Posted on Jan 04, 2019 in Employment by Karen Farrell
2018 was an eventful year for employment law. In addition to the introduction of the GDPR, the Data Protection Act 2018 and changes to the taxation of Payments in Lieu of Notice (PILON), we have seen the arrival of a number of highly publicised sexual harassment allegations being made by employees and the commencement of the #MeToo campaign.
With 2019 now underway, it seems an appropriate time to reflect on the changes and issues which have arisen in the past year as well as look forward as to what is in the pipeline for employers in the coming 12 months.
GDPR and the Data Protection Act 2018
One of the most significant developments in EU data protection law came into force on 25 May 2018 - the General Data Protection Regulations (GDPR). Alongside its introduction was the Data Protection Act 2018, which replaced the 1998 Act. As we are now 7 months on from their introduction, employers should reflect on whether their policies and procedures comply with the changes which were introduced.
While the GDPR continues the approach under the previous regime requiring a data controller to justify the processing of personal data before it will be considered lawful, it extends the information which must be given to employees regarding the processing. Under GDPR employers are required to issue privacy notices to their employees as well as job applicants, setting out how they will collect and use personal information about their employees during and after their working relationship with them. Reviewing, and if necessary updating, privacy notices and data protection policies should certainly be on employers to do list for 2019.
Changes to tax regulations for PILON
Prior to 6 April 2018, where an employer had a contractual duty to make a Payment in Lieu of Notice (PILON), it was generally considered to be earnings and, as such, would be paid subject to tax and national insurance contributions. Where there was no contractual duty to pay, the first £30,000 was exempt from tax. This was often a useful tool in negotiations with employees as they would get the gross value of notice not worked rather than the net amount.
Since 6 April 2018, the position changed and all PILON are to be treated as earnings and subject to deductions for income tax and class 1 national insurance contributions, whether contractual or not. Practically, the result is that employers are now required to split a "relevant termination award" (broadly, an ex gratia payment) between an amount treated as earnings and any payments that qualify for the £30,000 exemption (or exemptions). The part of the termination payment that must be treated as earnings will be, either, the whole termination payment (excluding statutory redundancy pay) if the ‘post-employment notice pay’ (PENP) is equal to or more than the termination payment, or, the PENP if it is less than the termination payment but is not nil. Effectively, employers will be required to subject to tax that part of a termination payment equivalent to the employee's basic pay if and to the extent that notice is not worked.
What we have found is the fact that some or exceptionally all of a termination award may be subject to tax is not being considered when discussions about a possible termination are taking place. Unfortunately the calculation of PENP is a bit like an algebra exam. Now is a good time for employers to consider whether their discussions with employees and any settlement agreements take account of these changes. It may be that employers will have, or may require to, increase the financial packages being offered to exiting employees to offset the additional tax which the employee may require to pay, especially if the question of tax has not been flagged up with the employee at an early stage. While further reforms to the taxation of termination payments were to take place on 6 April 2019, the Government has pushed these back until 2020.
2018 saw the advent of a number of highly publicised cases involving sexual harassment claims being made by employees. As a result, employers needs to be mindful that the way in which complaints of this nature have previously been dealt with may need to be amended. Questions about whether to address problems head on have also become much more complex from a reputational point of view.
On a practical level, employers should develop and implement sexual harassment policies and provide training to employees to head off any potential claims. However what good are policies if they are not acted upon? As well as disseminating policies to all employees, employers need to ensure that these are properly enforced and demonstrated in practice. Relevant training is key in this area, and our experience is that role play and the use of actors can be very powerful in bringing harassment situations to life. Prevention is better than cure and employers need to ensure that employees know what potentially falls within the large spectrum of harassment, as well as what to do if they witness it. Employers should ensure that any complaints of harassment are responded to promptly and effectively and should consider seeking legal advice where any claim of this nature is made to ensure that an appropriate course of action is taken.
Non-disclosure clauses in settlement agreements have previously been considered standard practice. However, going forward, these need to be considered much more carefully in light of recent media coverage highlighting that these may be used to silence claims of harassment and bullying. The government response to the review of non-disclosure agreements in the workplace, expected in 2019, may impact on the way in which these agreements can be used going forward. One to watch!!
Updating contracts and policies
Employers should review and update contracts of employment and policies in the workplace and consider whether these are in order. Employee job titles and/or terms of conditions may have changed since the implementation of the contract and the start of the new year is a good point to consider whether these truly reflect the employees position.
Further, in a recent case in December 2018 the Employment Appeal Tribunal has clarified that employees who work more than 1 month but less than 2 (which is time by when an employer has to issue a statutory statement of terms and conditions of employment) are still entitled to receive such a statement. The potential award is either 2 or 4 weeks wages so on the face of it not much, but could be significant for businesses that employ a lot of people on very short term contracts, either as an employee or a worker. So make sure you are issuing these statements as soon as someone starts with you as a matter of course.
2020 will see the extension of certain rights to workers (including the Good Work Plan), so businesses should start getting ready for these in 2019.
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