What SMEs should look out for in the coming year
Employment continues to be a highly politicised issue and significant changes to the law governing it have been brought in nearly every year during the last decade. This year is running true to form, and small and medium sized enterprises (SMEs) should start planning now for the most significant developments.
National living wage
Despite the name, this is best understood as an increased national minimum wage for workers aged 25 and over. The initial rate to be introduced from April 2016 will be £7.20 an hour (50p more than the current full rate). The National Living Wage will increase every year, with the aim of it being 60 per cent of median earnings. It is expected to be £9 by 2020.
This development is set to have a major impact on the retail, social care and hospitality sectors, and businesses are already looking at ways to mitigate the cost, such as reviewing other benefits (bonuses, for example), implementing staff cuts, and so on. Many staff paid at or near the minimum wage will have lost out financially as a result of changes to tax credits, so securing their agreement to bonus cuts may be tricky. Businesses need to consider carefully how to implement any such changes while staying the right side of the law.
Although auto-enrolment has been in force for several years now, its phased introduction means that many smaller employers will only begin grappling with it in 2016 and 2017. Businesses can find out their staging date (in other words, the date by which they need to have the auto-enrolment scheme up and running) by checking on the Pensions Regulator’s website
but should bear in mind that it takes a few months to select a scheme, get it set up and put the employee paperwork in place.
In most cases businesses need to start planning the process six months before their staging date. In particular, businesses need to determine which of their staff will need to be automatically enrolled and whether the business wants to use a ‘postponement period’ so staff are not automatically enrolled during their first three months of employment. Initially, the minimum employer contribution will be at 1 per cent of ‘qualifying earnings’, but this will rise over time to 3 per cent.
Calculating holiday pay ought to be simple but 2014 and 2015 proved this certainly is not the case. Various cases are still working their way through the appeal system in relation to whether voluntary overtime and commission payments need to be included in holiday pay and how this should be calculated. Businesses should keep a careful eye on this to ensure they understand their legal obligations.
Statutory pay rates
One minor piece of good news for businesses is that Statutory Maternity Pay will not be increased this year and so will remain at its current rate of £139.58 a week (paid for 33 weeks after the employee has received six weeks’ pay at 90 per cent of her weekly earnings).
SMEs should also bear in mind that reporting requirements on modern slavery (already in force) and the gender pay gap (due later this year) which apply to larger businesses may affect them if they have supplier contracts with bigger organisations, and they should expect these issues to play an increasing role in procurement and contract negotiations.
Alexandra Mizzi is a senior associate in the employment team at Howard Kennedy LLP