Are your contracts up to date?

From 6 April 2020, the requirements for the basic written statement of employment particulars will change. As well as changing what the statements need to cover, they also change when and to whom they need to be provided. Employers should start getting ready for this development and reviewing their terms in preparation.

Background

Currently employers are required to give a written statement of particulars to their employees within two months of them starting work if they are engaged for one month or more. These statements are also often referred to as "Section 1 Statements" as the requirement for them is set out in Section 1 of the Employment Rights Act 1996 ("ERA"). Many employers incorporate the Section 1 Statements into their contracts of employment or cross refer to handbooks and other policies for some of the information.

However, from 6 April 2020, as announced in the government's Good Work Plan following the Taylor review there will be a number of changes to Section 1 Statements relating to who is entitled to them, when they should receive them, what information needs to be provided and where.

Who do they need to be given to and when?

Currently only employees are entitled to Section 1 Statements but from 6 April 2020, it will be necessary to also provide Statements to workers as well as employees and there is no minimum service requirement. This is a significant change and may have real practical impacts for businesses that heavily rely on workers in their staffing structures – see below under "practical impact". The statements also need to be provided on or before the individual starts their engagement (see below for some exceptions to this).

The new requirements do not apply to employees employed before 6 April 2020, however, they can request a Statement complying with the new requirements and it will need to be provided within one month of a request.

What additional information needs to be provided and where should it be included?

Section 1 Statements may be given as a separate statement or included in a letter of engagement or contract of employment. Whereas previously employers were allowed to include some information in another document, now the majority of information needs to be included in a single document (known as the "Principal Statement"). On top of the current information required in the Statement, the following additional information needs to be included in Statements from 6 April 2020:

• The days of the week that they are required to work and whether the days are variable and, if so, how they vary;
• Any paid leave entitlement which is additional to annual leave and holiday pay (such as maternity and paternity leave) ("Additional Paid Leave");
• Details of all remuneration and benefits;
• Any probationary period, including any conditions and its duration, and
• Any training entitlement provided by the employer (including whether any training is mandatory and/or must be paid for by the worker ("Mandatory Training")).

Going forward from April 2020 the Statement can only refer to another "reasonably accessible" place (e.g. the employer's intranet or Handbook or requested from HR) where terms relating to the following can be found:

• incapacity and sick pay;
• Additional Paid Leave;
• pensions/pension schemes;
• certain information about disciplinary and grievance procedures; and
• any training entitlements (other than terms relating to Mandatory Training).

The Statement can only refer to the law or to a collective agreement in relation to terms on notice periods but it is not permissible to refer to any other accessible document for this information.

From 6 April 2020, most of the terms in the Section 1 Statement need to be given on day one or before. There are still some exceptions to this though and the following information can be given in a later instalment in a supplemental statement as long as it is given within 2 months of the job starting:

• pensions/pension schemes
• collective agreements
• certain information about disciplinary and grievance procedures
• any training entitlements (other than terms relating to Mandatory Training)

If there is no information in relation to a particular that is required, that must be stated.

Consequences of failing to comply?

Employees and workers can make a complaint to a tribunal that their employer has failed to provide a Statement or has given an inaccurate one and the tribunal can make a declaration confirming or amending or substituting their terms. If the individual has another substantial claim (e.g. unfair dismissal/ discrimination/breach of contract and working time and wages claims) then they may also be entitled to compensation of between 2 and 4 weeks' pay (capped at the statutory limit). The Taylor Review had proposed making this a standalone claim but currently that does not look like it is being taken forward.

Financially the risks are low unless there are substantive class actions that such claims are attached to. However, given that this right now extends to workers and given the number of worker status claims, particularly in the gig economy, in recent years the risks are potentially higher.

Practical impact and steps for employers

In practice, these changes mean that businesses need to have processes in place to ensure they are on top of their paper work and provide information at the right time and in the right way to the right individuals. It will also have an impact on what information should be received and provided as part of business transfers and outsourcing arrangements under TUPE. Determining whether contracts are compliant with the new changes on Section 1 Statements is not entirely straightforward and could be an administrative burden for employers. We are happy to assist on this and we can offer a review of a template employment contract to flag changes needed to bring in line with the Section 1 changes as well as providing templates.

These new requirements may also provide a good opportunity to review and refresh contract terms to check they are still fit for purpose and comply with recent employment developments. For example: have your contracts been updated to reflect changes on holiday pay, have you considered adding in PILONs since recent tax changes, are they appropriate for your employees, do they protect your business and do your contracts and staffing structures offer sufficient flexibility to deal with changes in staffing needs in an unpredictable market? We can also discuss additional pricing structures to update your contracts and reviewing them from a more strategic position to bring in line with your businesses' needs.

Also, as workers will now be entitled to Section 1 statements, clients will also need to be on top of their staffing structures and understand what workers they engage and on what terms, whilst also being alive to the different rights and consequences of an individual being found to be an employee, worker or genuinely self-employed. This will also be important given the proposed changes to the IR35 regime and the extension of the current off-payroll working rules to large and medium sized companies in the private sector from 6 April 2020. Essentially these rules will mirror the current approach in the public sector, shifting responsibility for IR35 compliance (that is accounting for tax and national insurance contributions in circumstances where a consultant engaged through a personal services company is to all intents and purposes an employee of the end-user) from the personal services company to the end-user client (or a third party intermediary where applicable). It is therefore important that organisations look into whether self-employed individuals working through personal service companies are genuinely self-employed or not. Again, we can help with conducting a review of working and staffing arrangements to help businesses understand and address such risks.

For more information, please get in touch with the employment team at Foot Anstey.