Work It: HK Employment Update – December update In this month's round-up of key employment and HR developments, we look at: • • • • • • •
Gender pay gap reporting: final draft regulations now out Uber drivers: Employment Tribunal rules that they are not self-employed Whistleblowing and corporate governance "Gay cake" case: implications for businesses What's on the horizon? Autumn Statement, executive pay and more Howard Kennedy Employment in the news Events
Gender pay gap reporting: final regulations now out After a long wait, the Government has published the final version of the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017. The basic regime remains unchanged from the previous version: businesses with 250 or more employees will need to publish the mean and median hourly pay gap for their male and female employees, based on the pay period in which a specific date in April each year falls (called the “snapshot date”). The first snapshot date will now be 5 April 2017, with the first reports due on 4 April 2018. Businesses must also publish the annual bonus gap between men and women (again using the snapshot date) together with the proportion of male and female employees who received a bonus that year, and the numbers of men and women in each of four pay quartiles.
However, there are some important changes in the final Regulations: Who counts as an employee? The Regulations now clarify that the wide definition of "employee" used in the Equality Act 2010 applies to the Regulations too. This includes workers and some self-employed contractors, meaning that more businesses will be caught. However, partners and LLP members are specifically excluded. Employers may also exclude from their calculations pay data for workers and contractors if the employer does not have the pay data (e.g. if a contractor is not paid through the payroll) and it is not reasonably practicable for the employer to obtain it.
What counts as "pay"? The final Regulations require employers to publish the mean and median hourly pay gap only for employees on full pay during the relevant pay period, not those on reduced pay due to holiday, sick leave, maternity, paternity, adoption, parental or shared parental leave or other forms of leave. This clarification is helpful, as these figures could otherwise skew the data.
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Bonuses: what counts and what must be published? Shares, share options and other interests in securities are counted as bonus pay, using the value they would have for tax purposes. Employers must publish the difference between the mean and median bonus pay figure for male and female employees (expressed as a percentage of male employees' mean/median bonus pay). Pay quartiles The final Regulations clarify that the pay quartiles should each contain an equal number of employees, ranked from highest to lowest paid by the hour. If employees at the same hourly rate fall into different pay quartiles, employers should ensure that ensure as far as possible that the proportions of men and women are the same in each quartile (to stop employers trying to skew the quartiles to suggest a more favourable gender balance). Employers must publish the data on their website (and may include a narrative if they wish). The data will also be published centrally on a Government website. The Government has indicated that it will publish further guidance shortly before the Regulations come into effect. Separate regulations applying to public sector employers will also be published. For more detailed guidance, please contact Jane Amphlett or your usual Employment team contact. Uber: Employment Tribunal ruling In one of the most high-profile employment cases of the year, an Employment Tribunal has ruled that two Uber drivers (whose claims were supported by the GMB trade union) are not genuinely self-employed but are "workers". This means that they are entitled to receive the national minimum wage, paid holiday, statutory sick pay and other employment rights. The decision, which follows similar litigation in the US, also raises the possibility that HMRC will pursue Uber for National Insurance contributions, which could be a substantial sum. Uber has announced its intention to appeal against the decision. The decision is very fact-specific, as cases on employee/worker status often are. Although it has been seen as a test case for "gig economy" businesses, it does not mean that businesses cannot lawfully engage individuals on a self-employed basis. The Tribunal emphasised that Uber could have structured its business so that the drivers were genuinely self-employed. However, the case has some key lessons for businesses in all sectors.
