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Employment Law Issues for the Financial Services Sector

Global markets, high pay, increasing regulation, more aggressive enforcement, media and political scrutiny and mobile talent characterise the financial services sector. These factors raise particular employment law issues.

 

Senior Managers & Certification Regime 

The Financial Conduct Authority has introduced new rules to ensure that individuals in the financial services sector are held to account for conduct failings.

The Senior Managers and Certification Regime has been extended to solo-regulated firms and its aim is to enhance the integrity of the financial services sector and reduce the risk of harm to consumers. HR professionals in the financial services sector must familiarise themselves with the regulator’s expectations and the strict requirements of the individual accountability regime.

 

The Good Work Plan

The Good Work Plan comes into force on 6th April 2020. The biggest overhaul of employment law in 20 years, the regime introduces wide-ranging changes which employers must ensure compliance with.

From 6th April, all workers will be entitled to receive a document that sets out all of the key terms of their contract. This document must be given from day one of their contract. Currently employers only need to provide key terms of employee’s contract within two months. HR must be ready to implement this change and be mindful of any additional administrative burdens this could place upon them.

All workers have the right to request a ‘more stable’ contract. Workers will have this right after 26 week’s service. You should be prepared to introduce a system for processing these requests, which can be similar to how flexible working requests are currently handled. Remember that whilst you can refuse this, you will need to provide sound business reasons for doing so. Also, like flexible working, it looks like there will be a three-month timeframe with which to deal with the request.

The break in continuous service will increase. Currently, a gap of just one week can break an individual’s continuity of service. This can restrict their access to key rights of employment, and can occur despite the employee working regularly on and off for the same employer. Therefore, as of April 2020, the gap will increase to four weeks, making it easier for those employees who work sporadically to qualify for more employment rights. You should review current processes and liaise with HR and payroll to ensure they are aware of this and are not unlawfully denying rights to workers. Also re-evaluate current processes in light of this to avoid falling into traps – you may end up having to provide rights and entitlements when you don’t intend to because of previous allowances when taking on casual workers.

There will also be further protections for agency workers. They will have the right to be provided with Key Facts pertaining to the type of contract they are accepting, as well as their rate of pay, who is responsible for paying it, and any deductions or fees that might be taken.

 

IR35 Off payroll working extended to private sector 

The IR35 rules prevent contractors working through a Personal Service Companies (PCS), who are in similar roles to employees, paying less tax and NICs than employees. When the rules were initially introduced, contractors themselves assessed whether IR35 applied to them. In April 2017, public sector employers were made responsible for deciding contractors’ tax status and for deducting the right amount of tax and NICs from fees they were paying to their PSCs.

From 6th April 2020, this responsibility applies to all private sector employers who, within a tax year, have more than 50 employees, an annual turnover over £10.2 million and a balance sheet worth over £5.1 million.

In anticipation of these changes, it is essential that medium and large businesses carry out an assessment to determine whether the new rules under IR35 apply to their independent contractors and review their contracts and pay arrangements. Small businesses will not be caught by the changes.

 

Amendments to Agency Worker rules 

The Agency Worker Regulations 2010 (AWR 2010) entitle agency workers to receive the same pay and basic working conditions as direct recruits once they have completed 12 weeks’ continuous service working in the same role.

The ‘Swedish derogation’ currently provides an exemption to the right to equal pay, if agency workers are employed under a permanent contract of employment with the temporary work agency and are paid by the agency for periods between assignments.

From 6 April 2020, the Swedish derogation is removed. Once agency workers have satisfied the 12-week qualifying period, they will be entitled to equal pay to workers who are engaged directly by the employer.

On or prior to 30 April 2020, agency workers whose existing contracts contain a Swedish derogation provision must be provided with a written notification by the agency that it will no longer have effect.

In addition, from 6 April 2020 all agency work-seekers must be provided with a key facts statement setting out the terms under which they will undertake the work.

 

Change to holiday pay reference period 

The calculation of holiday pay can be complicated, particularly for those with variable hours and variable rates of remuneration. Currently, the holiday pay reference period is 12 weeks.

From 6 April 2020, the holiday pay reference period will increase from 12 weeks to 52 weeks. Employers will be required to look back at the previous 52 weeks where a worker has worked and received pay, discarding any weeks not worked or where no pay was received, to calculate the average weekly pay.

It is hoped that this change will help to even out the variation in pay for workers, particularly those in seasonal or atypical roles.

 

New parental bereavement entitlements

The Parental Bereavement (Leave and Pay) Act 2018 comes into force in April 2020. Bereaved parents will have the right to two weeks of leave following the loss of child under the age of 18, or a stillbirth after 24 weeks of pregnancy.

Bereaved parents will be entitled to take their leave in one two-week block or in two separate blocks of one week. The leave must be taken before the end of a period of at least 56 days beginning with the date of the child’s death.

Bereaved parents employed with a minimum of 26 weeks’ continuous service will also be entitled to receive statutory parental bereavement pay. Those with less than 26 weeks’ continuous service will be entitled to take two weeks of unpaid leave.

 

Need assistance?

DavidsonMorris are established advisers to the financial services sector. As employer solutions lawyers, we work with FS companies to support with their full people requirements including employment law advice , human resource consultancy,  immigration legal advice and global mobility expertise.

We understand the commercial and legal challenges facing businesses in the sector, and work to support our clients in meeting their people management and planning needs while reducing legal risk exposure. Contact our finance sector specialists today.

Last updated: 2nd January 2020

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