Employment Law Newsletter – March 2019
02 Apr 2019
Welcome to our latest Employment advice update.
Michelle Shore, an employment advisor with Richard Nelson LLP, would like to welcome you to our latest employment service update. Set out, in what we hope is an easy to read format, are a number of articles which employers need to be aware of during the coming months.
IMPORTANT TO REMEMBER FOR THIS MONTH
In other words, if you don’t do anything else after reading this!
Do you understand the difference between an EMPLOYEE, a WORKER and a SELF-EMPLOYED CONTRACTOR or CONSULTANT? If not, read our short guide below. Once you have reviews the advice, contact us if you have any concerns or wish us to review your existing contracts.
- IMPORTANT TO REMEMBER FOR THIS MONTH
- Employee, workers and self-employed – do you know the difference?
- 30 second read
- What are restrictive covenants?
- Holiday pay
- IMPORTANT INFORMATION: Wage changes
- What items would you like us to review in our next newsletter?
- Don’t forget…
Employee, workers and self-employed – do you know the difference?
There has been a lot of publicity in the last few months about the difference between an employee, a worker and a self-employed contractor/consultant. An employee is an individual who has entered into or who works under a contract of employment, whether that contract is written or verbal. A worker is generally classed as a person who:
- Has a contract or other arrangement to undertake work or provide a service personally for which they receive a reward (usually a wage or salary, paid daily, weekly, monthly or even a fixed rate payment)
- Has only a limited option to appoint a replacement to do their work (for example a sub-contractor);
- Has to turn up for work even if they don’t want to;
- Has the right to expect their “employer” to provide work for them for as long as the contract or the arrangement lasts;
- Is not delivering work via their own limited company, as part of an arrangement where the employer is actually a customer or client;
- Provides the materials, tools and equipment they need to do their work.
A self-employed contractor or consultant is a person who:
- Runs their own business for themselves and takes responsibility for its success or failure;
- Can choose what work to do, when to work and how to carry out the work;
- Can send a substitute to undertake the work on a particular contract if they cannot attend themselves;
- Can hire additional personnel to undertake the work for which the “client” is not accountable for in terms of HMRC regulations;
- Is responsible for fixing any unsatisfactory work in their own time;
- Can work for as many clients as they wish.
Workers have the following rights:
- Entitled to receive the National Minimum Wage;
- Protection against unlawful deductions from wages;
- Entitled to a statutory minimum of paid holiday (5.6 weeks);
- Entitled to statutory minimum rest breaks (20 minutes after 6-hour shift);
- Opting out of the Working Time Regulations in terms of not working more than 48 hours on average per week;
- Protection against unlawful discrimination;
- Protection as a whistleblower (having made a protected disclosure)
- Entitled to statutory sick pay, maternity pay, paternity pay, adoption pay and parental pay (if they meet the minimum requirements)
- It is important to get this right from the start when engaging self-employed persons or workers to avoid a dispute, unexpected costs, liability to HMRC or litigation. We can help, please get in
30 second read
New requirements for itemised pay statements for workers and varied pay for employees
From 6 April 2019 the right to receive an itemised pay statement will apply to workers, as well as employees. For those employees whose pay varies from month to month (or week to week) according to time worked you will also need to include the total number of hours worked for which the variable pay is received.
New requirements to publish salary rations between CEO and employees
If you have more than 250 employees, you will have to report on ratios between the Chief Executive Officer’s pay and benefits and those of your employees. This requirement applies for the financial years beginning on or after 1 January 2019 with the first reports to be produced from 2020.
What are restrictive covenants?
Restrictive covenants are clauses added to an employee’s contract of employment to protect the employer’s legitimate business interests. For example, they may seek to protect confidential information, trade secrets, business relationships, relationships with vital third party contacts and suppliers, and the relationships and ongoing employment with their skilled and experienced workforce.
Restrictive covenants may involve:
- Placing conditions on when and where an individual can work after they leave your employment;
- How they use the contacts and knowledge they have built whilst working for you in the future;
- Placing restrictions on the employee’s ability to work for a competing business after they leave your employment;
- Preventing an employee from encouraging or facilitating your other employees from leaving your organisation.
Covenants should not be used just to prevent competition. They can be difficult to enforce and they should be clearly based on your need to protect specific legitimate business interests. Thought is required to tailor the restrictions to what is reasonably necessary to achieve that protection.
If you want to include restrictive covenants within your contracts, please get in touch. We can draft them for you.
Statutory holiday pay entitlement is 5.6 weeks per annum. However, the way in which holiday pay is calculated has been the subject of a number of important decisions in the appeal courts. So here is a recap for those of you who are still unsure:
- Holiday pay is calculated on the basis of the employee’s normal pay for the full 5.6 weeks entitlement;
- Overtime contractually included in an employee contract of employment must always be included in holiday pay calculations;
- Where an employee normally works overtime, this should be included in the above calculation. However, this could be limited to the first 4 weeks of holiday pay (and therefore, not the last 1.6 weeks). However, there is no definition as to what constitutes regular overtime. Where there is no clear pattern of overtime, our advice is to calculate the average pay over an agreed reference period (for example 12 weeks before the holiday date(s) to be taken) and included in holiday pay.
If you make a payment for outstanding holiday pay as part of a termination you should take advice on the tax liabilities. To avoid confusion, ensure your holiday policy is up to date and explicit in terms of calculation of pay.
It is also advisable to inform all members of staff of their outstanding annual leave entitlement on a regular basis to ensure that, as you get towards the end of your annual leave year, they are aware that if they do not take their annual leave, they will lose it. The only exception to this is if they have been on long term sickness absence, maternity leave, parental leave or you have agreed to allow a carryover of leave from one year to another for business reasons.
IMPORTANT INFORMATION: Wage changes
The national minimum wage rate increases from 1st April 2019
- £8.21 for those aged 25 and over;
- £7.70 for workers aged 21 but under 25;
- £6.15 for workers aged at least 18 and under 21; and
- £4.35 for workers aged under 18 but no longer of compulsory school age.
Increases in statutory family and sickness payments
- From 7.4.19 the family pay rates will increase to £148.68 per week for 2019/20 which covers maternity, adoption, paternity and shared parent pay and maternity allowance.
- From 6.4.19 Statutory Sick Pay will
increase to £94.25 per week.
Are there particular issues you are facing and would welcome an article explaining more information about it? Get in touch via the website or tweet @MichelleShore6 and we will be happy to research your item and print it in the next copy of the bulletin.
The rules around employment of EU Nationals will change. Once the UK leaves the EU, free movement will change. If you are in doubt about whether this affects you please get in touch to discuss further.