As the UK Government works through its phased COVID-19 recovery strategy and lockdown restrictions are progressively eased, employers in the United Kingdom are contemplating the implications of returning staff to the workplace. In this article, we address some of the key issues for employers to consider, with a particular focus on the UK Government’s “Covid-secure” workplace guidance. The issues raised in this article are subject to any local requirements that may apply in Wales, Scotland and Northern Ireland.
In the UK, changes in restrictions will see non-essential shops opening and many workers hesitantly going back into offices even though they could work from home. Government focus has therefore started to shift to the “re-opening” of business.
The United Kingdom is no longer a member of the European Union and has entered into a transition period until December 31 2020, unless an extension of 1 or 2 years is agreed by July 1 2020 (the Brexit Long Stop Date).
During this transition period, the UK will continue to trade with the EU in much the same way as it did before its exit. Negotiations will take place throughout this year to determine the future permanent relationship between the UK and the EU.
The UK’s Prime Minister, Boris Johnson, has repeatedly stated that the transition period will not be extended beyond the end of this year. This is an ambitious deadline to reach a comprehensive agreement with the EU and the possibility of a “no deal” Brexit remains an event for which companies should prepare.
Against this backdrop, this update summarises the current status of the UK’s relationship with the EU and sets out some of the key legal implications associated with a “no deal” scenario for certain areas—one of which being employment, which we examine here.
The UK Government has confirmed that it will extend to the private sector tax rules designed to target tax avoidance by contractors who operate through an intermediary personal service company (PSC).
The UK Government has announced that new “off-payroll working” tax rules (commonly known as IR35) will apply to the private sector from April 2020. The move will shift responsibility for determining the tax status of individuals who personally provide services through an intermediary personal service company from that PSC to the end user client.
Most major jurisdictions have pay equity laws, but their approach is far from uniform. Global companies need to evaluate compliance with these laws on a country-by-country basis whilst simultaneously addressing their compensation policies globally.
A sample of the rules across several countries helps to identify trends that can drive effective global policies.
Australia
The Australian Workplace Gender Equality Act of 2012 mandates equal pay for equivalent or comparable work. There are annual reporting requirements for employers with 100 or more employees. Those reports must include the following indicators: gender composition of the workforce, gender composition of governing bodies, and equal compensation between men and women.
Employers are penalised by being publicly named if they fail to lodge a public report on time, or inform employees or other stakeholders that a public report was lodged, or give the requested compliance data under the Act.
While campaigning for President in 1932, Franklin Roosevelt promised a crowd in Pittsburgh that he’d balance the federal budget while cutting “government operations” by 25 per cent. When he returned to Pittsburgh during his 1936 campaign, Roosevelt asked his staff how to answer questions about that unfulfilled promise and was told “deny you were ever in Pittsburgh.”
So much has changed since then: what is said and done is now instantly visible. This lesson came earlier to politicians, it is now unavoidable for business entities. There is no option to deny that you were there.
Let’s look at some consequences of this global visibility:
El Super, a small California-based grocery chain with approximately 600 unionized workers, failed to resolve a routine labor dispute at one store with the union representing those employees. As a result of this dispute involving just one store, El Super’s Mexican parent company, Chedraui Commercial Group, found itself subject to double barrel complaints filed by US and Mexican labor unions under the North American Free Trade Agreement labor agreement and Organization for Economic Cooperation and Development guidelines.
Vedanta found itself subject to a lawsuit by individuals living more than 5,000 miles away when an appellate court in the United Kingdom held that farmers from a Zambian village could bring a claim against Vedanta and its Zambian subsidiary (Lungowe and Ors. v Vedanta Resources PLC and Konkola Copper Mines PLC [November 2017] EWCA Civ 1528). The court’s decision expanded the potential “duty of care” that parent companies have under UK law to employees of their subsidiaries, to include even non-employees who might be affected by its subsidiaries’ operation.
In case you have been distracted by other recent events in the UK, here is a reminder that the compensation limits on Employment Tribunal awards and certain other amounts payable under UK employment legislation increased as of the first week of April 2019.
This alert sets out the changes in full and highlights important consequences for employers.
The government has published its response to feedback received on its proposals to simplify the taxation of termination payments, expected to come into force in April 2018.
The following table sets out the main proposals and the effect these will have on employers. Importantly, there is no change to the current £30,000 tax free allowance.
ProposalChangeEffect1. Termination payments above £30,000 to be subject to employer National Insurance contributions (NICs). Currently, termination payments above £30,000 only attract income tax, not NICs. While employer NICs will be payable under the proposal, employee NICs won’t. At 13.8%, the addition of employer NICs could add a not inconsiderable cost to paying a termination payment exceeding £30,000. 2. All payments in lieu of notice (PILONs) (contractual and non-contractual) to be taxed as income.
Currently, contractual and non-contractual PILONs are taxed differently.
Contractual PILONs (that are provided for in the employment contract) are treated as earnings and subject to income tax and both employer and employee NICs. Non-contractual PILONs, which are paid in the absence of the contractual right to do so, are subject to income tax, but not NICs.
It isn’t always straightforward to determine whether a PILON is contractual or not given that HMRC can also have regard to the regularity with which the employer pays PILONs.
This clarification is actually welcome given the differences in opinion which can arise when negotiating a settlement agreement. 3. Injury to feelings awards (such as for harassment or discrimination) will not qualify for general injury tax exemptions.
There is an exemption to income tax on termination payments, in addition to the £30,000 threshold, when a payment is made because of death, disability or injury of the employee.
It is currently unclear whether injury to feelings awards qualify for the exemption as there have been contradictory decisions on the point. This proposal would provide additional welcome clarity, but in common with all 3 proposals, means increased cost to employers.
These changes are likely to come into force in April 2018. Given that items 2 and 3 in the table clarify points that are currently argued either way, a prudent employer might want to veer on the side of caution when considering those issues before April 2018.
Lauren Goda (Trainee) contributed to this article.
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