What payroll and employment law changes are coming in 2020?

2020 is shaping up to be an important year for legal changes in employment and payroll – here’s what you need to know.

Jaspal Randhawa-Wayte

Jan 8th 2020

2020 is shaping up to be an important year for legal changes in employment and payroll, with many new requirements coming into effect.

At Zellis, we’re focused on helping our customers navigate the ever-changing legislative landscape and stay compliant, both through our award-winning payroll and HR software, ResourceLink, and our expert Managed Services.

Below we’ve put together a quick breakdown of the changes your organisation may need to know about and comply with, with several applying from the start of the new tax year on 6th April 2020.

Increases to the National Minimum Wage

In December 2019, the government announced an increase to the National Minimum Wage and the National Living Wage. The changes will come into effect on 1st April and are as follows:

  • National Living Wage (25-years old and up) - Up 6.2% to £8.72
  • National Minimum Wage (21-24 years old) - Up 6.5% to £8.20
  • National Minimum Wage (18-20 years old) - Up 4.9% to £6.45
  • National Minimum Wage (Under 18 years old) - Up 4.6% to £4.55
  • Apprentices - Up 6.4% to £4.15

Calculating pay for employees on the National Minimum Wage or National Living Wage can be a daunting and complex exercise because of the risk of inadvertently underpaying your staff. You must keep track of changes to minimum wage rates and be conscious of the various pitfalls to avoid.

We’ve developed new functionality for ResourceLink that helps our customers to remain compliant with these rules by automatically running reports at individual and various group levels, and alerting the payroll team of anyone at risk of being underpaid.

Executive pay ratio reporting

As of this year, UK-listed businesses with more than 250 employees need to publish a report which details and explains how the remuneration of their top boss (typically the CEO, but not always) compares to the rest of their employees.

In addition to calculating and disclosing the executive pay ratio, businesses must be prepared to provide supporting information which explains any changes from the previous financial year.

Executive pay ratio reporting isn’t a straightforward process, as the reports must be produced with high levels of accuracy and in the required format. This is made easier with the new reporting tool we’ve introduced in ResourceLink. With gender pay gap reporting already in effect and further similar requirements potentially on the horizon, it’s essential to develop consistent processes to streamline compliance.

IR35 and off-payroll rules

Perhaps the change that is being most carefully watched this year, we’ll see IR35 (tax rules for off-payroll workers) extended to medium- and large-sized private sector businesses from April. In short, this will bring these businesses in line with the rules which public sector organisations have been following since April 2017.

Businesses will hold the responsibility for determining whether their contractors fall inside or outside of IR35 rules, and issue the appropriate Status Determination Statement (SDS). According to official government guidance: “The rules apply if a worker provides their services to a client through an intermediary, but would be classed as an employee if they were contracted directly.”

IR35 awareness levels are low, particularly amongst medium-sized businesses. If this includes your organisation, consult with experts to make sure you are prepared for the changes.

The Parental Bereavement (Leave and Pay) Act 2018

Under this act of legislation, any employed parents and carers who lose a child under the age of 18 or experience a stillbirth after a pregnancy of 24 weeks will be entitled to two weeks of bereavement leave. This is applicable from day one of their employment.

Employees with 26 weeks or more of continuous service are entitled to receive the statutory rate of pay for the two-week period, while those with fewer than 26 weeks of continuous service will receive unpaid leave.

Average holiday pay

This is another complex area of payroll legislation. From April 2020, the holiday pay reference period will be increased from 12 to 52 weeks. The intention is that this will help to ensure people with irregular or seasonal working patterns are not disadvantaged and that they receive the correct amount of holiday pay.

Written statements

Every employee starting on or after 6th April 2020 will now be entitled to receive a written statement (or contract) containing their key employment terms (e.g. salary, holiday entitlement, notice period) from day one of their employment.

A similar document will be required for agency workers, including information such as:

  • The type of contract
  • The minimum expected rate of pay
  • How they will be paid and by whom
  • Any non-monetary benefits they will be entitled to
  • Any entitlement to annual leave and how this will affect pay

Get in touch with Zellis

To learn more from our experts, or to find out more about our payroll and HR software, get in touch with us today.

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