Tax simplification review
The office for tax simplification has announced a proposal to review the distinctions between employment and self-employment for tax purposes. It is intended that the review be completed in time for the 2015 budget and the announcement of the review states unequivocally that the intention is that the report will include any "quick wins" that can be taken forward immediately.
It notes, however, that should significant reform appear necessary, this would be a matter for the next government to consider.
The terms of reference of the review include:
- whether current tests result in real uncertainty;
- sectors and labour types where particular difficulties arise;
- trends in employment law;
- HMRC guidance and advice;
- special cases regulations;
- scope for simplification; and
- international comparisons.
The IR35, the Construction Industry Scheme and differing treatment of expenses between employed and self-employed people are expressly outside the scope of this review.
Given the election timetable, it is perhaps unlikely that this review will result in significant legislative change in the short term. However, against a background of recent changes designed at engaging with so-called "disguised employment structures", the introduction of potential PAYE treatment for some categories of LLP Member previously treated as self-employed and the expansion of "worker" status as a concept in employment legislation, it is reasonable to anticipate a move to expand some form of tax-withholding regime beyond the scope of the genuinely employed.
Significant immediate change appears unlikely, but the direction of travel looks set towards greater application of PAYE or similar structure.
Whistleblowing: all change ... or not?
Whistleblowing continues to be a regular feature in all kinds of press - both in terms of stories about the experiences of whistleblowers and potential changes to the legal framework. It is clearly and firmly high up on the political and regulatory agenda.
Earlier this year the Government published its response to last year's call for evidence.
The tweaks to legislation have been relatively minor - MPs are now 'prescribed persons' to whom the whistle can be blown and student nurses are now expressly within the scope of Whistleblower protection. Guidance on the law and a model policy for employers are promised but have yet to materialise.
The bulk of the current legislation framework remains unchanged however. In particular, there has been no legislation to give effect to the Supreme Court's decision in the Bates Van Winkelhof decision which categorises LLP members as workers for the purposes of Whistleblower legislation.
It is unlikely that the Government will introduce a general provision for financial incentives whereby whistleblowers are rewarded for raising genuine issues. Such a regime operates in the US where whistleblowers can get a financial reward in certain circumstances if the whistleblowing results in successful action against a company.
The issue of financial incentives is unlikely to go away however, as the Government has recognised that an incentive might be appropriate in specific areas and cases. The Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) are also considering the value of financial incentives, and the steady reports of huge awards being made to whistleblowers in the US is likely to lead to further focus on this structure.
Despite a lack of further legislation since the Government review, it is clear that the spotlight is now on whistleblowing being part of a drive towards cultural change. The Government has made it clear that whistleblowing is to be recognised as a useful tool in managing risk and corporate governance issues.
Alongside a promise to highlight employer good deeds, the Government seems to be focusing on regulators - and particularly those who are prescribed persons under the whistleblowing legislation, such as the FCA and PRA - as the driver for change. Prescribed persons within such organisations are to have a duty to report annually on disclosures they have received.
While the mechanics of this are yet to be established, and implementation is some time away, it will put a greater onus on regulatory bodies to have an active role in not only properly monitoring and dealing with whistleblowing, but also in requiring those organisations within its remit to do the same. Regulated organisations will be keen to avoid being named and shamed in their regulator's annual report.
The process of referrals from employment tribunals to prescribed persons is to be reviewed to ensure that it operates effectively. If this works as intended, then when a whistleblowing claim is lodged, the relevant Prescribed Person will be notified. This is likely to lead to a level of regulatory scrutiny of allegations made.
Employers who can point to a clear and well-publicised process available to enable genuine whistleblowers to raise concerns will be better equipped to deal with such scrutiny than those who do not.
Where does this leave employers?
Organisations will be expected to do more to ensure that people can raise concerns in the workplace without suffering. Putting aside the issue of malicious whistleblowers, this should be an important part of an organisation's overall approach to risk management.
Whistleblowing is something which cuts across every business - from bribery and corruption issues to health and safety concerns as well as financial wrongdoing. By putting in place an effective framework, an organisation will be in a good position to avoid incidents of whistleblowing arising in the first place, and to effectively manage the consequences of any allegations which are made.
To share or not to share - shared parental leave
Parents of babies due or children adopted from 5 April 2015 will be entitled to take shared parental leave subject to qualifying for the right.
This new right will sit alongside already established family-related rights including maternity leave, parental leave, and the right to request flexible working, although introduction of the new right will see the abolition of additional paternity leave which was introduced back in 2011.
