Update on apprenticeships  

The government has recently confirmed that the apprenticeship levy will be implemented from April 2017 as originally proposed.

The key changes announced by the Government include:

• There are to be 15 funding bands each with a maximum cap ranging from £1,500 to £27,000. Degree apprenticeships will retain their funding cap of £27,000. It will be up to employers to negotiate prices with training providers.

• A £1,000 incentive for both employers and training providers will be provided for 16-18 year olds who are taken on as apprentices. There will also be similar additional funding for employing apprentices aged between 19-24 year who have been in care.

• Employers with less than 50 employees will not have to contribute anything towards apprenticeship costs for 16-18 year olds, young care leavers or young persons with an Education Health and Care (EHC) Plan.

• Employers of all sizes will only be required to contribute 10% of the cost of training an apprentice. The government will cover the remaining 90% of training costs.

• Where employers recruit an apprentice with additional learning needs (such as dyslexia), or other learning difficulties or disabilities, the Government will make a payment directly to the training provider to help with the extra costs of supporting the apprentice’s learning.

• A new online calculator will be set up to help businesses work out their costs and obligation

Employers are advised to use the time between now and next April to prepare for the introduction of the levy. Employers should look at:

1. Determining the financial impact of the levy on their business; and

2. Reviewing the training arrangements currently in place and the requirements of the levy to ensure they maximise their ability to utilise the levy funds before they expire.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/545509/Apprenticeship_Funding_Proposals_from_May_2017.pdf

Proposals for changes to the taxation of termination payments

As announced in this years budget, the Government intends to make changes to the taxation of termination payments, which are currently very complex and can encourage manipulation by employers to take advantage of the employer National Insurance Contributions (NICs) exemption.  To this end, HM Revenue & Customs has now published draft legislation.

From April 2018, it is proposed that:- 

• NICs will be payable on payments above £30,000 (currently only subject to income tax);

• all payments in lieu of notice will be taxable, even if they are non-contractual, to prevent employer manipulation and ensure post-employment payments are consistent;

• foreign service relief will be removed; and

• payments for injury to feelings will no longer be exempt from tax (there is currently a divergence of judicial decisions about this issue)

The Government will continue to allow the first £30,000 of a termination payment to remain exempt from income tax and any payment that relates solely to the termination of employment will continue to have unlimited employee NICs exemption. 

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/545135/Simplification_of_the_tax_and_National_Insurance_treatment_of_termination_payments-government_response_and_consultation_on_draft_legislation.pdf

Immigration Act in force

Section 35 of the Immigration Act 2016 (the Act) came into force on 12 July 2016.

Under section 35 of the Act, an employer who has ‘reasonable cause to believe’ that they have been employing illegal workers will risk an unlimited fine and a custodial sentence of up to 5 years. This wording widens the scope to penalise employers who may be employing staff who do not have the right to work in the UK and means employers can no longer plead ignorance.

These amendments are accompanied by new immigration officer powers to enter a business’ premises, search for and retain evidence and close a business for 48 hours.

Most employers are aware that they must carry out the correct right to work checks on all employees by:

1. Obtaining one or more of the original documents set out in the Home Office Guidance;

2. Checking them in the presence of the holder; and

3. Making and retaining a full and clear copy, as well as making a record of the date that the copy was made.

If an employer carries out these checks, it will have a statutory excuse against liability for a civil penalty, i.e. if it is found that the employer has employed someone who does not have the right to work, but it has correctly conducted document checks, it will not receive a civil penalty for that illegal worker.  However there can be no statutory excuse where an employer knew or had reasonable cause to believe that the employee in question did not have the right to work in the UK. 

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/536953/An_Employer_s_guide_to_right_to_work_checks_-_July_16.pdf

Employment law proposals from both sides of the political divide

With a new Prime Minister in No 10 Downing Street and the Labour Party set to elect (or re-elect) its leader, we thought it would be interesting to look at the proposals for employment law from both sides of the political spectrum.

On the right, Theresa May made proposals relating to job security and promised worker representatives on company boards andincreased powers for shareholders to vote on executive pay before her appointment as Prime Minister. Theresa May has now put David Davis in charge of the Brexit negotiations and Mr Davies has made it clear that he has no desire to reduce the current impact of EU employment law in the UK any time soon.

The two Labour leadership candidates, Jeremy Corbyn and Owen Smith, have also set out a number of proposed reforms for employment law.  Most notably, both candidates would outlaw zero-hours contracts, repeal the Trade Union Act 2016 and abolish employment tribunal fees.

Mr Corbyn would also:

• Make union recognition compulsory for collective bargaining about pay in large companies;

• Increase the National Living Wage to £10 per hour; and,

• Force businesses with over 21 staff to publish equal pay audits.

Mr Smith would also;

• Require worker representation on remuneration committees;

• Introduce ‘day one’ employment rights;

• Allow electronic balloting in industrial action ballots;

• Introduce wages councils in certain sectors;

• Require employers to provide compensation for cancelled shifts;

• Re-introduce discrimination questionnaires; and,

• Propose further legislation to deal with the gender pay gap. 

The leadership election will run until 21 September 2016 and the results will be announced at the Labour Party conference on 24 September.  

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