Deborah Moon, HR Consultant, reflects on the key employment themes of 2016 and those expected during 2017, assessing some of the practical implications for HR professionals in the public sector. This review concludes with a timetable of employment legislation which, it is hoped, HR professionals will find useful in planning for the year ahead.

As we said goodbye to 2016 and welcomed in 2017, many commentators reflected on the “remarkable” events of the preceding 12 months and how the year compared to other notable periods in history. With the outcome of the EU referendum, the ongoing debate over the triggering of Article 50 and the approach to the forthcoming Brexit negotiations, a new Prime Minister and political leadership team, together with the US election result and President-elect Donald Trump, dominating the headlines, 2016 certainly proved to be an unpredictable and somewhat turbulent year.

The Brexit vote raises a range of issues and potential implications for employment law and related HR issues. However, the precise effects will not be known for some time, leaving many employers uncertain about the specific impact leaving the EU will have for their businesses and workforce. In the meantime, there has been much speculation about the extent to which there will be resulting changes to domestic legislation and the impact on the employment of EU (and other) nationals within the UK. The Prime Minister’s speech on 17 January, setting out 12 negotiating objectives, provided greater clarity on the overall direction and approach, but whether, and exactly how, these will be achieved remains to be seen.

Away from Brexit, a range of employment law reforms, including a number specific to the public sector, continued to progress. However, in some areas, somewhat uncertain and shifting timescales have meant that understanding and assessing the practical implications and planning for their implementation has, perhaps, become more challenging than normal. Issues of low pay and the changing nature of work, and the employment relationship within the so-called “gig economy” have also been a continuing theme and this trend is likely to continue. With a range of interesting case law decisions and developments, there has been much to occupy the minds of the busy HR professional and 2017 looks as though it will be no different.

Brexit and the potential employment implications

The story which dominated the headlines for most of 2016, and continues to do so, was undoubtedly the Referendum on 23 June and the vote in favour of leaving the EU. The Brexit vote brings with it a number of potential employment law implications, including the position of EU-derived domestic legislation, the future status of EU citizens living and working in this country, the shape of any new UK immigration policy and the future role of EU social and community law. Much of this will depend on the approach to, and outcomes from, the forthcoming negotiations with our current EU partners which will take place once the Government has invoked Article 50 (the mechanism by which a Member State leaves the EU).

The Prime Minister, Theresa May, has stated that Article 50 will be invoked by the end of March 2017 (which means that, given there is a two-year negotiation period, April 2019 would be the earliest date for the UK to exit from the EU) and that this will be followed by the Great Repeal Bill. This will, presumably, have the effect of removing the European Communities Act 1972 (which gives EU law supremacy over UK law) from the statute book, and convert existing EU laws that apply in the UK into domestic law as from the date on which the UK leaves the EU. However, the legal framework under which EU-derived employment (and other) law is transposed into UK law is complex and so this process is unlikely to be straightforward.

A further complication is the legal challenge brought against the Government in the case of R (on the application of Miller and another) v Secretary of State for Exiting the EU), concerning whether the Government has the power to give notice under Article 50 of the UK’s intention to withdraw from the EU without an Act of Parliament providing prior authorisation to do so. At the time of writing, the Supreme Court had just ruled against the Government’s appeal against the High Court decision, determining that Parliament must decide on Article 50. The Court’s decision could affect (delay) the Prime Minister’s proposed timetable and/or strategy for invoking Article 50 and what subsequently follows from this.

Any significant changes in EU-derived employment rights and rights to work in the UK are unlikely to happen in the short- to medium-term and would, of course, require Parliamentary approval. Much is likely to depend on the particular “agenda” of the Government with regard to employment matters/legislation at the particular time, as well as the nature of any “deal” resulting from the EU negotiations. It should also be remembered that, while a significant body of employment law derives from, or has been influenced by, the EU, eg discrimination, working time (including holiday rights), part-time and fixed-term workers, agency workers and transfer of undertakings (TUPE), there are also a number of areas which are unaffected by this, principally those relating to pay and dismissal, eg unfair dismissal rights, individual redundancy law, unlawful deduction of wages and minimum wage legislation. There are also a number of areas where UK legislation has gone beyond that required by EU law, eg the additional 1.6 weeks’ holiday under the Working Time Regulations, when the relevant EU directive provides for a minimum of four weeks.

A number of commentators have speculated about those issues which may be the focus of any future changes, eg the calculation of holiday pay and interaction between holiday and sickness absence, the 48-hour weekly limit on working time and the rights of agency workers. In her speech on 17 January, the Prime Minister stated that “we will take back control of our laws and bring an end to the jurisdiction of the European Court of Justice in Britain”. In addition, she stated that the Government would not only “protect the rights of workers” set out in European legislation but “build on them”.

A further area of uncertainty for both employers and employees is the position of EU citizens who live and work in the UK (both those currently here and those who enter between now and the date of formal separation). Again, much will depend on the approach to, and outcome of the forthcoming negotiations, particularly in relation to the nature of any future trading relationship or similar arrangements. Business groups and the TUC have called upon the Government to provide greater certainty and reassurance regarding future rights to remain in the UK, together with an indication of the extent of any potential additional restrictions on migrant workers, in order to help them manage this issue during the transition period. In the meantime, there have already been a number of reports of employers encountering difficulties in recruiting EU workers and a reduced level of interest within Europe about working in the UK.

