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7 employment law changes start-ups can’t afford to ignore in 2017

Unsure of the employment law changes coming into effect this year? Don't worry, this step-by-step small business guide covers all you need to know...

The start of the new year brings optimism, business planning, strategic marketing planning, and the start of a strong sales period for many small businesses.

But, while your staff are busy beavering away, have you made provisions for the employment law changes that are likely to affect them this year?

There are seven vital changes that all small business owners with employees need to be aware of, and a further seven changes that look likely to happen.

To help ensure that you stay on top of employment law, our friends at CitrusHR have compiled this reader-friendly list:

What's very likely, or definitely happening? 

1. Pension auto-enrolment

2017 is a year when many smaller businesses are likely to have their auto-enrolment staging date coming in, that is the date by which they need to have a pension set up for employees. So if you haven’t already started preparing for this, you can’t really afford to wait any longer.

It’s worth noting that the government has delayed some of the increases in employer contributions that it had originally planned so this means that the 2% minimum is now due in April 2018, and the 3% minimum is due to begin in April 2019.

2. Changes to statutory pay from April 2017

If you need to make payments to staff who are having children, the statutory rates of pay for maternity, paternity, shared parental leave and adoption are increasing in April 2017, as is the rate of statutory sick pay. This is the first time these rates will have risen since April 2015.

With effect from the beginning of the new tax year in April 2017 this harmonised rate for Statutory Maternity Pay, Statutory Paternity Pay, Statutory Shared Parental Pay and Statutory Adoption Pay will be increased by £1.40 per week, to £140.98 per week. These rates will be reduced to 90% of an employee’s earnings if this is lower than the statutory rate.

In addition, the rate of Statutory Sick Pay, which has also been the same since April 2015, will be increased from the beginning of April from £88.45 per week to £89.35 per week.

To be entitled to these statutory payments, your employee’s average earnings must be equal to or more than the lower earnings limit. The weekly lower earnings limit is increasing at the same time from £112 to £113 per week.

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3. Increased rates for National Living Wage and National Minimum Wage from April 2017

The National Living Wage for those aged 25 and over is going up at the beginning of April from £7.20 per hour to £7.50 per hour.

There will also be increases at the same time to the National Minimum Wage payable to those under 25 and apprentices. You can find more detail about the planned National Minimum Wage changes here.

These are minimum requirements of pay and are assessed by looking at a worker’s average salary across all of their hours of work, even if you pay different rates for different work, such as travelling time.

4. Salary sacrifice scheme tax treatment changes from April 2017

The government has decided to take away the tax benefits from April 2017 in relation to many salary sacrifice schemes, including those relating to company cars (unless ultra-low emission vehicles), work-related training, workplace parking, private health schemes and health screening checks, mobile phone contracts, mobile phones and computers, gym membership, accommodation and school fees.

There are some transition arrangements for plans already in place before April 2017.

However, salary sacrifice schemes which the government is keen to promote will be exempted from the changes and will continue to benefit from favourable tax treatment. These exempted schemes include those relating to pension contributions and advice, childcare, cycling to work and ultra-low emission cars.

It is perhaps also worth remembering here in relation to childcare voucher schemes that the government is planning to increase the number of hours of free childcare for three and four year-olds in working families from the current 15 hours to 30 hours from September 2017.

5. Data protection – getting ready for 2018 changes

In 2016 an EU General Data Protection Regulation (GDPR) was passed by the European Parliament with the purpose of harmonising data protection rules across the EU including in the UK.

The regulation is due to come into effect in May 2018 and should become part of UK law at that point, but Brexit may change this, at least after March 2019 if Article 50 is triggered by March 2017.  The government has so far indicated that we should assume that the GDPR will come into force in the UK, which will still be a member of the EU in May 2018.

For employers, the GDPR is important as it will change the rules regarding consent by employees to processing of their data. There will also be changes to data request processes, the introduction of the ‘right to be forgotten’ which will allow requests for erasing information in certain circumstances, and the ‘right to rectification’ allowing employees to insist, in certain circumstances, on making changes to their personal information.

All this will be introduced in an environment of increased penalties for non-compliance.

