers over the age of 25 will be entitled to the National Living Wage of £7.20 per hour.

Tax and termination payments: the government has consulted about the way that termination payments are taxed but has yet to set out its intentions. At the moment, the first £30,000 of any compensation for loss of employment is not taxable, but it looks as though the government want to significantly reduce the tax free allowance and limit the circumstances in which an employee to could be paid tax free. Changes are also taking place in relation to the tax allowances around pension contributions.

Could you indicate how these updates will affect day to day working?

The introduction of the Living Wage will not have as much impact in high cost areas, such as London, where employers often pay more than the minimum wage, to attract and retain staff in any event. However, in other areas of the UK, the National Living Wage could increase employer's costs.

Increasing taxes on termination payments could lead to higher exit costs for companies, and/or more litigation as packages which companies are able to offer on termination become less attractive to employees.

What systemic changes do you anticipate in the coming years from an employment law perspective and how can employers prepare?

Since the introduction of Tribunal Fees in 2013, Employment Tribunal litigation has significantly reduced.  The Supreme Court is due to consider an appeal from the Court of Appeal about whether the new Tribunal Fees are a barrier to justice. There have been a number of challenges to Tribunal fees already that have not been successful and it remains to be seen if Tribunal fees will be subject to a successful review at any time. There is also a suggestion that Scotland may see the exit of Tribunal fees at some point, with the Scottish Government it seems being opposed to them.

Another more fundamental systematic change on the horizon is Brexit. A significant proportion of UK employment law is based on EU law, including the right to paid holiday and the right not to suffer discrimination on grounds of religion or sexual orientation. It seems unlikely that EU derived laws would all be repealed if Britain left the EU, but some unpopular regulations on working time and agency worker rights might go.