In her speech on 17 January, the Prime Minister made clear that Britain will no longer be a member of the single market, with the associated freedom of movement. Rather, the objective is to ensure Britain can “control immigration from Europe”, while still wanting to attract “the brightest and the best to work or study in Britain” (it is not clear how this statement relates to the large numbers of EU nationals who come to work in low-skilled sectors such as care and agriculture). The Prime Minister also stated the Government “wants to guarantee the rights of EU citizens who are already living in Britain, and the rights of British nationals in other Member States, as early as we can”.

Changes to the free movement of labour and to the UK’s broader immigration policy are likely to make it more difficult for employers to address recruitment difficulties and skills shortages through recruiting migrant workers, with a potential knock-on effect on performance and productivity. Those sectors and industries, including a number of public services, which are very reliant on such workers are likely to be particularly affected, for example, within health and social care, and any changes could therefore have significant resourcing implications. The cost and resource implications of complying with any future immigration system for all migrant workers, eg a points-based system, may also deter some organisations, particularly smaller employers, from hiring overseas workers. However, as with employment law more widely, it is unlikely that any major changes will take place in the short- to medium-term.

In the meantime, employers should be extra mindful of their duty of care to any staff who are anxious about their position, stressing that there will be no immediate changes, and keeping them updated as the negotiation over the UK’s future relationship with Europe progresses. Employers are also likely to want to critically assess the potential impact of Brexit on their workforce and skills requirements, particularly those which currently employ, or rely upon, EU citizens.

Employment status and the “gig economy”

Another key theme which is likely to continue and develop in interest and importance is that relating to the changing nature of employment arrangements and the relationship between businesses and those engaged to undertake work for, and on behalf, of those organisations. The emergence of a number of more flexible business models and working arrangements within the so-called “gig economy” is leading to increasing concern and confusion about the employment status of those individuals, with a number of high-profile legal challenges made, for example, by taxi drivers working for Uber and by a cycle courier working for CitySprint. In both these cases, tribunal rulings have found in favour of the relevant individuals, determining that they are not self-employed but “workers” within the meaning of the Employment Rights Act and are therefore legally entitled to certain rights such as the national minimum/living wage and holiday pay.

While these cases are fact-specific and may well be subject to appeal, commentators have observed that other companies operating similar business models may also be subject to such claims and that this may only represent the “tip of the iceberg”. These concerns follow similar ones expressed in relation to the growing use of zero-hours contracts and other forms of more flexible and transient employment. Certain “protections” have now been introduced for those working under zero-hours contracts, particularly in relation to the use of exclusivity clauses, ie a clause which prevents an individual from working for another employer, with the right not to be unfairly dismissed or subject to detriment for failing to comply with such a clause.

It is within this context that the Prime Minister has commissioned RSA Chief Executive Matthew Taylor to lead an independent review into how employment practices need to change in order to keep pace with modern business models. The review will examine how flexibility can be maintained while also supporting job security and workplace rights, and whether new employment practices can be better used as an opportunity for under-represented groups.

The review, originally commissioned in October last year and expected to take six months, will address six key themes.

  1. Security, pay and rights.

  2. Progression and training.

  3. The balance of rights and responsibilities for new business models.

  4. Representation.

  5. Under-represented groups.

  6. New business models.

Further details of the review can be found at www.gov.uk.

In a separate development, the Commons Select Business, Energy and Industrial Strategy Committee launched an inquiry into the future world of work, focusing on the rapidly changing nature of work, and the status and rights of agency workers, the self-employed, and those working in the “gig economy”. The inquiry will also look at issues such as low pay and poor working conditions for people working in these non-traditional employee roles.

More information about the future world of work and rights of workers inquiry and its terms of reference are available at www.parliament.uk.

In addition, HM Revenue & Customs (HMRC) announced the formation of a specialist team to examine working practices at organisations that use freelance staff to fill what amount to full-time roles, thereby avoiding the accrual of associated employment benefits and rights, as well as the payment of employer National Insurance contributions (NICs). This “crackdown” comes at a time when HMRC is taking a renewed interest in the use of “umbrella companies” to pay staff, (see also item on personal services companies in the public sector, below) as well as other types of unusual working arrangements that seek to circumvent payment of the national minimum/living wage, NICs and other taxes (with significant loss of income to the Treasury).

It is clear that the increasingly flexible nature of work is blurring traditional lines of employment/self-employment, causing difficulties in determining the correct contractual status of the particular arrangement. While there are benefits to both employers and employees from these more flexible working arrangements, there is a need to ensure they are used responsibly and appropriately, and that the nature of the contract reflects the practical reality of the particular situation. Getting this wrong can be expensive and cause reputational damage — if an organisation miscategorises someone as self-employed, when in reality they are a worker or employee, it could face significant tax liabilities and other penalties, as well as a range of employment tribunal claims. These cases and reviews serve as a reminder to employers to ensure that appropriate working arrangements are made for the type, nature and duration of the role to be undertaken and the relevant rights and responsibilities are complied with.

Low pay and the National Living Wage

On a similar theme to uncertainty over the nature of more flexible working arrangements, are concerns over continuing pay pressures and constraints. These include reports during 2016 of companies who had failed to meet statutory minimum wage requirements and of the continuing significant gap between executive remuneration levels and the pay of other workers. Indeed, it was reported by the High Pay Centre that some top company executives had earned more by the first Wednesday of 2017, ie 4 January (referred to as “Fat Cat Wednesday”), than a typical UK worker earns in a year. Concerns have also been raised about corporate governance arrangements, the role of remuneration committees and whether companies should be required to publish the earnings gap between the CEO and average employee.

