What will the Employment Status Test and the Good Work Plan mean for my company?

There are over half a million contractors working for employers through personal service companies, or sole director companies, and it is a substantial task for HMRC to assess whether each contractor is genuinely self-employed or whether they should be classed as a worker or employee – and taxed accordingly.

From April 2020, employers with more than 50 staff and/or with turnover of more than £10.2million will become responsible for determining the employment status of their contractors. This applies to both the private and voluntary sector – the public sector has already been doing this for a while.

If your business meets the criteria, you can use on online toolkit to establish the employment status of your contractors:

https://www.gov.uk/guidance/check-employment-status-for-tax

The online toolkit applies the tests of:

• Control: how much autonomy does the contractor have in terms of how they deliver a project? For example, what hours do they work, where do they work, what tools or processes do they use? The more autonomy they have, the more likely they are to be self-employed, but this isn’t enough in isolation.
• Personal service: can the contractor send in a substitute in their place – someone they’ve vouched for, not someone you’ve interviewed or someone from a pool of approved workers? If they can, they’ll almost certainly be self-employed. But, often the answer will be no.
• Mutual obligations: do you have an obligation to give the contractor work or to pay them for a minimum number of hours? Does the contractor have an obligation to accept the work or to do a minimum number of hours? If there are obligations of this nature, and less financial risk for the contractor, then they’re more likely to be self-employed.

It is a tricky area and even the online toolkit doesn’t always produce a firm answer. If you’d like help assessing any of your contractors, we’d be happy to take a look at it for you.

The Good Work Plan

The Good Work Plan was published in December 2018, following the Taylor Review. It makes key recommendations to improve the fairness of modern working practices and Theresa May pledged to adopt most of the recommendations.

We took a look at this in our December 2018 blog and the expectation is still that many of these recommendations will come in to play from April 2020, including:

• Employees will be entitled to receive a copy of their contract of employment (or “statement of key terms and conditions”) from their first day of employment. Currently, employers have up to two months to issue this document – and sometimes miss this deadline. You may need to amend your recruitment and induction practices to comply with this change, for example, you may decide you’ll send out contracts of employment as soon as an offer of employment has been accepted.
• Workers will be entitled to receive a statement of key terms and conditions from the first day of their engagement. This will need to include information about hours of work, place of work, duties, holiday pay, eligibility for sick pay and pension, and how much notice is needed to terminate the engagement.
• It is proposed that agency workers will be entitled to receive a key facts document before accepting an assignment, including information about what they’ll be paid, who will be responsible for paying them, and any deductions that will be made from their pay.
• The contracts/ statements for employees and workers will need to include more specific information about their hours of work, including the days of the week on which they’ll be expected to work and, if the pattern of hours may vary, information about how their hours will be determined.
• Employers are expected to be required to give a minimum amount of notice to cancel hours of work and to pay a minimum level of compensation to employees/ workers who have had hours of work cancelled at short notice.
• It is also proposed that employees will be able to request ‘fixed’ or ‘stable’ working patterns in the same way that they can currently request ‘flexible’ working patterns. This will allow an employee to request a guaranteed minimum number of hours or fixed days of work, to help them plan their finances, apply for mortgages, plan childcare arrangements, or take secondary employment. It seems likely that this proposal will be taken forward and will follow a similar procedure to flexible working requests – including an obligation on the employer to consider the request and to refuse it only if there is a justifiable business case for doing so.
• The calculation of holiday pay, which must be based on average pay (including overtime and commission), will need to be worked out over a period of 52 weeks ending with the last full week before the holiday is taken. And, there will be a TV advertising campaign to alert employees and workers to their rights in connection with holiday pay.
• There is set to be a single enforcement authority, separate to HMRC, responsible for enforcing correct payments to staff, including holiday pay, National Minimum Wage and Statutory Sick Pay.
• It is likely to become harder to break continuous service. Currently, if an employee stops working for you for more than one week (Sunday to Saturday) and there is no expectation that they will come back, their continuous service will be broken. This means that if you let someone go because you have no work for them, but then you find some more work for them two or three weeks later and they come back, their continuous service will be broken and re-start from zero. The proposal is to amend this, so that if the employee comes back within four weeks their continuous service will be preserved.

Extension of Statutory Sick Pay

Currently, SSP is paid only to employees and workers who earn more than the lower earnings limit for NI contributions (currently £118 per week).

A consultation on possible changes to SSP have recently closed and we await the outcome of it. However, it seems possible that we’ll see:

• Removal of the lower earnings threshold for SSP
• SSP being paid on the basis of a percentage of earnings
• Increased fines for non-payment of SSP.

It has also been proposed that there should be new legislation enabling non-disabled employees to request reasonable adjustments. At present, an employee must have a disability before qualifying for reasonable adjustments – such as adaptations to their duties, working hours or environments.

However, we would generally advise that employers consider reasonable adjustments for any employees with known health conditions that are causing them a disadvantage at work – this mitigates your risk of a disability discrimination claim arising and helps your staff to be more productive and effective in their role.

Whistleblowing

An EU Directive is due to come into force, which will require member states to introduce new whistleblowing legislation. Although we may no longer be part of the EU at the time the Directive comes into force, we may be required to comply with it if we enter into a trade deal that requires us to have a level of corporate governance and accountability that is consistent with EU standards.

This may mean that employers with over 50 staff or over €10million turnover will be obliged to introduce more comprehensive whistleblowing procedures, including guaranteed confidentiality, an acknowledgement within seven days and an investigation and outcome within three months unless the matter is very complex.

Employees who feel that an investigation may be jeopardised by internal disclosure, or who feel that their internal disclosure has not been satisfactorily dealt with within three months, may whistleblow externally to a public authority (to be set up by the government).

Employees who feel that internal/external disclosure has been or will be unsuccessful and who believe that there is an imminent threat to public safety will be able to report their concerns to the media.

If you’d like further guidance on this or any other HR or employment law matter, get in touch!