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Ensure written contracts reflect how working arrangements operate in practice Uber was heavily criticised by the Tribunal for using contracts which sought to suggest that Uber's drivers entered into contracts directly with passengers, when commercial reality suggested that any contract was between Uber and the passenger, with the driver providing the service on Uber's behalf. As a result, it largely disregarded the written contracts and focused on how the drivers operated in practice. Self-employed individuals should be treated as independent The Tribunal found that Uber exercised a high degree of control over the drivers. Uber recruited and interviewed the drivers, it required drivers to accept trips and not cancel them (penalising those who did by logging them out of the app), it imposed conditions on drivers (such as what model of car they could use) and effectively performance-managed them through its ratings system. Although there is an obvious commercial benefit in exercising such control – helping to maintain a quality service for customers – businesses should be aware that it increases the risk of individuals being deemed to be workers or employees. Consistent language A contributing factor in the Tribunals decision was the fact that Uber's corporate communications used language inconsistent with self-employment to describe the drivers, such as referring to them as "Uber's drivers" and saying that Uber had generated "thousands of jobs in the UK". Businesses which engage self-employed individuals should take care to ensure that internal and external communications are consistent with that status (e.g. refer to "fees" rather than "wages"). The case looks set to run and run, as the appeal process could take some time. In the meantime, HMRC has announced that it has a new team looking specifically at "bogus" self-employment and there appears to be increasing political appetite for a review of the law on employment status, with a Governmentcommissioned review and a Select Committee enquiry both announced recently. Businesses will need to stay ahead of proposed changes so that they can plan effectively and those most affected may wish to make submissions to the enquiry so that they can ensure their voice is heard. For further guidance, please contact Jane Amphlett or your usual Employment team contact. Whistleblowing and corporate governance Having robust internal whistleblowing procedures in place can be essential when seeking to defend a whistleblowing claim in the Employment Tribunal; it is also increasingly necessary from a regulatory and corporate governance perspective. We look at three key reasons why businesses should put such procedures in place and ensure they are followed.
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Bribery Offences Under the Bribery Act a business is guilty of a criminal offence where a person associated with it (such as a director or employee) bribes another person intending to obtain/retain business or a commercial advantage for the business. However a business will have a defence a bribery charge if it can show that it has in place adequate procedures designed to prevent bribery. The Ministry of Justice issued guidance which is intended to help commercial organisations of all sizes and sectors understand the type of procedures they can put in place to prevent bribery. Under the guidance companies are advised to have in place procedures for reporting bribery which would include "speak up" or whistleblowing procedures. Failing to have effective whistleblowing mechanisms could make it harder to defend a bribery charge, as the business may not be able to argue that it has adequate procedures in place to prevent bribery. Deferred Prosecution Agreements Businesses have a strong incentive to encourage early internal whistleblowing in respect of any allegations of criminal conduct. Identifying wrongdoing at an early stage can make an enormous difference to a business' position. For example, this could afford the business an opportunity to selfreport (for instance to the SFO where the criminal conduct involves serious or complex fraud, bribery or corruption) which in turn may provide them the opportunity to seek a deferred prosecution agreement (under which a business may avoid a criminal conviction in exchange for full cooperation). Avoiding a criminal conviction is likely to have significant reputational and commercial benefits. However, employees may be deterred from reporting such issues internally if the business does not have adequate whistleblowing procedures in place or has a reputation for marginalising employees who report concerns. Businesses should review their procedures and practices to ensure that legitimate whistleblowers are not being discouraged. Financial Services From March 2016, some larger financial services firms (primarily banks, building societies, large investment firms and insurers) were obliged to appoint a whistleblowers' champion and, from 7 September 2016, were obliged to put further measures in place to encourage whistleblowers, including an independent whistleblowing channel through which disclosures can be made confidentially by any person wishing to disclose a reportable concern.
Under the new rules, there is an express link between how a firm handles whistleblowers and the fitness and propriety of the firm and its employees. Detrimental treatment of a whistleblower could potentially result in regulatory approval for the firm or for its senior staff being withdrawn.
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These requirements are likely to be extended to smaller financial services firms. It is therefore essential that these businesses assess now whether their whistleblowing procedures are up to standard. For more information, please contact Ian Ryan or Kyle Phillips in our Business Crime team. Gay cake case: implications for businesses All businesses need to be aware of the law prohibiting discrimination in the provision of goods and services. The scope is very broad: it covers everything from ensuring premises are accessible by disabled customers to ensuring that customers with protected characteristics are not placed at a disadvantage by the organisation's business practices. The risks lie primarily in the reputational damage which claims often bring. The Northern Irish Court of Appeal has confirmed that a bakery's refusal to bake a cake with a slogan supporting equal marriage was discrimination on grounds of sexual orientation. The case has attracted considerable press interest and controversy, as an apparent clash between religious freedom and LGBT rights. A crucial question in this case was whether the customer (who was gay himself) was discriminated against when the bakery refused to provide him with a cake with the slogan he requested as decoration. The bakery argued that, as many heterosexual people support equal marriage, it could not be regarded as discrimination against the customer because he was a gay man; the bakery was refusing to support a particular cause. However, the Court of Appeal decided that the refusal was associative discrimination: i.e. refusing to provide a customer with a service because he supported a cause closely associated with the LGBT community. Businesses should take care when dealing with campaigns or causes closely linked to a group of people with a particular protected characteristic, due to the risk of discrimination claims. In our experience, campaign groups are increasingly savvy about using the threat of goods and services discrimination claims as a means of obtaining publicity for their cause. So, businesses need to be alive to the legal and reputational risks. For further guidance, please contact Jane Amphlett or your usual Employment team contact.