Perhaps somewhat ironically, in recent years it is senior management pay levels in the public sector which have been subject to significant political and media scrutiny and criticism. This attention, combined with overall pay and funding constraints, have led to concerns that senior pay levels are no longer sufficient to attract the required calibre of individuals to take on these demanding roles. Of course, the overall “cap” of 1% on public sector pay has meant that salary increases in the sector more generally have remained subdued and, in overall terms, continue to lag behind those in the wider economy. According to new analysis, recently published by the TUC, workers in the public sector face “real pay falls of thousands of pounds by 2020” as a result of this restriction. The TUC has proposed that the Government allows each part of the public sector to “determine appropriate pay, rather than a blanket national limit”. It has also called on the Government to reform pay review bodies to be “genuinely independent, and raise low public sector pay to become a real living wage employer”. More information about the report Public Sector Pay Restraint in England, is available at www.tuc.org.uk.

1 April 2016 saw the introduction of the National Living Wage (NLW), introduced by the Government to “move away from a low wage, high tax, high-welfare society and encourage a model of higher pay and higher productivity”. Initially set at a rate of £7.20 per hour for workers aged 25 and over, with the objective of achieving £9 per hour by 2020, this essentially added a further “tier” to other National Minimum Wage (NMW) rates, and provided an increase to the pay rates for many low earners above the average level of other settlements. Although, when it was first announced by George Osborne, former Chancellor, concerns had been expressed by employers about the potential impact on jobs, analysis by the Low Pay Commission (LPC) has indicated there is, so far, little evidence of this, with many companies absorbing the increased costs through lower profits (although whether such an approach is sustainable in the longer term remains to be seen). Increases to NMW rates also took effect on 1 October and these were followed in November by the announcement of increases to the London and UK voluntary living wage rates (which, at £9.75 and £8.45 respectively, remain higher than the NLW).

A further change in 2017 will see the alignment of the date on which NMW and NLW rates increase, meaning that the annual uprating of all these will, in future, take effect on 1 April. In the Autumn Statement, delivered to Parliament on 23 November, the Chancellor, Philip Hammond, announced that the NLW for employees aged 25 and over will increase to £7.50 from April 2017 — an increase of 4.2%.

The NMW rates will also rise as follows:

  • 21- to 24-year-olds: from £6.95 to £7.05 per hour

  • 18- to 20-year-olds: from £5.55 to £5.60 per hour

  • 16- to 17-year-olds: from £4.00 to £4.05 per hour

  • apprentice rate: from £3.40 to £3.50 per hour.

These changes follow recommendations from the LPC. However, the increases are lower than had previously been forecast, raising doubts about whether/how the Government’s original expectation of an NLW of £9 per hour by 2020 will be achieved.

Within the public sector, concerns have been expressed about managing the increased costs of the NLW, both as a direct employer and in respect of the commissioning and contracting of services, with the impact on the social care sector of particular concern. In addition, the longer term impact on current salary structures and differentials will require a more fundamental review of overall pay arrangements. At a national level, the National Joint Council (NJC) for local government services is conducting a review of the NJC pay spine, with the aim of concluding this by the end of June 2017. To assist with this, the Local Government Association (LGA) commissioned Incomes Data Services to undertake research into the impact of the NLW in local government and related areas. The resulting report provides an insight into the actions taken by a number of councils (and, to a limited extent, the care sector), including how they have raised lowest pay rates, the effects on differentials, measures to manage wage costs and potential next steps.

The Impact of the National Living Wage in Local Government and Related Areas: A Report for the Local Government Association by Incomes Data Services September 2016 is available on the LGA website.

The Government also announced further investment and initiatives to support NMW enforcement, enabling HMRC teams to review employers that are considered at risk of non-compliance. However, some commentators have expressed concerns that although the Government has sought to boost enforcement, including naming and shaming bad employers and increasing fines, there has been a lack of formal prosecutions on this issue.

The gender pay gap and other equalities issues

Alongside the issues regarding overall pay levels, addressing the gender pay gap continues to be a challenge for many organisations. For example, analysis recently published by the Resolution Foundation, based on ONS statistics, found that while the gender pay gap for millennials in their 20s has halved in a generation to just 5%, much of that progress is subsequently undone, with early signs showing that the gap continues to escalate as women enter their 30s and 40s. This suggests that millennial women will still earn significantly less than their male counterparts over their careers. Although there would appear to be progress in the right direction, tackling the gender pay gap at all stages of women’s careers remains key to “reducing the lifetime earnings penalty” they still continue to face.

More information about this research and analysis is available on the Resolution Foundation website.

There has been much debate over the extent to which the forthcoming gender pay gap reporting requirements will help in addressing this issue. Following an earlier Government consultation, publication of its response and initial draft regulations, the final draft Equality Act 2010 (Gender Pay Gap Information) Regulations 2017 were published in December. These are due to come into force on 6 April 2017, subject to Parliamentary approval, and will require private and voluntary sector employers with 250 or more employees to publish information relating to differences between the pay of their male and female employees. In particular, they will be required to:

  • publish their mean and median gender pay gaps

  • report on their gender bonus gap

  • identify the proportions of men and women in each quarter of their pay distribution in order to show whether women are concentrated in a particular part of the pay range and whether there are any blockages to their progression.

