The government’s 2018 Good Work Plan means all employers will have to review their written terms of employment to bring them in line with the new regime in time for April 2020.
The current requirements
Most employers are entirely familiar with the current set up and their standard written terms of employment (i.e. employment contracts) will normally cover the basics required in section 1 of the Employment Rights Act 1996 (i.e. name of employer, pay, notice, hours, location, holiday, sickness pay, pension and grievance and disciplinary procedures). At the moment employment contracts are supposed to be issued within 2 months of the start date and the requirement does not extend to workers or employees whose employment continues for less than a month.
These basic ‘section 1 terms’ can be provided across more than one document and it is common for employers to cover some in the offer letter, in a later more formal contract, a staff handbook or subsequent amendment letters.
What is changing?
From 6 April 2020, the information in relation to terms of employment (i.e. the employment contract) must be provided to employees and workers on or before their first day of work regardless of their length of service.
These ‘new section 1 terms’ should be provided in a single document (more or less) as opposed to the current position of the section 1 terms often being across more than one document (i.e. offer letter, employment contract, subsequent amendment letters etc).
In addition to the requirement set out in section 1 that currently applies, the new sections 1 terms must also include:
- Working pattern – the hours and days of work, whether there is any variability and how that variation is determined;
- Terms and conditions relating to any other remuneration or benefits;
- Entitlement to paid leave (in addition to sick leave and holiday), for example, maternity and paternity leave;
- Entitlement to training provided by the employer, whether it is compulsory training and/or paid for by the employer;
- Details of any probationary period, its length and any conditions.
If any of the above listed terms do not apply then the employer will be required to make a statement in the ‘new section 1 terms’ to that effect.
Information about pensions, collective agreements, any non-mandatory training entitlement and disciplinary and grievance procedures do not have to go in the initial section 1 terms and employers will have a slightly longer window as this is to be provided within 2 months of the employment starting.
Certain additional information can be cross-referred to in the new section 1 terms and provided in another reasonably accessible document such as a staff handbook. Such information relates to terms on incapacity and sick pay, entitlement to paid leave (other than holiday), particulars of training, pension schemes and notice periods and certain information about disciplinary and grievance procedures.
The changes will take place from 6 April 2020 for new employees and workers only.
If an existing employee or worker requests an updated statement then one must be provided within one month that is compliant with the new section 1 terms.
An updated section 1 statement must be also provided if, at any time after 6 April 2020, there is a change to any of the new information required to be given or if the worker or employee is re-engaged.
What are the consequences of non-compliance?
The penalties for failing to provide a section 1 statement of terms (or providing an inaccurate or incomplete statement) remain unchanged from April 2020 except that the right to bring a claim is extended to workers as well as employees.
Such action is a referral to the Tribunal for a declaration of the terms of employment / engagement and/or a claim for compensation of between 2 and 4 weeks’ pay (currently capped at £525) that can be presented alongside another specified claim, such as unfair dismissal.
What should you do?
Employers should start thinking now about how to prepare for these changes. We recommend that you:
- Review current ‘new issue’ employee and worker contracts to ensure they are compliant with the upcoming changes whilst ensuring that:
- Worker and employee contracts are distinguishable from each other so as to avoid confusing the lines in terms of employment status (while noting any impact on worker engagements you may have in relation to pending IR35 changes as a separate matter);
- Benefit entitlements are not in inadvertently made contractual;
- Consider recruitment processes to ensure systems are in place to issue documentation on or before the first day (or within one month of request); and
- Communicate changes to employees and be prepared to respond to queries without delay.
What else is changing from April 2020?
There are a number of changes in employment law that happen every April and the changes for April 2020 are summarised in the following articles:
- What Businesses Should Be Doing To Prepare for IR35
- Negotiating Private Sector IR35 reforms: what businesses should be doing to prepare?
We are well placed at Ashfords to assist businesses with preparing for these changes. If you require any advice on these changes, please contact the Employment Team.