New employment law changes up ahead! – February 2024 KLG Newsletter

Employment Status: Checking whether you’re inside or outside IR35

KLG were recently asked by Inca Accountants to comment on the latest updates and changes set to arrive in April to the IR35 Rules. Read more about our opinions in their blog here.

Up until now, HMRC lacked the capability to offset the PAYE liability attributed to the fee-payer against taxes already settled by the contractor.

Starting April 2024, the introduction of the IR35 offset empowers HMRC to reconcile tax and National Insurance contributions previously paid by a worker and their intermediary for income derived from engagements under the off-payroll working regulations. This adjustment is designed to rectify potential instances of excessive tax and National Insurance collection due to non-compliance with these regulations.

This initiative aims to resolve the issue of double taxation arising from incorrect ‘outside IR35’ status determinations. HMRC will pursue recovery of the PAYE liability from the fee-paying party while considering the taxes already remitted by the contractor for their earnings from the engagement.

Paternity Leave Changes

New regulations have been published which amend the statutory paternity leave entitlements, applying to parents of babies whose expected week of birth begins after 6 April 2024 or who are expected to be placed for adoption on or after 6 April 2024. The changes see eligible parents able to take their two weeks of paternity leave in non-consecutive periods of a week (rather than in one go), and within the first 52 weeks (rather than 56 days). The notice to be given for taking leave is also being shortened to four weeks, with flexibility introduced to allow dates to be changed. Employers should update their paternity leave policies accordingly. Read more about this in our upcoming blog.

Transfer of undertakings (TUPE)

A recent decision by the Employment Appeal Tribunal (EAT) has addressed the issue of liability in a case involving constructive unfair dismissal and harassment. This case pertained to a situation where the alleged harasser underwent a TUPE transfer to a new company, while the claimant did not, as their employment terminated before the TUPE transfer occurred. The claim was filed solely against the former employer, without naming the alleged harasser. The former employer contended that liability for the claim had transferred to the transferee under TUPE regulations. However, the EAT ruled otherwise, stating that since the claimant did not undergo a TUPE transfer and did not resign for reasons connected to TUPE, liability for any employment claims did not transfer either. Thus, the employer retained responsibility for the alleged wrongdoing, despite the alleged harasser undergoing a TUPE transfer (Moore v. Sean Pong Tyres).

Termination: Settlement Agreements

The Scottish Court of Session has been examining the extent and validity of a waiver aiming to exclude the claimant from pursuing a future claim, even if that claim was not within the parties’ awareness or contemplation at the time of entering the agreement. In this instance, the claimant entered into a settlement agreement upon his redundancy, wherein the terms included an additional payment aligned with a collective agreement, scheduled for payment a few months later. However, it emerged subsequently that the claimant’s age at the time of dismissal rendered him ineligible for this additional payment, prompting him to file a claim of age discrimination.

The question of whether the settlement agreement effectively waived this claim was disputed, and while the initial Employment Tribunal (ET) determined that the claim was barred, the Employment Appeal Tribunal (EAT) overturned this decision. The Court of Session sided with the initial ET, asserting that a future claim could fall under a waiver, even if the employee lacked knowledge of it at the time of the settlement agreement, provided the agreement explicitly and unambiguously intended such coverage.

This ruling may offer reassurance to employers relying on similar waivers, although careful drafting is necessary to enhance enforceability. Additionally, it remains uncertain whether this principle applies solely in termination scenarios or extends to ongoing employment relationships. Observers speculate the latter, but further case law may be needed for clarification (Bathgate v. Technip Singapore OTE Ltd).

Practical Point:

Decisions of the Court of Session are not technically binding in England and Wales, but are highly persuasive, so this case provides a good indication of how such claims will be decided by English employment tribunals and the EAT. 

Employers will welcome this decision which provides greater clarity on relying on settlement agreements to waive future claims. That said, it is advisable for employers to include as much detail as possible in settlement agreements about the specific complaints being settled, and to include some form of warranty to the effect that the employee has no intention of bringing future claims.

New Guidance

1. Flexible Working – ACAS published Code of Practice
   ACAS has published a draft version of the Code of Practice on flexible working, offering revised advice on initiating and managing flexible working requests in light of anticipated legislative amendments set to be enforced in April 2024.The draft needs approving by Parliament and will be accompanied by yet-to-be-published non-statutory guidance.
2. Right to Work in the UK – Updated statutory Code of Practice
   There is an updated statutory Code of Practice for employers which sets out the checks they should be carrying out to avoid penalties for illegal working.
3. Terminal Illness – CIPD issued guidance for Employers
   The Chartered Institute of Personnel and Development, has issued guidance for employers on supporting employees with a terminal illness, or who are caring for or bereaved from someone who was given a terminal diagnosis.
4. Holiday Pay – New Guidance
   The government has published guidance on holiday entitlement and holiday pay reforms. The new guidance sets out how holiday pay should be calculated for irregular hours and part-year workers, as well as other holiday pay reforms, the majority of which apply from leave years beginning on or after 1 April 2024 although some apply from 1 January 2024.

   In addition to setting out the definition of ‘irregular hours worker’ and ‘part-year worker’, the guidance includes:

   1. Holiday entitlement calculations where a worker leaves a job part-way through a leave year, requiring a pro-rating of the annual statutory minimum entitlement
   2. How statutory holiday entitlement is accrued and calculated for irregular hours and part-year workers 
   3. Calculating statutory holiday entitlement accrued by irregular hours and part-year workers while they are on maternity or family-related leave or off sick 
   4. The operation of rolled-up holiday pay, which is permitted for irregular hours and part-year workers 
   5. Calculating holiday pay for irregular hours and part-year workers

The guidance contains worked examples to illustrate how the calculation of holiday entitlement and pay should operate under the new regime. Employers should update their policies and procedures so that they comply with the new holiday entitlement and holiday pay rules.

Long-term Sickness reaches record high

According to the Office for National Statistics, long-term sickness absence reached a record high in 2023, with more than 2.5 million people off work on a long-term basis.

Meanwhile, levels of absence due to poor employee mental health have increased significantly over the past year with 35% of adults saying they felt high or extreme levels of pressure and stress, and research from Mental Health UK finding that burnout is affecting 20% of workers. 

A number of external factors such as the cost-of-living crisis and global events are playing a part in this, and it’s sensible to consider how you can offer practical support to those affected where possible.

Employment Tribunal Fees

The government is consulting on reintroducing a fee for lodging an employment tribunal claim or appeal. The previous fee regime was introduced in 2013 but abolished in 2017 following a successful judicial review. Under new proposals, and different to what went before, a flat £55 fee will be payable on presenting a claim or lodging an appeal, with some limited exemptions. This is regardless of the type of claim, with nothing else payable throughout the journey of the claim or appeal. The consultation is open until 25 March 2024.