The relevant reports will be based on a “snapshot date” of 5 April each year. Employers will be required to publish the relevant information within 12 months of this “snapshot” date. This means that the first gender pay gap reports will need to be published by 4 April 2018 and annually thereafter. Employers must publish the report on their website and retain the information online for at least three years, as well as submitting evidence of compliance to the Government. Employers will also be encouraged to provide an accompanying narrative to explain the context of the report and what action is being taken to address any identified pay inequalities.

Commentators have speculated as to whether the publication of gender pay gap information may lead to more equal pay claims against private (and voluntary) sector employers — the focus of such claims until now has been primarily in the public sector, including local government. One case which is being watched with great interest is that of Brierley & Ors v Asda Stores Ltd in which female shopfloor workers are seeking to compare their jobs in retail stores with male-dominated jobs in distribution centres. The outcomes of this could have wider implications for the retail sector more generally.

With regard to employers in the public sector, the Government has recently published the draft Equality Act 2010 (Specific Duties and Public Authorities) Regulations 2017 — these come into force on 31 March 2017. The regulations amend the Public Sector Equality Duty Specific Duties Regulations to provide a mandatory requirement for the relevant bodies to undertake gender pay gap reporting. As with private and voluntary sector employers, this will apply to organisations with 250 or more employees. While the regulations largely mirror those for the private sector, for public bodies the annual “snapshot” date on which pay information is to be collected is 31 March, rather than 5 April. This will mean that public sector employers must publish their first figures by 30 March 2018, and annually thereafter.

Public sector organisations should be well-placed to respond to and manage these new requirements — the Public Sector Equality Duty already requires the publication of certain workforce information, including that relating to the gender pay gap and many have also undertaken equal pay audits, either as part of pay and grading reviews and/or separately. However, councils will need to understand and apply the particular requirements of the new reporting regulations, eg in relation to the methodology for the relevant pay calculations, which may differ from any approach they have previously used. The reporting requirements will also place additional administrative burdens on councils at a time of significant resource pressures.

With regard to other equalities issues, there remains the potential for legislation to make caste discrimination a form of race discrimination under the Equality Act 2010 (although in the case of Tirkey v Chandok, the Employment Appeal Tribunal (EAT) indicated that caste can come within the definition of race (ethnic origin) under that Act).

There were also a number of interesting case decisions during 2016 on a range of discrimination and equalities issues and no doubt more will arise in 2017. For example, in relation to religious discrimination, a decision by the European Court of Justice is expected in the cases of Bougnaoui and another v Micropole Univers, and Samira Achbita and another v G4S Secure Solutions NV concerning whether an employer can ban a Muslim woman from wearing an Islamic headscarf (the Advocate General’s non-binding opinion in both cases was published last year).

The issue of workplace dress codes and the need to be mindful of equalities and discrimination considerations also hit the headlines in 2016, when it was reported that a receptionist had been sent home from work for refusing to wear high heels. She complained that the dress code was discriminatory since her male colleagues were allowed to work in flat shoes, also starting an online petition calling for a change in the law. While the Equality Act does not require employers to apply identical dress code requirements to male and female employees, the case served as a reminder to employers to ensure they have clear and legitimate reasons for any policy, that any requirements or restrictions are reasonable and appropriate in relation to a particular role, and that these are kept under regular review as business needs and attitudes towards dress standards change.

The Northern Ireland Court of Appeal decision in the case of Lee v Ashers Baking Company also received much media attention when it ruled that a bakery that refused to supply a customer with a cake bearing a message of support for same-sex marriage had discriminated against that customer on the ground of sexual orientation. While not an employment case, it did have a “read across” to workplace and service provision situations, highlighting yet again the somewhat tricky issue which can face employers in managing potentially conflicting equalities provisions and protections.

Industrial relations and trade union reforms

A number of high-profile trade disputes took place in 2016, particularly those relating to junior doctors in the NHS and in the rail industry, and this has also been a continuing theme over and into the New Year period, with ongoing disruption on the rail and London underground networks. It is within this context that reforms to industrial action legislation, as provided for within the Trade Union Act 2016, along with other proposed changes relating to trade unions, will start to take effect. These include:

  • introducing a new “participation threshold” which must be met by trade unions in order to secure a lawful mandate for industrial action (in future, a ballot mandate for strike action must be one in which at least 50% of those members entitled to vote do so)

  • additional requirements which must be met in certain important public services (health, education, fire, transport, border security and nuclear decommissioning), ie a requirement that 40% of those entitled to vote must vote in favour of industrial action

  • increase in the notice of industrial action to be given to an employer from 7 to 14 days (seven days if the employer agrees)

  • a six-month time limit for industrial action (which can be increased to nine months if the union and employer agree)

  • changes to the process for political donations from trade union subscriptions (automatic opt-in will no longer be allowed)

  • new requirements on the supervision of picketing

  • regulation-making powers in respect of reporting requirements, and potential restrictions, on paid time off for trade union duties in the public sector (facility time)

  • employers in the public sector (and some private sector employers that provide public services), the deduction of trade union membership subscriptions through payroll (checkoff) will only be allowed if the union contributes to the cost of administering the system.

The various provisions of the Act will come into force through secondary legislation.

With regard to the new requirement in respect of “important public services”, in December 2016, the Government published five sets of draft regulations covering the fire, health, education, transport and border security sectors. These define the “important public services” in these sectors for the purposes of the Act. Draft regulations for the nuclear decommissioning sector have not yet been published. The draft regulations are due to come into effect on 1 March 2017 or, if later, 21 days after the date on which they are made. The Government has also published accompanying guidance on the regulations, providing advice on applying the 40% threshold in practice, and with examples of workers who will be covered in each sector. The guidance is available at www.gov.uk.

