NEWS EXTRA THE GOING RATE
The Bible may not be top of many night time reading lists, but it does make a number of valid points, not least of which is that “the love of money is a root of all kinds of evil” (I Timothy 6:10). Prophetic it may be, but problems associated with money, specifically pay, still persist.
Chloe Themistocleous, an associate in the Employment department of Eversheds Sutherland, reckons that it’s the National Minimum Wage and National Living Wage (NMW), maternity pay, sick pay and the threshold of earnings for claiming that cause most problems for businesses. She says that “while not necessarily troublesome, they all add increasing cost pressures on businesses every year as the statutory minimums increase due to the rising cost of living.” John Palmer, senior guidance advisor at Acas, the government’s independent conciliation service, echoes Themistocleous’ views. He knows from experience that “pay affects the workplace in lots of different ways… and it isn’t regulated by one particular piece of legislation.”
Simmering pressures The world of work in 2019 is markedly different from that of just 10 years ago. It was for this reason that the government ordered a review of modern working practices. Termed the Taylor Review, after author Matthew Taylor, the government responded with a policy paper called the Good Work Plan which set out 53 recommendations for the future form of the UK’s labour market. These include devising a better definition as to who a worker is as they are entitled to various benefits, NMW, holiday pay, sick pay etc.; ensuring that piece rates meet NMW; having a better alignment of tax between the employed and self-employed; considering a higher minimum wage for zero hours workers; and giving HMRC the right to enforce holiday and sick pay as it does with NMW.
Themistocleous says it is “a holistic review of the UK labour market. It demonstrates that the government wants to make change in the labour market in a very employee protective manner that could be extremely costly and operationally difficult for business.” Palmer too can see change coming. He believes that change is overdue precisely because of “the shifting nature of employment arrangements to ‘gig’, agency, zero-hour, part time working and the employment status issues that go with them.”
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Gender pay differentials have been in the news recently. Despite the legislation being in place for more than a year it’s telling that, according to a BBC report published at the start of April, fewer than half the UK’s biggest employers have succeeded in narrowing their gender pay gap. The report noted that “across 45% of firms the discrepancy in pay increased in favour of men, while at a further 7% there was no change. Overall, 78% of companies had a pay gap in favour of men, 14% favoured women and the rest reported no difference.” The worst sector was construction (28%) while the best was accommodation and food (1%).
Charles Cotton, senior reward and performance adviser at the CIPD, adds: “From 1 April, employers which are publicly listed and employ 250 staff or more will need to report the pay ratio of their chief executive and their employees.” He reckons that around 1,000 companies will be affected. He goes further and says it’s anticipated that from April 2020, employers will be required to report on their ethnicity pay gaps just as they do now with their gender pay gaps.
Apart from gender issues, there is another pay-related change to reckon with, one that will be obvious to anyone wondering why their take-home may have fallen post 5 April - pension auto-enrolment saw an increase to the minimum employer and employee contributions.
Cotton also highlights: “If an organisation outsources work to a contractor, it will soon be down to the HR function to decide if the individual is self-employed or employed, impacting the amount of tax they pay.” Naturally, for legislation to be effective it needs enforcement. For breaches of NMW legislation it’s notable that action can be brought by affected employees while HMRC has the power to carry out audits of potentially non-compliant firms. Themistocleous emphasises here the potential impact of the Taylor Review which suggested that there should be a new enforcement regime for sick pay and holiday pay. If matters do get serious and end up before a court, evidence indicates that they too are
taking a hard line when dealing with employers who do not meet statutory pay requirements. “The employment tribunals have been given the power to publish names of employers who do not pay tribunal awards. Maximum penalties for aggravated breaches increased from £5,000 to £20,000 as of 6 April 2019.”
More changes
Themistocleous reminds firms to be aware of the regular changes to statutory pay that are subject to annual review. She adds that current hot topics relate to agency workers and the gig economy,“There is an increasing trend to give rights usually reserved for employees to workers to ensure they are treated fairly.”
And then there’s the Swedish Derogation rules that enable some agency workers to be paid less than permanent employees - this will be repealed from April 2020 meaning that agency workers must have pay parity after 12 weeks of service.
Other changes that some may have missed: The first relates to payslips; these must be given to workers, not just employees, and from April 2019 the payslip must include the total number of hours worked where the pay varies accordingly (for variable or zero-hour contracts). And new legislation that will apply from 2020 that gives employed parents two weeks of leave if they lose a child or suffer a stillbirth from the 24th week of pregnancy. From April 2020, when calculating employee’s holiday pay, the reference period will change from 12 weeks to 52 weeks.
As Cotton points out, “all these changes will increase demand on HR teams, so they should start preparing for these changes now to ensure they are ready.”
In summary
The law on pay changes frequently. It is good practice for businesses to undertake routine checks and reviews to ensure they are compliant with all legislation. With what’s on the horizon it’s best to plan ahead; change is not going away, and as demonstrated employees and the authorities aren’t afraid of being litigious. BMJ
www.buildersmerchantsjournal.net September 2019
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