Scott Glacken and Kate Martin of Taylor Vinters look at some of the changes and trends in employment law that all employers need to know.
Taxation of termination payments
PILON, which stands for ‘Pay in lieu of notice’, is paid out by employers where the employee is not required to work their notice following resignation or termination of employment (although not in cases of gross misconduct). Until 6 April 2018 this year, taxation of PILON depended on whether an employee’s contract contained a specific right for the employer to make payments in lieu of notice. However, the tax treatment has now been changed. From 6 April 2018, all PILON payments are subject to tax and national insurance, regardless of the contract wording.
We recommend that employers always make sure there is a PILON clause in contracts outlining conditions under which it can be paid and what would be paid (typically only basic salary and not benefits accrued during the notice period). There is a slightly complicated formula to calculate the precise amount of tax payable on notice pay – but the basic position is that all PILONs will be taxable going forward.
Abolition of tribunal fees
In 2013, the government introduced fees of up to £1,200 for employment tribunal claimants seeking to pursue a claim to a full hearing. However, in 2017 the Supreme Court ruled this as unlawful and the fees regime was abolished.
Since then, according to the Ministry of Justice, England and Wales has seen an increase in employment tribunal claims, with 10,996 made in April-June this year compared to just 4,241 during the same period last year – a rise of 165%.
While the Ministry of Justice has indicated it might reintroduce ‘progressive and proportionate’ fees, it is likely that the current fee-free regime will be in place for the foreseeable future. Given the increased likelihood of claims (according to the stats), employers will need to factor this in to termination strategy and possibly consider seeking to settle claims at an earlier stage than they may have previously. Equally, employers should ensure that they have good policies and processes in place to better protect their position, should these be tested in the tribunal.
GDPR – known effects so far
The implementation of GDPR means that employers and employees alike are more knowledgeable about how personal data should be handled. However, with this increase in awareness, there is anecdotal evidence that data subject access requests (DSARs) are being used by disgruntled employees as a means to inconvenience employers with a view to negotiating a settlement package.
DSARs can take up a huge amount of time and expense, so employers should be careful about what employee data is stored on their systems and should keep retention periods under review to ensure that personal data isn’t kept for longer than needed. Remember that personal data isn’t limited to what is put in an email, it can also include other forms such as WhatsApp, Instant Messenger and text messages.
It’s good practice to have a clear policy around data retention with guiding principles that set out whether you delete data after a certain amount of time.
Global workforces and agile working
We continue to see year-on-year growth in flexible working, with employees increasingly working remotely, sometimes in other countries.
Having an employee moving to work in a different country can be a minefield from a legal and tax perspective. An important decision for employers to make is whether to leave employees on their UK contract or move to a local law contract. In many cases, the latter is preferable given that minimum statutory laws around issues such as social security, tax, severance payments etc can automatically apply (and can vary dramatically between countries). Seeking specialist legal advice in this scenario should certainly be considered.
If you need any help or advice on any of these areas please do drop us a line on firstname.lastname@example.org.