Public sector organisations and trade unions will need to understand the scope of these regulations, and the particular services and types of roles which will be covered by them in order to ensure that the appropriate balloting requirements are complied with where any potential industrial action arises.

Also in December 2016, two revised draft Codes of Practice were published: the Draft Code of Practice on Picketing and the Draft Code of Practice on Industrial Action Ballots and Notice to Employers. These contain revisions relating to new requirements that will be introduced by the Act and will come into effect on dates to be confirmed.

The Government had also indicated that it intends to remove the ban on the use of temporary/agency workers to cover for staff taking part in industrial action. However, the Act does not contain any provisions relating to this and the Government’s response to the previous consultation on this issue, published in 2015, is still awaited.

The changes referred to above are intended to support the Government’s commitment to make the process for taking industrial action more “democratic” and reduce the level of disruption to customers/the wider public. Indeed, in the light of the ongoing transport disputes, there have been calls from some politicians for even tougher legislation to be considered (eg outright bans on strike action in the transport industry). The changes had previously provoked much controversy and angry responses from many trade unions and it will be interesting to see their practical effect once implemented. Certainly, if the start of the year is anything to go by, the general industrial relations “mood” does not appear to have improved from that in 2016. In another development, it has recently been reported that the Welsh Assembly has proposed a new Bill to stop the Act from applying to devolved public services in Wales.

Review of electronic balloting

The Act also requires the Government to commission an independent review of possible methods of electronic balloting, although it does not include any commitment to its introduction. In November 2016, the Government published the terms of reference for this review to be led by Sir Ken Knight CBE. The final report is due to be presented to the Secretary of State by December 2017.

More information about this can be found atwww.gov.uk.

Immigration

Immigration was, of course, one of the key issues of debate during the EU referendum campaign and is likely to remain so as the negotiations regarding the terms on which the UK will exit the EU progress, both in relation to EU citizens specifically and immigration policy and migrant workers more generally.

The Immigration Act 2016 came into force in May 2016 — this contains a number of measures intended to “tighten up” on the prevention of illegal working, for example, employers who hire illegal migrants and the workers themselves face criminal sanctions, with the possibility of imprisonment for up to five years. There is a new power under the Act for immigration officers to issue closure notices on premises where illegal working is suspected.

Further changes relating to the rules for non-EU skilled migrants coming to work in the UK are due to take effect in April 2017, including:

  • increase to the Tier 2 (general) salary thresholds for experienced workers to £30,000

  • introduction of an Immigration Skills Charge levied on Tier 2 employers at a rate of £1000 per person per year, with a rate of £364 for smaller businesses and charities (subject to certain exemptions)

  • changes to the Resident Labour Market Test and intra-company transfer provisions.

The Act also introduced a provision requiring public authorities to ensure that anyone working for them in a customer-facing role (including agency workers) speaks fluent English (or Welsh in Wales) (in force from November 2016). A Code of Practice has been published to assist public authorities meet this requirement.

The Code can be found at www.gov.uk.

Public sector employers will have needed to consider the implications arising from this requirement for both new and existing staff and for any related changes to their employment policies, procedures and practices. In addition, the tightening of immigration controls, combined with changes arising from Brexit (see above), is likely to make it more difficult to employ migrant workers, and which may lead to particular problems where there is reliance on their use in key skill/service areas.

Employment tribunals and access to justice

Another issue which continued to attract attention during 2016 was that relating to employment tribunal fees (introduced in July 2013), and ongoing concerns about the decline in the number of tribunal cases which followed this and the effect on access to justice for potential claimants.

Two reviews on this and other related issues were announced in 2015: a Ministry of Justice review of employment tribunal fees and the effectiveness of the fee remissions scheme, and separate House of Commons Justice Select Committee inquiry into fees and charges in courts and tribunals, with speculation as to whether these might lead to some changes in this area. The House of Commons Justice Select Committee published its report in June 2016. The Committee criticised the Government’s failure to publish its separate post-implementation review (originally intended to be completed by the end of 2015). Based on its own considerable evidence collected during its inquiry, the Committee concluded that the introduction of tribunal fees had had a significant adverse impact on access to justice. It made a number of recommendations, including that the level of fees charged for bringing employment tribunal cases should be substantially reduced. It also recommended that the Government should publish, without delay, the factual information it had collated as part of its review. However, at the time of writing, the outcomes from this review are still awaited.

The Justice Select Committee’s report is available at www.publications.parliament.uk.

In addition, Unison’s appeal to the Supreme Court regarding its previously unsuccessful legal challenge against the introduction of employment tribunal fees is expected to be heard in March 2017.

There were a number of reforms to employment tribunal procedures in 2016, including rules limiting the parties’ ability to postpone hearings. In December, a consultation was launched regarding reforms to the tribunal system, including the potential delegation of some case management functions to caseworkers and online decision making for certain claims. This closes on 20 January.

Reforming the Employment Tribunal System is available at www.gov.uk.

Changes to the reporting of tribunal decisions are also due to take place in 2017, which will enable any member of the public to search online for these judgments, by company name or by topic (at present, judgments are only available by request or in person from HM Courts and Tribunals Service). Although broadly welcomed in the interests of increasing transparency and highlighting bad employment practice, some concerns have been expressed about potential implications, including the possibility of reputational damage for respondent employers as a result of verdicts being made available in this way.

