Author: Glenn

Legislation has been introduced in Parliament to upgrade UK workers’ rights.

The legislation is wide ranging with the intention of tackling poor working conditions and benefitting businesses. A summary of the main changes are:

• The existing two-year qualifying period for protections from unfair dismissal will be removed, delivering on the Labour manifesto commitment to ensure that all workers have a right to these protections from day one on the job.
• The government will also consult on a new statutory probation period for companies’ new hires. This will allow for a proper assessment of an employee’s suitability to a role as well as reassuring employees that they have rights from day one, enabling businesses to take chances on hires while giving more people confidence to re-enter the job market or change careers, improving their living standards.
• The bill will bring forward 28 individual employment reforms, from ending exploitative zero hours contracts and fire and rehire practices to establishing day one rights for paternity, parental and bereavement leave for millions of workers. Statutory sick pay will also be strengthened, removing the lower earnings limit for all workers and cutting out the waiting period before sick pay kicks in.
• Accompanying this will be measures to help make the workplace more compatible with people’s lives, with flexible working made the default where practical. Large employers will also be required to create action plans on addressing gender pay gaps and supporting employees through the menopause, and protections against dismissal will be strengthened for pregnant women and new mothers. This is all with the intention of keeping people in work for longer, reducing recruitment costs for employers by increasing staff retention and helping the economy grow.

A new Fair Work Agency bringing together existing enforcement bodies will also be established to enforce rights such as holiday pay and support employers looking for guidance on how to comply with the law.

Employers and employees who would like more information on the scope of the new legislation can view a Department for Business and Trade press release at https://www.gov.uk/government/news/government-unveils-most-significant-reforms-to-employment-rights.

The Department for Work and Pensions has published an outline of the new Pensions Scheme Bill. There are three main objectives that the government want to achieve, and they are set out below. However, the process of consultation and redrafting that will no doubt be required will probably delay the parliamentary process for some time.

The three objectives outlined by the Minister for Pensions are:

“First, the Bill will enable the consolidation of multiple small pots, helping bring individuals eligible pots together in one place. This will support people to keep track of their savings so they can live better and more comfortably in retirement, but it will also mean that consolidators will generate scale at a greater rate, improving opportunity for investment.

“Second, the Bill will introduce a Value for Money Framework for defined contribution schemes, which you’ve already mentioned, to drive consolidation of the sector. We want to see fewer, larger providers who have the scale and expertise to invest in a more diverse portfolio. The Value for Money Framework will also contribute to economic growth, as there will be an increased focus on assets that can deliver long term value.

“Third, the Bill will introduce a requirement for pension schemes to offer retirement products, including a default retirement solution. It is crucial that we improve the options for people when they reach retirement age, and many have said to me that people feel as if they’re left on their own at that crucial time that they retire. But we need to go further, and in July, the Chancellor asked me to lead the first phase of the Pensions Review. I would like to thank all of you in this room who contributed to our Call for Evidence, especially given the short timeframe of our consultation.”

Chancellor Rachel Reeves has recently introduced a series of new measures aimed at advancing the priorities of the new government. The key announcements include:

• New funding for breakfast clubs at 750 schools with primary-aged pupils.
• The publication of a new Industrial Strategy in the spring.
• A reversal of the decision to write off over £640 million in Covid PPE contracts.
• HMRC will consult on the implementation of e-invoicing for businesses and government departments.

Further details are as follows:

School Breakfast Club Pilot

The Chancellor announced a £7 million breakfast club pilot that will invite up to 750 schools with primary-aged pupils to participate. This funding will allow these schools to provide free breakfast clubs for their students during the summer term (April-July 2025). The initiative aims to reduce the number of hungry children starting the school day, ensuring they are ready to learn.

Covid Corruption Commissioner

The Chancellor declared that no Covid-era PPE contracts will be abandoned or waived until they have been reviewed by the new Covid Corruption Commissioner, who will be appointed in October. This decision affects £647 million in Covid PPE contracts that were previously set to be waived.

Industrial Strategy

The Chancellor emphasized that the Industrial Strategy will be central to the government’s mission to stimulate economic growth, unlock investment, and improve prosperity across the country. A green paper is expected to be published shortly outlining the long-term sectoral growth and priority industries of the government

HMRC Package

Chancellor Reeves also detailed a package of reforms aimed at enhancing the UK’s tax system to strengthen the foundations of the economy. As part of this initiative, HMRC will launch a consultation on e-invoicing to encourage its broader adoption among UK businesses and government departments. Additionally, a new Digital Transformation Roadmap is expected to be published in Spring 2025, outlining HMRC’s vision to become a digital first organisation.

There are special VAT reverse charge rules in place for certain building contractors and sub-contractors. These regulations, which came into effect on 1 March 2021, make the supply of most construction services between construction or building businesses subject to the domestic reverse charge. The reverse charge only applies to supplies of specified construction services provided to other businesses within the construction sector.

If you are VAT registered in the UK and supply services to the building and construction industry, you must use the VAT reverse charge if the following conditions are met:

• Your customer is registered for VAT in the UK.
• Payment for the supply is reported under the Construction Industry Scheme (CIS).
• The services you provide are standard or reduced-rated for VAT.
• You are not an employment business supplying staff or workers, or both.
• Your customer has not provided written confirmation that they are an end user or intermediary supplier.

When these rules apply, sub-contractors do not add VAT to their supplies for most building customers. Instead, contractors are responsible for paying the deemed output VAT on behalf of their registered sub-subcontractor suppliers. And note, contractors can then reclaim the same amount of VAT as input tax on their VAT return, subject to the usual rules. In effect, contractors are paying their subcontractors' VAT to HMRC and then claiming it back on the same VAT return.

It is important for businesses to understand and comply with these rules in order to avoid potential penalties from HMRC.

New regulations that prohibit employers from withholding tips for employees in the hospitality, leisure, and services sectors took effect on 1 October 2024. This change follows the enactment of The Employment (Allocation of Tips) Act 2023, commonly referred to as the Tipping Act, along with the statutory Code of Practice on the fair and transparent distribution of tips, which also took effect on 1 October 2024.

This means that more than 2 million workers will have their tips protected. HMRC has estimated that this new law will mean an estimated £200 million a year will go back into the pockets of hard-working staff by retaining tips that would have otherwise been deducted. These new measures apply in England, Scotland and Wales. Employment policy is devolved to Northern Ireland.

Employers who violate these rules could face fines or be required to compensate their staff. Workers will have the ability to hold their employers fully accountable through employment tribunals.

The statutory Code of Practice provides businesses with advice on how tips should be distributed among staff. The Code of Practice is statutory and has legal effect, meaning it can be introduced as evidence in an employment tribunal.