2020 is set to bring a number of employment law changes and issues affecting tech sector companies.
Changes to off payroll tax treatment
One of the most significant employment changes relates to tax legislation regulating off-payroll working (commonly known as IR35), which comes into effect on 6 April 2020.
These new rules will require private sector businesses to deduct income tax and National Insurance contributions via payroll from fees for services paid to a personal service company (PSC) where the individual performing the services would, but for the PSC, ordinarily be regarded as an employee of the client company for tax purposes.
Whilst this is already the case in the public sector, extending this will hit sectors such as IT, technology and financial services where these arrangements are prevalent.
The treatment of individuals who are directly engaged by the client company — for example “Joe Bloggs” rather than “Joe Bloggs Limited” — will remain the same. The correct tax treatment of the fees paid to these workers will depend on whether they are in reality an employee of the client company for tax purposes, or if they’re genuinely self-employed.
It pays to be prepared for this reform. When similar changes were introduced in the public sector two years ago, many organisations were caught out, or attempted to impose ‘global’ determinations, which were then challenged by their contractors.
Employers are urged to conduct an auditing of off-payroll labour, to allow time to make individual decisions and have different communications with each PSC.
The audit is likely to have knock-on consequences that may require legal advice. As well as determining employment status, you may need legal advice to amend or draft contractual documentation, to advise on the effects on pension liability, and to consider how this change intersects with rules around immigration, the apprenticeship levy, and the gender pay gap reporting figures and strategy. In addition, if liabilities are identified or a revised model for engaging your workforce is required, accountancy advice may be needed to quantify the position.
It is also important to be alive to the consequences of an audit and consider privilege. Only legal advice on the employment status of off-payroll labour will be privileged, whereas advice from non-lawyers about audits and advice on employment status determinations would be disclosable to HMRC and in any subsequent dispute with workers.
Holiday calculations
The reference period used to calculate holiday pay for workers with variable pay is changing on 6 April 2020.
Currently, this is the pay that a worker receives during the 12 weeks worked prior to taking a holiday. In Williams & Ors v British Airways PLC [2011] IRLR 948 (as applied in Lock v British Gas Trading and Ors [2014] IRLR 645), the ECJ held that holiday pay for the minimum four week leave entitlement under the Working Time Regulations must take into account ‘normal remuneration’ such as contractual or regular patterns of overtime, pay allowances and certain commission payments.
This made reference period problematic for workers with variable pay. Fluctuations in pay meant that holiday pay would be higher if leave is taken immediately following peaks and lower holiday pay if it is taken following troughs.
From 6 April 2020, the reference period will change to 52 weeks, or the number of weeks of employment if a worker has been employed for less than 52 weeks.
For the purposes of holiday pay, many organisations begin their holiday year on 1 January. If that is the case, employers need to decide whether to change the way they calculate holiday pay on 6 April, or at the start of your holiday year. Organisations will need to consider the cost and practical issues which can arise, such as holiday carry over.
Many employers have been considering how to include variable pay in holiday pay. Whilst the change in the law only affects the reference period, April 2020 may be a good time to review how employers calculate holiday pay more broadly. Advisers looking at this will need to consider how changing pay moving forward affects historic claims and manage employee relations.
Although these legal reforms may seem minor at first sight, they require legal input. Many have legal and financial consequences. Preparation is key to success here and the companies that start work on these changes now will be in a good position going into 2020.
Pay reporting
While we’re still a way away from disclosing all employees’ salaries, organisations are now increasingly expected to provide gender pay gap, CEO pay ratio, and ethnicity pay gap reports. The ongoing conversation about pay creates a challenge for HR as more employees become concerned or start asking questions about their own pay levels. Handling these queries or concerns inappropriately could lead to employees becoming disgruntled, raising grievances, or even leaving the company.
HR should focus on being open and honest about pay levels, such as introducing a transparent salary framework or banding, which can help overcome uncertainty about pay.
Setting clear objectives and scheduling regular pay reviews can also help to reassure employees they have an appropriate place to discuss pay when they need to.
Data protection & vicarious liability
In Various claimants v WM Morrison Supermarkets plc, the Supreme Court is to rule whether an employer is vicariously liable for the data protection breaches of an employee even though the employer itself was not at fault for the way in which it processed and protected personal data.
In the first group data breach action to come before the courts, the Court of Appeal held that the supermarket is vicariously liable for the actions of a rogue employee who published the personal data, including bank and payroll information, of nearly 100,000 of his co-employees online.
The Court of Appeal rejected the supermarket’s argument that it could not be liable as the rogue employee had published the information using his personal computer at home on a Sunday, and several weeks after he had downloaded the data at work. The Court held that the claimants’ cause of action had arisen the moment the data was downloaded and not when it was published.
The Supreme Court is expected to deliver its decision in WM Morrison Supermarkets plc in the first half of 2020.
Employment tribunal extends TUPE protection to workers
It is expected that the controversial first-instance decision in Dewhurst and others v Revisecatch Ltd t/a Ecourier and another will be appealed as conventional wisdom is that TUPE applies to employees only.
The claimants worked for City Sprint and they provided courier services for its client, HCA Healthcare. When City Sprint lost its contract with HCA Healthcare, the claimants switched to working as cycle couriers for HCA Healthcare’s new provider Ecouriers.
The couriers brought, among other claims, cases in the tribunal for failure to inform and consult under TUPE. Their claims could proceed only if the couriers, as workers, fall within the definition of “employees” under the TUPE legislation.
The tribunal allowed their claims to proceed because, in its view, TUPE protection extends beyond employees to cover workers.
If the decision is upheld, it would mean that employers would have to include workers in employee liability information and inform and consult with them on a TUPE transfer.
Employment status & gig economy
Aslam and others v Uber BV and others is a high-profile case has hit the headlines for the past few years but the proceedings will end this year when the Supreme Court delivers the final judgment.
The Supreme Court is due to hear the appeal in Uber BV and others in July 2020.
Uber drivers have been successful at every stage of the legal process in arguing that they are workers and not self-employed. And if the Supreme Court agrees that they are workers, this will be the last word on the subject.
The decision is hotly anticipated by employers in the gig economy because it has significant business implications. This is because worker status entitles individuals to receive basic worker rights such as the national minimum wage and paid annual leave.
Need assistance?
DavidsonMorris are established advisers to the tech sector. As employer solutions lawyers, we work with tech companies to support with their full people requirements including human resource consultancy, immigration & employment 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 tech sector specialists today.
Last updated: 2nd January 2020
Author
Founder and Managing Director Anne Morris is a fully qualified solicitor and trusted adviser to large corporates through to SMEs, providing strategic immigration and global mobility advice to support employers with UK operations to meet their workforce needs through corporate immigration.
She is a recognised by Legal 500 and Chambers as a legal expert and delivers Board-level advice on business migration and compliance risk management as well as overseeing the firm’s development of new client propositions and delivery of cost and time efficient processing of applications.
Anne is an active public speaker, immigration commentator, and immigration policy contributor and regularly hosts training sessions for employers and HR professionals
