UK Government Makes Moves in the Employment Space

UK Employment Law | August.04.2015

​The Conservative Government has settled in and turned its attention to the world of employment law. We update you below on five of its key moves.

1. Gender Pay Gap Reporting

The Government will enact legislation making it mandatory for companies with over 250 employees in Great Britain to publish their gender pay gap statistics. The Government is currently consulting on the Regulations.

The biggest challenge to this process will be framing the requirement to report in a way that produces meaningful figures and analysis. From what we already know of the UK workforce, it's clear that there will be a disparity between junior and senior roles, and full and part time roles, which will affect the statistics. In industries where pay is incentivised, and in industries dominated by men and/or women, statistics could also be skewed. This has resulted in a suggestion that contextual information should be published alongside the basic gender pay gap information.

In addition, the consultation will consider details such as where the statistics will be publicised, the nature of the statistics, whether 250 is an appropriate minimum number and the frequency of reporting (to be no more than annually).

Businesses have resisted this move for a long time, but with a gender pay gap for full and part time workers sitting at 19.1%, with women earning on average 80p to men's £1 (that's the sixth highest pay gap in the EU), the Prime Minister has decided to push on and make this a mandatory requirement.

We understand that the Government aims to bring the Regulations into effect in the first half of 2016, although implementation may be postponed to give businesses the opportunity to prepare.

2. New National Living Wage

There has been a national minimum wage in the UK since 1999. There are currently four different categories of minimum wage, based principally on age: the standard (adult) rate, the development rate, the apprentice rate and the young workers rate. The standard (adult) rate is £6.50 per hour as at the date of this alert.

The concept of a "living wage" has been gaining traction in the UK for some time prior to the 2015 election, when it became a key issue. Organisations including the Living Wage Foundation calculate a higher rate of hourly wage that they say an employee requires to be able to cover the basic cost of living in the UK. This is currently £7.85 an hour and £9.15 an hour for London. IKEA recently made headlines as the first large retailer to commit to pay it.

When the Conservative party won the election, the expectation was that the living wage would be less of a big deal, it having principally been a Labour party issue during the campaign. However, in his 2015 budget announcements the Chancellor, George Osbourne, announced what is effectively a new category of minimum wage for over 25s, called the "national living wage", and from April 2016, over 25s will be eligible for £7.20 per hour, set to reach £9 per hour by 2020.

The biggest impact of this change will be felt in the retail sector, where a lot of roles are paid at national minimum wage levels. There is some concern that, rather than prompting a pay rise, this move will instead result in redundancies.

3. Review of Employment Tribunal Fees

The previous Coalition Government committed to a review of the employment tribunal fees regime prior to the 2015 election, and the new Government has made good on that commitment.

The Ministry of Justice's terms of reference of the review are available here. It is expected to conclude towards the end of 2015.

Some of you may remember that the introduction of fees in the employment tribunals led to a drop in claims of upwards of 64%; a huge decrease whichever way you consider it. Numbers have remained in decline since the fees were introduced, although some claimants are able to successfully receive reimbursement of their fees from the tribunals.

The Government's aim in introducing the fees was to make the system self-funding, and was part of a continued drive to lessen what they perceived to be a burden on employers of spurious and unfounded claims and the resulting legal costs. Critics of the system cite it as another example of a blow to access to justice in this country.
The review will consider whether or not the system is meeting its original goals, whilst maintaining access to justice. It is understood that the reviewers will consider what other reasons there may be for the substantial fall off in claims. Fee levels will also be considered.

Separately, it has been announced that the House of Commons Justice Select Committee has initiated its own inquiry into fees and charges in courts and tribunals, to include employment tribunals. The Committee's focus with employment tribunal fees will be the impact this has had on access to justice.

4. Trade Unions and Balloting

In a throwback to Conservative Governments past, the Government is also introducing a new Trade Union Bill which will seek to restrict union activity around industrial action. Key changes the Department for Business, Innovation and Skills is looking for include: (i) a requirement of a 50 per cent. member turnout to vote on proposed industrial actions in order to constitute a valid ballot, and (ii) a requirement that any ballot approving industrial action remains valid for four months only.

5. Termination Payments – Taxing Questions

And finally, the Government is considering "simplifying" (and we use that word in the most ironic sense) the tax treatment of termination payments from the (in our view) pretty straightforward and long-established current £30k limit. Suggestions include:

  • Changing the £30k limit to an amount that varies with employees' length of service, with the potential to massively reduce the tax-free sum available for shorter serving employees;
  • Introducing a two year qualifying period for tax free treatment of termination payments (if things weren't bad enough during your first two years' employment);
  • Making injury to feelings awards (which most argue are currently tax free) subject to tax in whole or in part; and/or
  • Doing away with the distinction between contractual and non-contractual payments (so that contractual payments might also be made tax free).

So that's all very clear and simple then!

We can't help remembering that the Government's big promise was to simplify employment law for businesses, yet here we are with more moving and shaking and still not much in the way of streamlining.

Still, lots to keep us busy, then; although that's nothing compared to what Labour frontrunner, Jeremy Corbyn, has promised in his "Working With Women" policy document.

Either way, there's no rest for the wicked – or, at least, for employment lawyers and HR!