Business Law & Compliance

What’s next on the agenda for employment law?

10 min read

12 January 2017

With 2017 set to be a busy year in terms of employment law – key changes include the introduction of mandatory gender pay gap reporting, the apprenticeship levy and the potential triggering of Brexit – we discuss some of the changes.

1) Gender pay gap reporting

When it comes to employment law, this change is taking the UK by storm. The Equality Act 2010 Regulations have now been published in final form and are due to come into force on 6 April 2017. The regulations will require all private sector organisations with at least 250 employees to publish details on the gender pay gap, based on a snapshot of pay data as of 5 April 2017. Data will need to be published no later than 4 April 2018, with employers being required to publish pay gap figures annually thereafter.

The regulations extend not only to basic pay but also require employers to take steps to calculate and publish details of bonus pay gaps. Importantly, the regulations introduce some fairly significant changes to the approach contained in the previous draft. Reporting requirements for public sector organisations are expected to mirror these provisions.

2) Brexit

The prime minister intends to trigger Article 50 before the end of March 2017, thereby beginning the formal process of the UK leaving the EU. This will not result in immediate changes. Although much UK employment law is derived from the EU, leaving the EU will not bring about changes to our rights. But the potential implications for the future are significant. It remains to be seen whether she will have the freedom to trigger Article 50 – the government’s appeal against the High Court decision that Article 50 could not be triggered without Parliamentary approval was heard by the Supreme Court in December 2016. The decision is expected early in 2017.

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3) Apprenticeship levy

Also soon to change in the employment law landscape is the funding of apprenticeships, starting in April 2017 as a result of the introduction of an apprenticeship levy (part of the government’s initiative to fund 3m new apprenticeships by 2020). UK employers whose annual pay bill exceeds £3m will be required to pay 0.5 per cent of their pay bill via PAYE by way of levy sums. Employers will benefit from a £15,000 allowance to offset against the levy. Bosses will access their levy sums through an account with the Digital Apprenticeship Service, with the government adding an additional ten per cent top up to the levy sum each month.

Separate arrangements will be put in place for Scotland, Wales and Northern Ireland. Employers who pay the levy can use their levy sums to cover the cost of apprentice training, assessment and certification from approved providers. The new rules also affect employers who will not be subject to the levy; they will be able to benefit from the new funding system from May 2017, with 90 per cent of their training costs being funded by the government.

4) Tax-free childcare scheme

The tax-free childcare scheme is expected to be launched in early 2017. The scheme allows working families to claim 20 per cent of childcare costs for children under 12 (or children with disabilities under 17) from the government. The costs that can be claimed will be capped at £2,000 per year and there are certain eligibility requirements in terms of minimum and maximum income levels.

Existing employer-supported childcare voucher schemes will remain open to new entrants until April 2018 and existing members of such schemes will be able to continue to access childcare vouchers for so long as their employer maintains the scheme. However, after the launch of the new tax-free childcare scheme, employers will no longer be able to offer childcare vouchers to new employees on a tax-exempt basis. In addition, we expect free childcare to be extended in September 2017.

5) Salary sacrifice schemes

The government will make changes to the tax status of salary sacrifice benefits with effect from April 2017, with most salary sacrifice schemes becoming subject to the same tax as income. These employment law changes follow the plans set out in the government’s 2016 Autumn Statement. Arrangements in place before April 2017 will be protected until April 2018 or April 2021, depending on what they cover. The change will affect different salary sacrifice arrangements in different ways but only a few will continue to benefit from tax and NICs relief.

More employment law changes are on their way

Image: Shutterstock

6) Public sector exit payments

New provisions – introducing a cap of £95,000 on exit payments and requiring repayment where an individual earning over £80,000 receives a payment and returns to the public sector within 12 months – were due to be implemented in 2016 but were delayed. We expect them to be introduced in 2017.

7) The Trade Union Act 2016

This will introduce major changes to the balloting rules for industrial action and a new balloting threshold for important public services, as well as other provisions. We expect the Act to be implemented this year.

8) Immigration skills charge

Employers who sponsor foreign workers with a tier 2 visa will have to pay an annual charge of £1,000 per worker (£364 for small employers and charities) from April 2017.

9) Minimum wage changes

Increases to the national minimum wage and the national living wage will be aligned from April 2017, with changes to both taking effect on the same date. On 1 April, the national living wage will rise to £7.50 per hour and the adult rate of the national minimum wage will be £7.05 per hour.

10) Key cases

We end with a handful of key cases to watch out for this year:

The gig economy – self-employed or workers? In November 2016, an employment tribunal (ET) held that Uber taxi drivers were not genuinely self-employed and were, in fact, workers (meaning they benefitted from worker rights, including the right to paid holiday and the national minimum wage). Given the potential ramifications for Uber (and the gig economy more generally), the company appealed the decision and the Employment Appeal Tribunal is expected to hear the appeal later in 2017.

Holiday pay – we could not have a ‘cases to watch out for’ section without mentioning a pending holiday pay case. Following the Court of Appeal’s decision that UK law could (and indeed had to) be interpreted to give effect to the European Court of Justice (ECJ) decision that holiday pay should include contractual results-based commission, British Gas has lodged an appeal to the Supreme Court. No date has yet been set for the appeal to be heard, although it is likely to be some time in 2017. Given the direction of travel in holiday pay cases and the clear view of the ECJ in the Lock litigation, we suspect this further appeal is unlikely to be successful.

Ban on Muslim headscarves – the ECJ is considering its decisions in two separate cases concerning bans on the wearing of Muslim headscarves at work and whether such bans amount to direct discrimination. Last year saw two starkly conflicting opinions from two Advocate Generals on this point and it will be interesting to see how the ECJ rules on this controversial issue. The judgments are expected shortly.

Employment tribunal fees – Unison’s appeal against the Court of Appeal’s decision in its judicial review action against the Government in relation to the introduction of ET fees is due to be heard by the Supreme Court in March.

Whistleblowing – the Court of Appeal is due to hear Chesterton Global Ltd vs Nurmohamed in June, where the issue is whether it is necessary to show that a disclosure was of interest to the public as a whole in order to bring a whistleblowing claim.

Overall, 2017 promises to be a busy and interesting year in employment law.

Natasha Robson is an associate at national law firm Bond Dickinson