UK CEOs are starting 2017 with greater optimism about their company’s growth prospects than 12 months ago, despite many still having concerns about the global economic outlook, according to PwC’s 20th CEO Survey.
However, there are still some challenges. The PwC survey highlights that the main risks facing CEOs this year include the uncertainty surrounding the Brexit negotiations, tackling cyber security and dealing with skills shortages.
Adding to these challenges are several employment law changes being introduced that will also impact UK companies.
CEOs need to be aware of these, and ensure their HR teams start to prepare for them now as many of the new laws will involve having to collate additional data. What’s more, there are also cost implications.
- Gender pay reporting legislation
Perhaps the most significant law being introduced this year is the gender pay gap reporting legislation, which comes into force on 5 April 2017.
For the first time, organisations with 250 or more employees will be required to publish information on their gender pay gaps. This includes their mean and median gender pay and gender bonus-pay gaps, as well as information on the proportion of men and women receiving a bonus payment.
Meeting this new requirement is likely to be a challenge for many companies. Although a few, mainly very large, service-sector firms have previously reported their gender pay gap on a voluntary basis, the issue is new to many employers and the precise methodology will be new to all.
Employers need to base their first report on the pay period in which 5 April 2017 falls, while the required bonus information should take into account the 12 months leading up to this date.
The report must be published in English, by April 2018, on a company website that is accessible to employees and the public. There must be a written statement signed by a director vouching that the report is accurate, and it must remain on the website for three years.
- General Data Protection Regulation is on the horizon
Another change that CEOs must have on their radar is the introduction of the General Data Protection Regulation (GDPR) – new governing legislation for collecting and processing personal data in the EU. Although it does not come into force until May 2018, the scope of the changes under the GDPR means that preparing for it will be a high priority for UK employers in 2017.
In addition to changes to how employers collate and handle data, the GDPR creates a new enforcement system, with significantly higher maximum penalties than under the current Data Protection Act. Organisations breaching their obligations under the GDPR risk fines of up to €20 million or 4% of annual worldwide turnover, whichever is higher.
- National minimum wage increase cycle changed
There are changes this year to the national minimum wage cycle, which is being aligned so that increases for all age groups take place in April rather than October. This is in line with the introduction of the national living wage – the minimum wage rate for workers aged 25 and over – in April 2016. While the rates for the lower age groups have traditionally increased on 1 October each year, this will now change to 1 April. The alignment will mean a further increase on 1 April 2017 for workers below the age of 25, on top of their October 2016 increase.
- Apprenticeship levy introduced
In the spring the government will change the way it funds apprenticeships and some employers will be required to contribute to a new apprenticeship levy. Employers with an annual pay bill of more than £3 million will be required to pay a 0.5% levy on this, starting on 6 April 2017.
Large employers will be able to access levied amounts, plus a government top-up of 10%, to fund apprenticeships from accredited training providers. Smaller organisations that are not required to pay the levy will also be able to receive funding for accredited apprenticeships by contributing 10% towards the cost of an apprenticeship, with the government paying the remaining cost.
- Changes to rules for employing foreign workers
For companies employing or planning to employ foreign workers, it is important to note that a new “skills charge” of £1,000 per worker is set to be introduced in April 2017 for employers sponsoring foreign workers with a tier 2 visa.
The reasoning behind this new charge, which will be in addition to the current fees for visa applications, is to encourage businesses to recruit and train UK employees. It’s anticipated this will reduce their reliance on migrant workers. The minimum salary threshold for “experienced workers” applying for a tier 2 visa is also expected to increase to £30,000.
These five employment law changes are going to have a significant impact on many companies in the UK. The large compliance projects for data protection and gender pay gap reporting especially will take up a lot of preparation time and it’s important for companies to start the process now. In relation to gender pay gap reporting, while there’s no legal obligation on employers to publish any commentary on their figures, they need to be aware of the potential damage to their reputation of failing to put the figures in context, particularly as the reasons behind a gender pay gap are often outside the control of the individual organisation.
CEOs must also be mindful that their costs are likely to increase when the apprenticeship levy and the additional fees for sponsoring foreign workers are introduced and ensure they budget for this.
XpertHR provides advice and guidance for employers to ensure they keep on top of employment law issues – including new requirements – as well as HR policy issues. This includes practical guidance on gender pay gap reporting, ‘How to measure and report a gender pay gap’, which takes into account changes to the reporting requirements introduced by the final draft gender pay gap reporting Regulations in December 2016.