Other Changes and Developments in 2017

Apprenticeships

Draft legislation has been published which provides for the introduction of an apprenticeship levy, to be charged on employers in all sectors from April 2017. The levy will be collected through Pay As You Earn (PAYE) at a rate of 0.5% of an employer’s pay bill. Employers will receive a £15,000 allowance to offset against their pay bill, meaning that the levy will only be paid on annual pay bills over £3 million. The Government has stated that less than 2% of UK employers will have to pay the levy. The Government has published guidance, explaining in detail how the levy will operate.

The guidance is available at www.gov.uk.

The Government has also published Apprenticeship Funding in England from May 2017 available at www.gov.uk.

While generally supportive of the overall aim of increasing the number of apprenticeships and quality of such schemes, concerns have been raised about the cost of the levy to employers, particularly alongside that arising from the NLW.

At the start of 2016, the Government consulted on the introduction of a target for the total number of apprentices working in public sector bodies. The Government has recently published its response, announcing at the same time that the Department for Education is setting the public sector a target of recruiting 200,000 more apprentices by 2020. This is part of the Government’s commitment to deliver three million apprenticeships by that date, requiring at least 2.3% of the workforce in public bodies in England to be apprentices. This new duty, brought in as part of the Enterprise Act 2016, will apply to public sector bodies with 250 or more employees and is due to be implemented from 1 April 2017.

Apprenticeship Targets for Public Sector Bodies: Government Consultation Response is available at www.gov.uk.

Many public sector bodies have successfully utilised and operated apprenticeship schemes, eg as part of their overall workforce development plans, but concerns have been expressed about this new “ambitious” target and its impact on organisational costs and other resources at a time when the sector is already stretched.

Salary sacrifice schemes

Following the announcement in the 2016 Budget and subsequent Government consultation on this issue, in the Autumn Statement the Chancellor confirmed that the Government will limit the benefits that attract tax and NI advantages when provided as part of a salary sacrifice arrangement. The benefits that will continue to attract tax and NI relief if provided through salary sacrifice will be limited to:

  • enhanced employer pension contributions to registered pension schemes (and pensions advice)

  • childcare benefits (employer-supported childcare and provision of workplace nurseries)

  • cycles and cyclists’ safety equipment provided under the cycle to work scheme

  • ultra-low emission cars.

The limitation will take effect from April 2017. However, arrangements in place before that date will be protected until April 2018 or for cars, accommodation and school fees, until April 2021.

Many employers, including those in local government and the wider public sector, provide benefits through salary sacrifice arrangements. These can be a flexible and cost-effective way to maintain and improve the overall value of the reward package, particularly when pay levels are under pressure. Concerns have therefore been expressed about the impact of this, eg in relation to recruitment and retention, with a need to review current benefit and contractual arrangements and related systems, involving providers, where appropriate.

Childcare

The introduction of a new tax-free childcare scheme for working families under which the Government will provide 20% of childcare costs, subject to an annual limit of £2000 per child is due to take place in (early) 2017. This will replace the current employer-supported childcare arrangements, although the existing voucher scheme will remain open to new entrants until April 2018. After this date, only those who are already in a scheme will be able to continue using childcare vouchers.

Again, many public sector and local government employers operate such schemes and will need to review their current arrangements, as well as ensuring employees are advised of the forthcoming changes. Of course, this may also provide an opportunity to promote these, and other, benefits to employees, helping develop understanding of what is available to them.

An interesting development with regard to the provision of childcare vouchers under a salary sacrifice scheme occurred in 2016 as a result of the EAT’s decision in the case of Peninsula Business Services Ltd v Donaldson. HMRC guidance has traditionally been that employers cannot compel employees to opt out of receiving childcare vouchers during maternity leave. Overturning an employment tribunal decision, the EAT held that employers do not have to provide childcare vouchers during maternity leave where these are offered through salary sacrifice. The EAT did, however, make a distinction between schemes that operate through salary sacrifice and those where the employer provides childcare vouchers in addition to employees’ pay. Childcare vouchers which are provided on top of an employee’s salary count as a “benefit” and must continue during maternity leave.

The Government has also committed to doubling free childcare to 30 hours per week for working parents of three- and four-year-olds. Concerns have been expressed about the availability of funding for this development and the Government recently announced a £50 million grant will be made available to support the delivery of this.

While still in office George Osborne, former Chancellor of the Exchequer, had referred to the potential extension of Shared Parental Leave (SPL) to working grandparents, indicating that consultation on this would take place during 2016. However, at the time of writing, there have been no further developments on this. In the meantime, there have been a number of reports on the low take-up of SPL, both by mothers and fathers, with financial considerations/concerns and the complexity of the scheme suggested as the prime reasons for this.

One issue which arose when SPL was introduced was whether an employer who provided enhanced maternity pay might also have to do so in relation to SPL. In 2016, it was reported that a successful sex discrimination claim had been made by a father against Network Rail where the employer had refused to pay him the same as his wife while on SPL (Snell v Network Rail). However, this concerned a situation where enhanced shared parental pay was provided to mothers but not to fathers. It did not therefore address the situation where (as in many local authorities) the employer provides enhanced maternity pay but only offers paternity pay and shared parental pay at the statutory rate. Of course, this was only an employment tribunal decision and therefore not binding. In addition, Network Rail ultimately chose not to contest the claim and therefore the tribunal didn’t have to consider the various legal arguments as to why their actions might or might not constitute discrimination.

The Government’s advice remains that it is not necessary for an employer to provide the same rate of pay for those taking SPL as for those who are taking maternity leave — indeed SPL is paid at a lower rate than statutory maternity leave for the first six weeks.

