Changes are on the way in April 2020

Contracts, Holiday Pay, Parental Bereavement Leave and Taxation of Termination Payments

Most schools are aware that section 1 of the Employment Rights Act 1996 (the “Act”) requires employees to be given a statement of employment particulars detailing certain terms and conditions (which are usually contained in a contract of employment) within 2 months of their employment commencing. This is often known as a “section 1 statement”.
Well, as a result of the Government’s “Good Work Plan”, from 6 April 2020, the legislative requirements will change. The changes are aimed at increasing transparency between workers and employers as well as improving the enforcement of employment rights.

What are the new requirements?

Timing

From 6 April 2020, every new employee and “worker” will have the right to a section 1 statement from schools on (or before) their first day of work (rather than up to two months after their start date). As such, it will become a “day 1” right. There will no longer be an exception to this for jobs lasting less than one month.
These changes are not retrospective, so will only apply to new engagements on or after 6 April 2020.

 

Contact our Education team now.

 

New content

In addition to the current requirements, the section 1 statement must contain the following additional particulars:

• The days of the week the worker is required to work and whether working hours or days may be variable, with details of how any variation will be determined.
• Any entitlement to paid leave, including maternity leave and paternity leave.
• Any other remuneration or benefits provided by the employer.
• Any probationary period, including any conditions and its duration.
• Any training provided by the employer which the worker is required to complete and any other required training with respect to which the employer will not bear the cost.

Current “workers”

Current workers will also be entitled to request a section one statement (including the new, additional information) and such requests must be complied with within one month.

What if schools fail to comply?

As is currently the case, if an employer fails to comply with the section 1 statement requirements, affected employees (and, from April 2020, affected “workers”) may be entitled to bring an Employment Tribunal claim so that the Tribunal can determine the relevant terms of engagement. Compensation for breach is between two and four weeks’ pay (subject to the statutory cap, which is currently £525 per week).

Impact on schools

As is currently the case, if an employer fails to comply with the section 1 statement requirements, affected employees (and, from April 2020, affected “workers”) may be entitled to bring an Employment Tribunal claim so that the Tribunal can determine the relevant terms of engagement. Compensation for breach is between two and four weeks’ pay (subject to the statutory cap, which is currently £525 per week).

 

Impact on schools

In preparation for the changes, schools should take the following steps:

• Identify workers

Extending the remit of the section 1 statement to workers (as well as employees) means that schools will need to clearly identify who are “workers” (i.e. individuals who are obliged to provide work personally but do not carry on a business where the school is the customer). As such an audit of staff and their employment status should be carried out. In a school setting, workers may be, for example, certain peripatetic staff, exam invigilators and sports coaches.

Only those individuals who are “employees” and “workers” will need to be issued with a contract which meets the new requirements (i.e. not those who are genuinely self-employed).

• Analyse processes

Schools should ensure that they are in a position to provide their contractual documentation to new employees and workers on day one of employment, or prior to them starting work. Given that this has always been a best practice and our understanding is that most schools send contracts to new starters at the same time as their offer letters or prior to the individual starting work, we hope it will not be too burdensome.

• Review contractual documentation

Schools will need to review and update their current template contractual documentation for employees and workers to ensure that they are in a position to provide the additional mandatory particulars to new staff from 6 April 2020. Template contracts with “workers”, in particular, should be carefully considered.

We are currently in the process of reviewing and updating the template contractual documentation that we have prepared and maintained on behalf of the ISBA. Most of the new prescribed information is already contained with the various template contracts of employment and/or casual worker contracts but a few changes and additions will be required.

The revised contracts will be published as soon as possible to ensure that schools have plenty of time to update their own templates (or adopt the ISBA versions) in advance of April 2020.

How to calculate holiday pay from 6 April 2020?

When employers calculate holiday pay for workers without fixed hours or pay, the current reference period is 12 weeks. From April 2020, the government is increasing the holiday pay reference period to 52 weeks. The only exception to this is during a worker’s first year of employment. For example, if an employee had been employed for 20 weeks at the time of their leave, the previous 20 weeks would be used to calculate their holiday pay.

The 52-week reference period will operate in the same way as the previous 12-week period:

• Employers must count back across the last 52 weeks that the worker has worked and received pay.
• Weeks in which no pay was received will not be counted towards the 52-week average (for example, school holiday periods).
• Contractually obliged paid overtime worked during the reference period must also be included in holiday pay.
• Voluntary paid overtime which is sufficiently regular and/or recurring so as to form part of “normal” pay should also be included in the calculation.

The 52 week reference period will ensure that workers who do not have a regular working pattern throughout the year (as is often the case in schools) are not disadvantaged by having to take their holiday at a quiet time of the year when their average weekly pay might be lower. The new change should ensure that holiday pay will more closely reflect average pay.

This reform does not apply to workers who have normal working hours and non-variable pay (i.e. most salaried workers).

Impact on schools

Schools should ensure that their payroll systems and processes have been amended to take account of the change in the reference period.

Taxation of termination payments

Employer class 1A NICs will become payable on termination payments to the extent that they exceed £30,000 (the balance over £30,000 is currently only subject to income tax). Termination payments will remain completely exempt from employee NICs.

This reform was initially due to come into force in 2018 but was delayed first to 6 April 2019 and then again to 6 April 2020.

Impact on schools

Schools will need to be mindful of this change when negotiating settlements with employees where payments fall due post April 2020.