10th October 2022
Like buses, there are no developments in employment law for ages, and then three come along at once. The last week has seen key employment law developments that will cause a big impact. Walker Morris’ Employment & Immigration experts Andrew Rayment and Lucy Gordon explain.
Read on for more details.
The Retained EU Law (Reform and Revocation) Bill (the Bill) published last week aims to enable the government to create regulations tailor-made to the UK’s needs. While the government has had the power to change or revoke EU retained law since 31 December 2020, the Bill aims to speed up reform by including a “sunset clause” under which any EU-derived subordinate legislation and retained direct EU legislation not amended, replaced or repealed by 31 December 2023 will be revoked.
The Bill also proposes to repeal the principle of supremacy of EU law from the end of 2023, meaning that in areas where positive action is not taken to amend or replace retained EU law, the latest position legislated by the UK will become the rule (regardless of how long ago this was implemented).
While the Bill provides that the sunset clause deadline may be extended up to 26 June 2026, the upcoming general election may place pressure on the current government to fast-track reform. As the government reports that there are over 2,400 pieces of EU law retained in the UK, there is clearly a concern that there may not be enough time to review all retained EU law, or for meaningful consultation on any proposed changes to take place.
It’s not currently known which employment-related legislation the government intends to amend or replace, but the existing employment-related legislation affected by the Bill includes the Working Time Regulations 1998, the Agency Workers Regulations 2020, the Part-time Workers Regulations 2000 and the Transfer of Undertakings (Protection of Employment) Regulations 2006. The Bill therefore has the potential to substantively impact employee protections within the UK.
The Bill has already raised concerns that it will cause a great deal of uncertainty for businesses, not least with respect to employment rights, and it may be that amendments are made to the Bill following its upcoming review in both houses of parliament.
The off payroll working rules can apply if a worker provides their services through their own limited company or another type of intermediary to a client (also known as an “end user”). These rules are sometimes known as ‘IR35’.
Individual workers were responsible for determining how they should be taxed. Contractors were able to self-declare whether the work they did, and how it was performed, meant their engagements were in or out of scope of the IR35 rules. Workers were paid on a gross basis by clients.
Public authorities became responsible for deciding if the rules applied where they contracted workers who provided services through their own intermediary.
All public authorities and medium and large-sized clients outside the public sector were responsible for deciding if the rules applied to them on an individual basis and were faced with large fines from HMRC if their conclusion was inaccurate. If a worker provided services to a small client outside the public sector, the worker’s intermediary was responsible for deciding the worker’s tax status and if the rules applied. Changes to the IR35 rule were aimed at stopping employees from registering as freelancers in order to pay less tax.
Contrary to the 2017 and 2021 policy changes, public and private body employers will no longer be responsible for ensuring that agency staff who provide their services through a company pay appropriate levels of tax. Instead, the responsibility will revert back to the individual worker, as was the case before 2017.
Under the Treasury’s ‘growth plan’, workers providing their services through an intermediary will once again be responsible for determining their employment status and paying the appropriate amount of tax and National Insurance contributions (as it was in 2017).
Following the mini budget recently revealed by the Chancellor, it was announced that the government will legislate to force trade unions to put pay offers to members during negotiations. He explained that this is to ensure that “strikes can only be called once negotiations have genuinely broken down”.
He also has plans to ensure minimum service levels during transport strikes, saying that European countries had minimum service levels to stop “militant trade unions”, and therefore the UK government would do the same, “and go further”.
The decision was made as Ministers are becoming increasingly concerned that pay packages are being rejected by union bosses without the consent of their members.
Unions at present must secure 50 per cent participation in a vote of a company’s workers and then a simple majority of those voting must back industrial action for a strike to be legal. Employees in “important public services” additionally need to obtain approval from more than 40 per cent of the entire workforce.
In early July, Prime Minister Liz Truss said she wanted to change the law to require 50 per cent of the entire workforce at all places of work to vote “yes” in order for a strike to go ahead.
The decision to legislate has provoked a backlash from union leaders. Frances O’Grady, general secretary of the Trades Union Congress has said: “These new restrictions are unworkable, very likely illegal and designed to hold down pay across the economy.
Other commentary has suggested that this decision further impacts workers’ ability to go on strike at a time when wage increases are lagging behind inflation.
When will the legislation come into force?
The Chancellor did not confirm further information on the timing or details of the proposed legislation, however, it’s possible that once we get the legislation it will be challenged by the unions.
What does this mean for employers?
These proposed changes are certainly employer-friendly, and they will no doubt make it harder for the strikes to take place, meaning that some won’t last as long. It could also make those strikes that do go ahead far less disruptive for businesses and workers.
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