April 2020 - Contract of employment changes

In the second article in our series, we are focusing on changes to written statements of employment and work required as part of the Good Work Plan.

As the law currently stands, employers must give their employees a written “Section 1” statement (as required by Section 1 of the Employment Rights Act 1996) which sets out certain basic terms of employment; for example, information about rates of pay and place of work within 8 weeks of starting work. However, from 6 April 2020, there are going to be changes:

Written statements to be a “day 1 right”

From April 6, 2020, a Section 1 statement will need to be given to all staff as a “day one right” – note here, not just employees but also workers. Statements must be given on the day the job commences or before. 

Abolition of the “less than one month” rule

Also the exclusion for those employed for less than a month will no longer apply – all workers/employees will have the right to receive a written Section 1 statement, regardless of how long their employment or contract lasts.

Extending the scope - New information to include in the Section 1 statement

As well as the original Section 1 statement information, new statements, from 6 April 2020, will also need to include information about:

• days of the week the individual is required to work, and if hours or days vary (and how they will be notified of this e.g. a rota?)
• entitlement to any other paid leave for example maternity leave, or family leave but also any entitlement to, for example, sabbatical leave or workplace study leave
• any other remuneration or benefits (above base pay)
• any probationary period plus any conditions relating to probation and how long it will last
• any training provided, including whether it is mandatory or paid for by the employee/worker

The statement also needs to include:

• the notice period for termination
• absence terms, such as incapacity to work and sick pay
• length of temporary or fixed-term employment
• work conditions outside the UK if it's for more than one month

Does all this information have to be provided from day 1?

No - Some information relating to pensions and other benefits, for example, can be given within 2 months of the start date. 

Do we have to change contracts and statements for existing employees?

No, these changes are not retrospective so organisations do not have to change contracts/statements for their existing employees. However, there are some caveats to this:-

1.  Current employees can request that their employer issue them with an updated Section 1 statement post April. If an employer receives a request the employer has 1 month in which to provide an updated statement; and
2. Post 6th April 2020, if there is a change in the employees’ terms of work - including the new requirements - this is referred to as a ‘trigger’ and the employer must provide the employee with a statement of the changes “at the earliest possible opportunity” and not later than one month after the change.

Some clients are looking to send a pre-emptive letter to all staff detailing any changes rather than update all contracts.

Lastly, organisations might want to use this change as an opportunity to review and update their current contracts. Maybe they need to take into account longer notice periods or greater business protection. Maybe they need to be updated to take into account other legal changes. 

What about current workers, are they required to have a new written statement?

No, unlike current employees, there is no corresponding right for existing workers to request an updated statement. The trigger provisions above also do not seem to apply to workers.

But watch out, if an existing worker leaves and is then re-engaged by the organisation the new provisions would apply and a new statement of terms must be given.

What happens if employers fail to comply? 

The existing mechanism for enforcing compliance with Section 1 statement requirements will be extended to cover the new provisions. A failure to provide a Section 1 statement, or one that fails to meet the requirements, can give rise to an employment tribunal claim which could result in 2-4 weeks’ pay, where the employee or worker brings another successful claim in Tribunal. It is not a standalone claim.

How can organisations prepare for these changes?

As with all changes, it is important to review your workforce and assess who is an employee and worker and who is going to be potentially impacted by these changes.

Next agree a strategy:

• Is all information going to be given on day one, or will certain information regarding benefits, for example, be given within 2 months?
• Review recruitment – who is joining on/after 6 April 2020 – get ready to issue new documents.
• Existing employees –
  • Is there a process in place if existing employees do request an updated statement? Who is going to manage this and also within the timeframe?
  • Will you deal with requests piecemeal or will you issue new statements/letter across the workforce?

Also, what about workers who are re-engaged after 6 April 2020 – is there a check in place to ensure they are given the right set of terms? Another area of risk is the “trigger” where statements would need updating if contracts and Section 1 statement terms were changed – again, something to be aware of. 

Is this an opportunity to review your organisation’s documents as a whole? Remember to do so in good time. If changes are fundamental to the contract then the organisation will have to allow for staff to be consulted with about their new contract terms and deal with any issues which might arise during consultation. Also, remember any complete overhaul of agreed terms could constitute redundancy situation (and possibly a collective consultation) – always best to take advice. 

For advice about your organisation’s contracts and written statements and to discuss amending and updating your current contract terms (including whether any changes constitute redundancies), please speak to our employment team on [email protected]m or call 0118 9527284.

STOP THE PRESS – CHANGES TO IR35 ANNOUNCED

HMRC announced on Friday 7th  FebruaryJanuary that the operation of the off-payroll working rules will only apply to payments made for services provided on or after 6 April 2020.

The rules, also known as IR35, will now apply only to payments made for services provided on or after 6 April 2020. Previously, the rules would have applied to any payments made on or after 6 April 2020, regardless of when the services were carried out. HRMC state that organisations will only need to determine whether the rules apply for contracts they plan to continue beyond 6 April 2020. A copy of their statement can be found here.