The ever changing world of employment law

John O’Connor, Operating Director, comments on the latest in our series of Michael Page Human Resources and Watson Farley & Williams employment law seminars, held on March 16th and led by Devan Khagram and Rhodri Thomas. The subject on this occasion was landmark cases of 2015 and future developments.

Employment is one of the most dynamic areas of law, and as well as some important cases from 2015, we spent much of the seminar looking ahead to events taking place in 2016 and beyond. This year will see the first Conservative government reforms to employment law since the 1990’s and it is fair to say that some proposed changes are already proving controversial.  

As well as an overview of high profile cases from the last 12 months there was also a discussion around a possible Brexit from the European Union. Quantifying exactly what changes would occur and when, in the event of an exit from the EU, is clearly very difficult indeed. Whilst there are any number of permutations that could play out, it is unlikely that we would see any large-scale changes to the employment law in the immediate aftermath of a British exit from the EU. That said, the impact or potential impact is as yet, unclear. That in itself is enough to cause a degree of uncertainty and some senior HR Directors have confirmed that their organisations have already started formulating HR contingency plans to deal with the ramifications of an exit.  

What is clear is that any suggestion that Britain should be exempted from EU employment law is likely to meet strong resistance from other member states, whether or not the UK remains a member. In the scenario that the ‘leave’ campaign is successful and the UK does withdraw from the EU, it would possibly stay within the European Economic Area (EEA) or the European Free Trade Area (EFTA) with European directives applying to both areas. 

One interesting trend pointed out on the day was the fiscal nature of some of the proposed changes that could be made to termination pay-outs moving forward. The government launched a consultation in July 2015 on the basis that in its view, the system needed urgent simplification. 

Whilst these proposals are at this stage just that, it is clear that the government’s drive to generate as much tax revenue as possible from the economy is far-reaching and lowering the point at which payments can potentially be taxed is one option under consideration. The starting point may be that all payments made in connection with a termination of employment will be subject to income tax and NICs – both employee and employer NICs. Related proposals then include introducing a new exemption for payments in connection with wrongful or unfair dismissal, and for awards made as compensation for discrimination. As anticipated in the session, the Chancellor’s budget announcement later in the day did pick up on changes to the taxation of termination payments (making these subject to employer NICs above the first £30,000, from 2018), and confirmed that this is an area where further reform will be taking place.

One of the most interesting conversation topics focused on personal service companies. The government is now considering a number of proposals and one of these is that an individual utilising such a company would be obliged to move onto the payroll after only one month. Businesses rather than the individuals would be responsible for overseeing the rules but the implications here for both individuals and companies could be huge. Whilst this is a proposed change at present it has prompted much lively debate. 

Parental leave is another interesting area explored during the seminar. 

Evidence shows that more than half of parents rely on grandparents for childcare when they first go back to work after maternity leave and over 60 per cent of working grandparents with grandchildren under the age of 16 provide some childcare. In total, approximately seven million grandparents are involved in childcare and are clearly providing critically important assistance to working parents across the UK.  

With this being now clearly evident, the  government announced last year that it would extend shared parental leave and pay to working grandparents, and again these proposals were further addressed in the Chancellor’s budget shortly after the seminar.

Our next seminar in this series will be held in the September and if you would like to receive an invitation; please send your contact details to the email address below.  

John O'Connor

T: +44 207 269 2270

E: johnoconnor@michaelpage.com