Payroll Update - Review
So here we go again! back to the drawing board with the constant changes and review of government legislation.
The controversial announcement from the short-lived former Chancellor to remove the 45% additional rate tax threshold has been reversed, we now know that the plans to bring forward the 1p reduction of the basic rate tax from 20% to 19% from 2023, will not be going ahead.
The predecessor’s replacement Jeremy Hunt announced IR35 legislation (Off-payroll working) which was due to be scrapped from 2023, is now remaining firmly in place for the foreseeable future.
However, the repeal of the National Insurance Levy (1.25%) effective from 6 November 2023, and subsequent reversal of the Health and Social Care Levy that was due to take effect from April 2023, will proceed.
In addition, the announcement on reforms to employment rights has made significant progress.
The Retained EU Law (Revocation and Reform) Bill, introduced in the House of Commons on 22 September 2022 (Bill 156), outlines proposals to repeal, update or amend areas of employment law that have been established by EU principles, ultimately to ensure that these laws will no longer take precedence over UK law, and gives ministers greater powers to amend, replace, revoke or re-write ‘Retained’ EU law.
One of the concerns with this Bill is the short timeframe introduced by the government to effectively revoke all retained EU legislation by the end of December 2023, (the 3-year anniversary date of exit from the EU), at which point?the requirement for UK courts to interpret UK legislation in line with EU case law will end on 31 December 2023.
Several clauses have been added to the Bill, some reviews/repeals will be welcome, whilst others might be cause for concern!
The key areas under review are:
Transfer of Undertakings (Protection of Employment) TUPE transfers
The likelihood is that not much will change given the main intention of this legislation. Other less ‘contentious’ areas such as the relaxation of some of the consultation periods, could see these rules more aligned to redundancy consultation rules. Harmonised protections upon transfer could result in some but not all rights being retained.
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Working Time Regulations 1998
An overhaul of the legislation might see significant changes to some of the less popular rules that have been shaped by EU legislation relating to the entitlement and calculation of holiday pay.
A potential review of the entitlement rules pertaining to carried forward leave in periods of sickness, which allows employees to carry forward up to 4 weeks of statutory leave for a period of 18 months.
Some reform of the more cumbersome rules on the calculation basis of holiday pay, could lead to a reversal in judgement of cases like Locke v British Gas and those ‘intrinsically’ linked payments. The government might seek to align these with UK policies which could mean reverting to the principle of what is deemed ‘basic pay’ and excluding other pay components.
Unfortunately, any review or amendment to holiday pay will not impact the judgement of Harpur Trust v Brazel, as this has been established under UK legislation.
The maximum 48-hour working week and opt-out measures will probably be reviewed and seem likely that government will probably revoke this.
Other regulations under review are:
Possible reforms to some of the reporting duties for employers, such as Gender Pay Gap and Executive Pay Ratio, might see potential increases to the thresholds for reporting from 250 to 500 as a headcount.
There is no confirmed announcement of the exact date for any of the proposals outlined in the bill, and equally, there is no guarantee that the areas highlighted in this article will be subject to a review and changes as discussed.
Employers must remain more vigilant than ever and ensure you have measures in place to monitor and track changes in line with government announcements.
Since the announcement of the reforms to employment rights, the former minister of Business Energy and Industrial Strategy (BIES), Jacob Rees-Mogg has been replaced by Grant Shapps, whether this will signify further amendments to the Bill remains to be seen.