However, the case does indicate that claims relating to SPL pay are now starting to make their way through the tribunal system. It may only be a matter of time before there is a case which looks at the difference in treatment between maternity pay and shared parental pay. Perhaps we may see such a case in 2017?

Changes in the public sector

In addition to the above more general employment law developments, a number of changes are expected to take place in 2017 which will apply specifically to the public sector (although, as noted in the relevant sections, there are some aspects of the more general provisions which specifically apply to the public sector).

The legislative process with regard to changes to public sector exit payments has been somewhat tortuous/protracted, with changes to the initially proposed legislation and delays in originally anticipated timescales. However, at the time of writing, the current position would appear to be as follows.

  • The Repayment of Public Sector Exit Payments Regulations 2016 (published in draft at the time of writing) will implement provisions relating to the recovery of exit payments made to high earners who leave the public sector where they return to the public sector within 12 months. These are expected to be implemented in early 2017.

  • Cap on public sector exit payments

    In addition to the above recovery provisions, regulations which will introduce a “cap” of £95,000 on the total value of any exit payment made to an individual in relation to their exit from public sector employment are expected to be introduced in Spring 2017.

The Government has also consulted on further reforms to public sector exit payments, in addition to the recovery provisions and introduction of the £95,000 cap, referred to above. The Government has proposed setting a common framework of upper limits applied to the main elements of compensation provision across the main public sector schemes. It believes that applying these upper limits will mean there will be greater consistency between the schemes and will bring public sector terms more in line with exit terms in the wider economy. The framework includes further caps on exit payments, as well as removing or limiting employer-funded “top up” pension payments, to enable early access to a pension. Each department responsible for a particular workforce is required to devise its own scheme within the framework within three months from the date of publication of the Government’s response to the initial consultation (ie by 26 December 2016). The Government indicated there would then be a further period for consultation and negotiation. It also stated that if a particular workforce failed to implement the reforms within nine months (ie by 26 June 2017) it would consider making changes through legislation.

Further information is available at www.gov.uk.

Concerns have been expressed about all of these changes on the management of workforce reductions/reorganisations within councils and other public sector bodies, particularly in the light of ongoing budgetary challenges.

Personal service companies in the public sector

Following the announcement in the 2016 Budget and consultation on IR35 tax changes, the Government has confirmed it will reform the off-payroll working rules in the public sector from April 2017 by moving responsibility for operating them, and paying the correct tax, to the body paying the worker’s company. The Government has indicated that public bodies will be provided with an online tool by HMRC to help in deciding whether someone is legitimately self-employed or should be subject to PAYE and NICs.

Concerns have been expressed about the impact of this on the interim worker market, particularly at a time when public sector organisations are reliant on a more flexible workforce, and with a need for short-term specific expertise in key skill/service areas. Research by a number of providers suggests that interim managers may be less willing to work in the public sector and/or that the costs of engaging such workers will increase as a result of these changes.

In the courts

During 2016, both the UK and European courts continued to provide a range of interesting case decisions of interest to HR professionals. Some of these cases are ongoing, with further judgments, and potential resulting implications for employers, expected in 2017. As well as those already referred to, these include:

  • cases related to the calculation of holiday pay, specifically whether or not certain elements of an employee’s remuneration should be included in that calculation, for example, commission, overtime and other additional payments, such as standby and call-out. There is a potential appeal to the Supreme Court in the case of British Gas Trading Ltd v Lock & Anor, concerning commission payments and the calculation of holiday pay

  • the interaction between sickness absence and holiday rights (as indicated earlier, this and the above issue may be an area where domestic legislation may change post-Brexit)

  • whistleblowing: current legislation requires that an employee making a disclosure must have a reasonable belief that it is made in the public interest. In the case of Chesterton Global Ltd & Anor v Nurmohamed, the EAT upheld a tribunal’s decision that a disclosure about accounting irregularities, which was made in the interests of the claimant himself and 100 other managers, was in the public interest. This judgment suggested that a fairly low threshold is required in order to satisfy the public interest test. An appeal to the Court of Appeal is pending.

With regard to whistleblowing, the Government has announced that the Children and Social Care Bill will introduce legal protection for people applying for roles relating to children’s social care functions in local authorities to ensure they are not treated unfairly because they have previously made protected disclosures about their organisation.

Beyond 2017

It is quite possible that one or more of the developments referred to above will span into 2018. Two other developments for that year which are already known about and which employers should be planning for areas follows.

  1. April 2018: Taxation of termination payments

    Implementation of reforms to the taxation of termination payments, which are intended to make this simpler and fairer. In particular, all payments in lieu of notice (PILONs) will be subject to tax and NICs, regardless of whether there is a contractual right to make the payment or not. It is intended that the tax exemption for payments up to £30,000 made in connection with termination of employment (such as redundancy) will remain, but payments above that amount will be subject to both income tax and employer NICs.

  2. May 2018: EU General Data Protection Regulation

    Implementation of the EU General Data Protection Regulation (GDPR). The Information Commissioner’s Office (ICO) has published guidance to help organisations start preparing for this. This is available on the ICO website.

It is clear from all the above that 2017 will be yet another interesting and demanding year in employment terms. These challenges, together with those arising from the changing public sector and local government landscape, with continuing funding constraints, particularly in relation to social care, devolution plans and proposals, complex social and political issues, combined with the ongoing development of alternative delivery models, increasing utilisation of new technologies and different ways of working, mean that there will be no shortage of issues to keep busy HR professionals fully occupied. However, these demands and challenges will also be an opportunity for HR to play a key part in shaping the future world of work and in providing clarity and confidence in increasingly uncertain times.