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What's on the horizon? Salary sacrifice benefits reduced The Government has confirmed in the Chancellor's Autumn Statement that it will go ahead with proposals to subject most benefits in kind provided through salary sacrifice to tax and NICs, based on the higher of the amount of salary sacrificed or the normal cash value of the benefit. This will take effect in April 2017. The following will be exempted: • • • •
employer pension contributions; employer-provided pension advice; employer-supported childcare and provision of workplace nurseries; and cycles and cyclist’s safety equipment which meet statutory conditions.
Businesses which provide non-exempt benefits through salary sacrifice should review their benefits schemes and employment contracts now. Taxation of termination – payments The Government has also confirmed that changes to the taxation of termination payments will go ahead and will be brought into force in April 2018. The headline points are: • HMRC will clarify that the personal injury tax exemption does not apply to payments for injury to feelings; • employers' NICs will be payable on termination payments over £30k; • all PILONs will be treated as subject to tax and NICs, whether or not making a PILON is expressly permitted by the employment contract; and • foreign service relief will be abolished (except for seafarers) HMRC action on "self-employment" HMRC has announced a new specialist team to focus on businesses that use self-employed/freelance staff in what amount to full-time roles and to examine whether those individuals should be subject to PAYE tax and National Insurance contributions. Executive pay and corporate governance The Government is seeking views on possible reforms to executive pay and corporate governance in private companies, including the possible introduction of binding shareholder votes on executive pay in larger private companies. However, it has retreated from previous suggestions that it could be mandatory for some companies to have worker representatives on their boards. The consultation closes on 17 February 2017.
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Brexit The High Court has ruled that the Government must consult Parliament before Article 50 is triggered to begin the process of the UK's exit from the EU. The Government has appealed against the decision, and the appeal was heard by the Supreme Court from 5 – 9 December, with a ruling due by the end of January. While the Prime Minister has indicated that this will not delay the anticipated timetable (with Article 50 due to be triggered in March 2017), some commentators believe that delay is now likely, particularly if the Supreme Court decides that a ruling from the European Court of Justice is necessary to decide the case. In the meantime, HR and in-house counsel should ensure that workforce planning considers the impact of Brexit. Our detailed guide is here. Howard Kennedy Employment in the news Jane Amphlett on when a comment you later regret could cost you your job (CityAM)
Jane Amphlett on what an employee should tell their boss when they are off sick due to a miscarriage (Financial News - subscription) Alex Mizzi on the implications of the Uber case for the gig economy (BBC) Alex Mizzi quoted in People Management magazine on the HMRC crackdown on self-employment and on hiring autistic staff (People Management) Gill White and Alex Mizzi on Board diversity (People Management)
Events HR network breakfast for tech, media and the creative industries: The second of our HR Network Breakfast will take place on 18 January 2017 at 8.00 am for an 8.30 am start. This breakfast will focus on employment status and the gig economy, staff incentives and bonuses and business protection.
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Our roundtable breakfasts create a network for those responsible for staffing/HR matters in particular sectors to discuss key current workforce issues. The aim is to connect attendees with ideas, knowledge and people who can share and discuss their views. The breakfasts take place at our offices in London Bridge, hosted by Howard Kennedy's Employment team. For more information or to reserve your place, please click here. We take this opportunity to wish you all a very happy festive season and a happy and prosperous 2017.
Contact:
Jane Amphlett Partner: Head of Employment T: +44 (0) 20 3755 5360 E: jane.amphlett@howardkennedy.com
Alexandra Mizzi Senior Associate: Employment T: +44 (0) 20 3755 5614 E: alexandra.mizzi@howardkennedy.com
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