6. Apprenticeship Levy from April 2017

From the beginning of April 2017, businesses with a salary bill of over £3m will be required to contribute funding towards the costs of UK apprentices via the Apprenticeship Levy.

This should mean that there will be more funding available which smaller businesses can apply for, even though they are not required to pay the Levy.

From May 2017, the government is introducing a scheme of co-investment for smaller employers who wish to apply for training for apprentices. Employers who don’t contribute to the Levy will be required to make a 10% contribution to the cost of the training whilst the government will pay the remaining 90% up to the maximum amount of government funding available for that apprenticeship.

The government will also be offering additional support to organisations with fewer than 50 employees by paying 100% of training and assessment costs for their apprentices aged 16 to 18 and for those aged 19 to 24 formerly in care or with a local authority education, health and care plan.

If you haven’t done so already, it is probably well worth investigating the possibilities for apprenticeships in your sector. For more information on the government’s planned changes, click here.

7. Gender Pay Gap reporting

If you are a smaller employer with less than 250 employees then this is not one to worry about. If you are getting any queries raised about gender pay gap reporting because of recent media coverage about the new rules then you can let your staff know that you are not covered by the new law.

Larger companies with 250 employees or more will need to start collecting data from April 2017 in order to publish their first report on gender pay gap by April 2018.

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What should we be keeping an eye on?

  1. Uber drivers case on appeal
    Uber are appealing to the Employment Appeal Tribunal against the decision that went against them in October 2016 when two drivers won their claim to be considered workers rather than self-employed contractors. This meant that they were entitled to basic employment rights such as to be paid the National Living Wage or National Minimum Wage, and the rights to rest breaks and paid holiday.
    This case could have huge implications not just for Uber’s model of business, but for any gig economy business trying to use self-employed contractors for things like deliveries or transport, abd in situations where businesses seek to maintain high levels of control and management.
  1. Brexit
    The situation remains unclear about potential employment law changes as a consequence of Brexit, but it does not look currently as though 2017 will be a particularly significant year for that as it will be a year of beginning negotiations, if indeed Article 50 is triggered by the end of March 2017. The decision of the Supreme Court on the government’s appeal of the High Court decision that Parliament first needs to approve that triggering is expected in early January.
    Prime minister Theresa May has repeatedly said that workers’ rights will continue to be protected post Brexit but, until information on things like the proposed Great Repeal Bill emerge, we still lack any real detail.
  1. Trade Union Act coming into force
    The Trade Union Act 2016 became law in 2016 but has yet to come into force. One of the Act's key elements is to require a ballot turnout in a strike ballot of at least 50% of those entitled to vote. There are also higher thresholds for organising strike action for those working in ‘important public services’ like firefighters, and other more detailed changes of the process for organising strikes.
    It had been expected that the provisions of the new law would start to come into force in 2016, but this has not yet happened.
  1. Worker representation on boards
    The government has said that it intends to bring forward proposals for employee representation on company boards, but as yet we have no detail. At a recent appearance at the CBI, Theresa May appeared to rule out forcing companies to have workers or trade union reps on their boards, or having some sort of compulsory works councils, but we wait to see how the government proposes to encourage employee representation at board level.
  1. Lock -v- British Gas holiday pay case
    Start-ups and small businesses may get more clarity in 2017 about the way to calculate any elements of commission to be included in the calculation of holiday pay, and also more clarity on which elements of overtime need to be included. In the meantime, employers are having to make judgments on this, which is far from ideal.
  1. Shared parental leave for working grandparents
    The Brexit vote may well have blown off course things like the government’s proposed consultation on the extension of shared parental leave rights to working grandparents. The consultation was expected to start in 2016 and it was anticipated that any new rights would take effect in 2018, but this may well now be delayed. We will be keeping an eye on whether this policy resurfaces.
  1. Sunday trading changes in Enterprise Act 2016
    If you operate a retail business, or one which relies on Sunday shift work, then you will need to monitor whether provisions in the Enterprise Act 2016 come into force, changing things like the notice period required for an employee to opt out of working on Sundays. If so, there will be increased obligations on employers to notify staff about these changes and their rights under the new rules.

Citrus HR helps small businesses stay on the right-side of employment law by combining qualified HR advice with HR software.


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