Timetable of Employment Legislation 2017

The timetable below sets out, as far as possible, the key items of employment legislation intended for introduction during 2017. The implementation dates of a number of proposed legislative changes are as yet unknown as these are subject to the outcome of Government consultations and/or the completion of the relevant Parliamentary processes.

Legislation

Commencement date

Trade Union Act 2016

Implementation of reforms to the ballot thresholds for industrial action. In addition to the new participation threshold, which will require a turnout of at least 50% in all trade union ballots for industrial action, The Industrial Action (Important Public Services) Regulations 2016* will introduce a new 40% “important public services” threshold. The regulations specify which services, within the education, health, fire, transport and border security sectors will be subject to this threshold (draft regulations relating to the nuclear decommissioning sector are yet to be published).

Other provisions which are due to be implemented relate to:

  • tackling intimidation of non-striking workers, including a legal requirement for unions to appoint a picket supervisor

  • amendment to the process for payment of political donations from trade union subscriptions

  • reporting requirements and potential restrictions in relation to paid time off for trade union representatives in the public sector (facility time)

  • employers in the public sector (and some private sector employers that provide public services), the deduction of trade union membership subscriptions through payroll (checkoff) will only be permitted if the union contributes to the cost of administering the system.

Accompanying Codes of Practice on Picketing and on Industrial Action Ballots and Notice to Employers* are also due to come into force.

1 March 2017 (or, if later, 21 days after the date on which they are made)

Increases to NMW and NLW rates

Alignment of the date of increase to the NMW and NLW so that both increase in April from 2017 onwards. Increases to these rates take effect.

1 April 2017

Increases in statutory redundancy pay and in the compensatory award for unfair dismissal

The annual increases in these rates are due to take effect. The new rates are yet to be announced.

April 2017

New rates of statutory maternity pay, etc

Statutory maternity, paternity adoption and shared parental pay will increase from £139.58 to £140.98 per week. The earnings threshold for these benefits will increase from £112 to £113.

2 April 2017

New rates of statutory sick pay

Statutory sick pay will increase from £88.45 to £89.35 per week. The earnings threshold will also rise from £112 to £113.

6 April 2017

Gender Pay Gap reporting

The Equality Act 2010 (Specific Duties and Public Authorities) Regulations 2017*

Regulations requiring public sector bodies with 250 or more employees to publish information relating to differences between the pay of their male and female employees.

Relevant employers will need to publish their first report by 30 March 2018, based on a “snapshot” date of their pay gap on 31 March 2017.

31 March 2017

Equality Act 2010 (Gender Pay Gap Information) Regulations 2017*

Regulations requiring private and voluntary sector employers with 250 or more employees to publish information relating to differences between the pay of their male and female employees.

Relevant employers will need to publish their first report by 4 April 2018, based on a “snapshot” date of their pay gap on 5 April 2017.

6 April 2017

Apprenticeships

Introduction of the apprenticeship levy, to be charged on employers in all sectors from April 2017. The levy will be collected through PAYE at a rate of 0.5% of an employer’s pay bill. Employers will receive a £15,000 allowance to offset against their pay bill, meaning that the levy will only be paid on annual pay bills over £3 million.

6 April 2017

The Government has published guidance, explaining in detail how the levy will operate.

Introduction of a target for the total number of apprentices working in public sector bodies.

1 April 2017

Immigration Act 2016

Changes to the rules for skilled migrants coming to work in the UK, including:

  • increase to the Tier 2 (general) salary thresholds for experienced workers to £30,000

  • introduction of an Immigration Skills Charge levied on Tier 2 employers at a rate of £1000 per person per year, with a rate of £364 for smaller businesses and charities (subject to certain exemptions)

  • changes to the Resident Labour Market Test and intra-company transfer provisions.

April 2017

Salary sacrifice schemes

Implementation of changes (contained in the Finance Bill 2017) which will limit the benefits that attract tax and NI advantages when provided as part of a salary sacrifice arrangement. Some benefits will continue to attract NI and tax relief when provided through salary sacrifice, eg childcare and cycle to work schemes.

6 April 2017

(arrangements in place before that date will be protected until April 2018 or for cars, accommodation and school fees, until April 2021)

Personal service companies in the public sector

Implementation of IR35 tax changes to reform the “off-payroll working rules” in the public sector so that the responsibility for operating them, and paying the correct tax, will move to the body paying the worker’s company.

6 April 2017

Childcare

Introduction of new tax-free childcare scheme for working families under which the Government will provide 20% of childcare costs, subject to an annual limit of £2000 per child. This will replace the current employer-supported childcare arrangements.

Early 2017

Repayment of Public Sector Exit Payments

The Repayment of Public Sector Exit Payments Regulations 2016* will implement provisions relating to the recovery of exit payments made to high earners who leave the public sector where they return to the public sector within 12 months.

Expected early 2017

Cap on public sector exit payments

Regulations to introduce a “cap” of £95,000 on the total value of any exit payment made to an individual in relation to their exit from public sector employment.

Expected Spring 2017

*At the time of writing, published in draft.

Deborah Moon is a Consultant in HR and is a regular contributor to Croner-i HR for Local Government. Croner-i HR for Local Government is an online employment law and practice reference source designed specifically for HR Managers and their teams in local government.

Last reviewed 31 January 2017