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Jamie Lawrence

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Legal insight: upcoming employment law changes and how they affect HR

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This year we have seen a raft of employment law reforms. Sarah Bull, a senior associate at law firm Bates Wells Braithwaite, outlines the key changes HR professionals need to understand and offers advice on how to keep abreast of employment legislation changes.

There have been major changes in employment law in recent years and this year will see several new reforms that HR professionals need to understand in order to protect both their business and its employees.

The start of the new tax year brought significant changes in payroll reporting and several other employment law reforms. Keeping abreast of the latest legislation can be a challenge; however it is crucial that HR managers do so to avoid the risk of litigation. The following are the most important changes:

Real Time Information (RTI)
The introduction of RTI in April was described as the biggest shake-up of the PAYE system in 70 years. Now pay details and any change in employee PAYE deductions have to be reported at the time staff are paid, rather than at the end of the year. The information needs to be sent electronically to HM Revenue and Customs, so employers – or their payroll provider – must have the appropriate software in place.

The government claims it will initially operate a ‘light touch’ approach to penalties for failing to comply with the new system. However, up to 18 percent of organisations are still not prepared according to a poll from the Forum of Private Business, and employer groups remain worried about the administrative burden and potential for complications.

Adam Marshall, director of policy at the British Chambers of Commerce described RTI as a ‘massive change to the way that businesses operate across the UK’ and said that HMRC must not underestimate the potential problems that could arise and should provide employers with on-going support as they adapt to the new systems. He added that they were concerned that the new system and future penalties could hit many well-intentioned businesses, especially as there is no transition period from the old system to the new.

Redundancy consultation
Another significant change for larger businesses is that from 6 April 2013 the minimum consultation period for redundancies for 100 or more people was halved from 90 to 45 days. There is no change to the 30 day minimum period where at least 20, but fewer than 100, employees are affected. The government says the change will enable businesses to become more agile and lessen the uncertainty for staff whose jobs are under threat but trade unions are unhappy about the reform as it provides less protection for employees. However, most employers conclude their consultation within a 90-day period and commonly employees are also keen to progress matters so they have certainty about the future, so the change is unlikely to have much negative impact.

Unfair dismissal and political affiliation (25 June 2013)
Following a recent decision in the European Court of Human Rights, the government announced that it would amend the law to allow those employees dismissed on the basis of their political affiliation to bring a claim for unfair dismissal at any time during their employment. Accordingly, under the Enterprise and Regulatory Reform Act 2013 (ERRA 2013) the qualifying period for unfair dismissal will not apply where the main reason for dismissal is the employee’s political opinions or affiliation.

As such, a claim for unfair dismissal on this basis will be a ‘day one’ right for employees which means employees will not need to accrue the usual two years’ service before being entitled to bring a claim for unfair dismissal. However, this change does not mean that such dismissals will be rendered automatically unfair – the employer will be able to advance an argument that the dismissal is fair.

Whistleblowing (summer 2013)
ERRA 2013 also brings in changes to the law relating to whistleblowing. Under the reforms whistleblowers must now make their disclosure ‘in the public interest’, though disclosures no longer need to be made in good faith to qualify for protection. However, tribunals will have the power to reduce compensation by up to 25 percent if a protected disclosure has not been made in good faith.

Acts of bullying or harassment by the co-workers of the whistleblower will now be treated as being done by the employer, making the employer vicariously liable for the acts of its employees. Employers will have a defence if they can show that they took all reasonable steps to prevent the detrimental bullying or harassment.

Pre-termination negotiations (summer 2013)
ERRA 2013 also introduces the concept of pre-termination negotiations which are designed to bring the employment contract to an end amicably. Under the new law, settlement offers will be inadmissible in unfair dismissal proceedings. Negotiations can be initiated at any time in the employment relationship (but before any claim is lodged) when an employer or employee (though usually the former) proposes a settlement agreement which may be driven by the employee’s capability, conduct or attendance. It is not necessary for there to have been any disciplinary or grievance procedure prior to entering into negotiations. Acas has produced draft guidance which should be released in its final version soon.

New Employment Tribunal Rules (July 2013)
In July we will see new rules being introduced around employment tribunals which may make it harder for employees to take employers to a tribunal. The idea is for tribunals to become the last, not the first, port of call for disgruntled employees. The new rules implement recommendations that came out of review into tribunals by Mr Justice Underhill and include new strike out powers for employment tribunal judges to dismiss unmeritorious claims or claims that are patently out of time or outside the tribunal’s jurisdiction, at an early stage.

Case management discussions and pre-hearing reviews will be merged into one preliminary hearing meaning and there will be fewer technical impediments to striking out a claim (claims cannot be struck out at a case management discussion). The new rules provide that written reasons must be provided, if requested, for all decisions made by an employment judge, although they can, where appropriate, be very short.

Employment Tribunal Fees (summer 2013)
Subject to annual income and benefit entitlements, claimants will be required to pay two fees for bringing a claim in the Employment Tribunal: an issue fee on submitting the claim and a hearing fee before the hearing takes place. The fee will differ depending on the number and complexity of the claim and fees for the Employment Appeal Tribunal will be notably higher.

Cap on compensatory award for unfair dismissal (summer 2013)
The unfair dismissal compensatory award will be capped at the lower of one year’s gross pay (excluding pension contributions, benefits in kind and discretionary bonuses) and the existing limit, currently £74,200.

Employee shareholder (1 September 2013)
Another major change for employers is coming on 1st September. Under legislation passed in April, a new employee shareholder status has been created under which employees will give up some of their employment rights in exchange for shares in their employer. The status is entirely voluntary on the part of the employee.

The employee shareholder will receive a minimum of £2,000 worth of shares to the individual, with any gains made on the first £50,000 of shares being exempt from capital gains tax.

Arguably the most important right an employee shareholder will relinquish in return for shares in his employer is the right not to be unfairly dismissed but rights in respect of statutory redundancy pay, requesting flexible working and notice requirements for returning to work early from maternity or paternity leave will also either be removed or limited.

To conclude
As we live in an increasingly litigious society it’s more important than ever to keep abreast of changes in employment law and ensure your organisation is not at risk.

Here are some tips for keeping abreast of employment law reforms:

  • Subscribe and regularly check HR publications. Many give up to date advice and details about changing employment law designed for HR professionals
  • Many law firms offer updates in their web sites or by subscription services, such as email newsletters
  • Attend seminars and talks run by law firms. Breakfast seminars and events are often specifically designed for HR professionals
  • Social media. Both Twitter and LinkedIn often have updates on employment law or recently decided cases
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Jamie Lawrence

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