Those parents eligible for shared parental leave will be able to opt into this new regime. How many choose to do so remains to be seen, for a number of reasons. Will it become culturally more acceptable for fathers to opt into shared leave or will it remain the case that responsibility for childcare continues to fall in the main to women even where both parents are working? The TUC has suggested that only one in 20 fathers will be able to afford to take shared parental leave given the proposed level of statutory Shared Parental Leave pay.
The right to shared parental leave applies on both birth and adoption, with mothers and adopters being able to share leave with fathers (or the mother's spouse, partner or civil partner) and co-adopters. We have referred to parents for ease.
Parents will be able to take a total of 52 weeks' leave from work after having a baby or adopting a child. Compulsory maternity leave of two weeks must be taken by mothers, reducing the potential period of shared leave to 50 weeks.
Shared Parental Leave: Pay will be available for 39 weeks of the 52 weeks at rates mirroring Statutory Maternity Pay with 37 weeks' pay available to be shared once compulsory maternity leave has been taken into account.
Leave can be taken by parents separately or together and in blocks of one week or more and must be taken before the child's first birthday (or within 52 weeks of the placement with the parents of a child for adoption). Parents will be permitted to take up to three separate periods of leave, or to make up to three changes to the dates on which they propose to take leave. Further variations may be agreed with the employer.
Leave does not have to be taken in continuous blocks and employers will be permitted to refuse requests for discontinuous periods of leave.
A parent seeking to take Shared Parental Leave must share caring responsibility for the child with their partner and both they and their partner must satisfy eligibility tests.
These tests include the employment and earnings tests which requires both parents to have worked either as an employee or as a self-employed earner (subject to a minimum earnings threshold). In addition, the person taking the leave must meet the "duration of employment" test, i.e. have at least 26 weeks' continuous service at the 15th week before the expected week of childbirth or placement of the child, and remain employed until the week before the leave is taken.
In circumstances where the mother has already taken maternity leave she will need to end the arrangement (after the two week compulsory period) before she can apply to take up shared parental leave. Where the mother is entitled to statutory maternity pay or maternity allowance, she must terminate her receipt of those payments in order to qualify for Shared Parental Leave Pay.
The effect of these provisions is that a father may be eligible for shared parental leave even if the mother is no longer employed, provided that the mother satisfies the employment and earnings test.
The regulations prescribe a complicated set of notification requirements, involving both the mother and the father giving notification of the intention to take shared parental leave at least eight weeks before the chosen period. Employers are entitled to require evidence of the child's birth or adoption and information relating to the mother's or father's employer. There is then a requirement for parents to serve a separate period of leave notice.
Where the leave request is for one continuous period of shared parental leave the employee is entitled automatically to take that leave. However, where a period of discontinuous leave is requested, the regulations provide for a two-week period during which the employer may consent to the leave, propose alternative dates or refuse the leave. If no agreement is reached two weeks after the notice, the employee can withdraw the notice or take the total amounts of leave requested as a continuous period of leave.
The regulations also contain provisions providing for variation on up to three occasions and again, this can be waived by agreement.
Keeping in touch
The regulations allow employees to work for up to 20 days without bringing the shared parental leave to an end. These days will be known as SPLIT days, or shared parental leave in‑touch days. This is to distinguish them from KIT days which are available to mothers on maternity leave.
Return to work
On return to work after shared parental leave, the employee will be entitled to return to the same job provided that the total period of parental leave does not exceed 26 weeks. If the total period of leave exceeds this limit, the entitlement is to return to the same job or, if that is not reasonably practicable, then to another job which is suitable to the employee and appropriate in the circumstances. Again, that provision is similar to the rights available to mothers returning from additional maternity leave.
Shared Parental Pay
Separate regulations provide for statutory shared parental pay of up to 39 weeks. This is reduced by the number of weeks in respect of which Statutory Maternity Pay or Statutory Maternity Allowance has been paid to the mother. The eligibility criteria mirror those for Statutory Maternity Pay. To be eligible, a parent must have been continuously employed for a period of not less than 26 weeks ending with the expected week of childbirth (or the date of matching in the case of adoption) and must have had normal weekly earnings for the eight weeks at the end of the relevant week or date of matching which are not lower than the lower earnings limit (currently £111 per week).
As the legislation applies to babies due on or after 5 April, the new rights can be triggered earlier by premature birth before that date. As such, employers should be getting ready for the new framework now. Staff notifying of pregnancies during the autumn will increasingly be governed by the new framework and will wish to understand their options.
Employers should consider how the introduction of the new rights will be managed in practice and what approach they wish to take to requests for discontinuous periods of leave. A review will include preparing policies, amending existing policies (for example to deal with the abolition of additional paternity leave) assessing payroll capability, communicating the new rights to staff and training line managers on the operation of shared parental leave.