Employment Law Coffee Break | Fire and rehire, Covid-19 update, Vento increases and our March pensions spotlight

Fire and rehire: new statutory code of practice

Labour Markets minister, Paul Scully, has announced a new statutory code on the practice of "fire and rehire", the procedure whereby an employer dismisses a worker and rehires them on new, less favourable terms. There have been increasing calls during the Covid-19 pandemic for legislation around fire and rehire practices. Late last year the government confirmed that it would not be introducing any statutory protection for workers, but instead asked Acas to publish guidance for employers.

The new statutory code "will detail how businesses must hold fair, transparent and meaningful consultations on proposed changes to employment terms", including practical steps that employers should follow. A court or Employment Tribunal will be able to take the code into account when considering relevant cases, including unfair dismissal, and have the power to apply an uplift of up to 25% of an employee's compensation if an employer unreasonably fails to comply with the code where it applies.

We must now wait to see the detail of the new code and what this means for businesses in practice. The process of fire and rehire is used by employers in a number of circumstances, including harmonising terms and conditions following an acquisition or as part of a wider business re-organisation; in practice, while consultation enables agreement to be reached with a number of the workforce, it can be difficult for employers to agree changes with each individual employee given their particular circumstances. Employers will need to take particular care to ensure full and fair consultation in line with existing statutory provisions and the code, given the proposed uplift in compensation and the difficulties in effectively waiving a statutory protective award for failure to collectively consult under a  settlement agreement.

Covid-19 update: government sets out next steps

The government has confirmed that new guidance will be published on 1 April which will outline the steps people can take to reduce the chances of catching Covid-19 and passing it onto others. Principles that employers can follow will also be published on 1 April, to help them decide how to reduce risks in the workplace.  

While individuals should continue to follow current guidance until 1 April, the government has stated that "vaccines and treatments mean we can transition to managing Covid-19 like other respiratory illnesses" and the updated guidance to be published on 1 April will:  

• advise people with symptoms of a respiratory infection, including Covid-19, and a high temperature or who feel unwell to try to stay at home and avoid contact with other people, until they feel well enough to resume normal activities and they no longer have a high temperature – this advice also applies to children and young people attending school, college or childcare, which may impact on employees with caring responsibilities;
• advise anyone with a positive Covid-19 test result to try to stay at home and avoid contact with other people for five days; and
• provide advice for individuals who need to leave their home when they have symptoms or have tested positive, including avoiding close contact with people with a weakened immune system, wearing a face-covering and avoiding crowded places.

The press release confirms that free Covid-19 testing for the general public will end on 1 April. Covid-19 tests will continue to be available to "people at risk of serious illness from Covid-19, and eligible for treatments… to use if they develop symptoms, along with NHS and adult social care staff and those in other high-risk settings". Guidance on those whose immune system means they are at a higher risk is also due to be updated. Vaccination continues to be encouraged with the government considering that vaccines remain the "best defence"; spring boosters are now being offered to the elderly, care home residents and the most vulnerable. A number of changes and new guidance is also being confirmed for adult social care settings.

Employers must now await the new guidance on 1 April to understand appropriate steps for reducing workplace risk. It is likely that many of these will not come as a surprise given the guidance that has been in place over the last two years. Dame Jenny Harries, Chief Executive of the UK Health Security Agency has stated that "Covid still poses a real risk to many of us, particularly with case rates and hospitalisations on the rise. That is why it is sensible to wear a mask in enclosed spaces, keep indoor spaces ventilated and stay away from others if you have any symptoms of a respiratory illness, including Covid".

Employers should also note her comments that "the pandemic is not over and how the virus will develop over time remains uncertain"; the government has confirmed that the situation remains continually under review with "plans in place to enable rapid testing response should a new health threat emerge, such as a new variant of concern emerge" and the "NHS Covid-19 app for contract tracing [remaining] active and if needed [it] could be used as a tool for dealing with any future threats from Covid-19".

Injury to feeling awards: new Vento bands announced

Vento bands are used as a means of assessing injury to feelings awards; new Presidential Guidance has now been issued on employment tribunal awards for injury to feelings, including updated Vento bands which take into account the retail price index (RPI) measure of inflation. For claims presented on or after 6 April 2022, the bands will be as follows:

• Lower band £990 to £9,900 for less serious cases;
• Middle band £9,900 to £29,600 for cases that do not merit an award in the upper band;
• Upper band £29,600 to £49,300 for the most serious cases;
• In excess of £49,300 for the most exceptional cases.

The new rate of a week's pay and maximum unfair dismissal compensation which will also apply for appropriate terminations on or after 6 April have already been announced.  

HR pensions spotlight: things to consider for the new tax year

There were no pensions-specific announcements in last week's spring statement. The Chancellor's announcements do provide some food for thought though:

Take another look at salary sacrifice  

A temporary increase in national insurance contributions (NICs) is due to come in on 6 April 2022, with the new Health and Social Care Levy applying from next year. If you don't already offer salary sacrifice for pension contributions, it could be worth looking at it. It won't be suitable for every workforce and it isn't clear how it will fit with the Health and Social Care levy being introduced from April 2023, but it could bring income tax and NIC savings. Under current rules, neither you nor your employees pay income tax or NICs on salary given up ("sacrificed") to pay pension contributions. You can choose whether to keep that saving to help offset your costs or pass some or all of it on to employees. If you already offer salary sacrifice, there might still be some things you can look at. For example, is there anything you can do to increase take up? And do you wish to take another look at what happens to the employer NIC savings, to review the extent to which they may be able to help offset your increased NIC costs?

Remind workers earning less than £10,000 that they can save for a pension even if they don't pay NICs

The announcement that the National Insurance Primary Threshold will increase from £9,880 to £12,570 from July 2022 does not affect the earnings trigger and qualifying earnings thresholds for automatic enrolment. These have been set at £10,000 and £6,240 to £50,270 respectively for April 2022 to 2023. You will already be automatically enrolling and re-enrolling jobholders aged 22 or over (but below state pension age) who meet the earnings trigger of £10,000, but if you have jobholders aged 16 to 75 who earn between £6,240 and £10,000, is it worth reminding them that they can opt in to pension saving and receive an employer contribution?

Note the impact on pension tax relief

We expect the reduction in the basic rate of income tax from 20% to 19% from April 2024 to be reflected in the draft provisions the government has said it will publish this summer to introduce a top-up payment for net pay savers from the 2024-25 tax year. At the moment, employees who make pension contributions through relief at source arrangements (typically by saving in group personal pension plans or SIPPs) receive a 20% top up to their pension savings (basic rate tax relief on their pension contributions) even if they don't earn enough to pay income tax. In contrast, employees who contribute via net pay arrangements (typically occupational pension schemes managed by trustees) receive tax relief on pension contributions at their marginal rate – so nothing if they don't earn enough to pay income tax. The government has committed to address this difference in treatment by introducing a top-up payment for people saving through net pay arrangements. Under provisions to be included in a new Finance Bill, HMRC will contact eligible members after the end of the 2024-25 tax year. 

Take a look at what your employees are contributing to their pension

The reduction in basic rate tax to 19% will mean a lower top-up payment from HMRC from April 2021, so employees may wish to increase their pension contributions. This should not wait until 2024. Are your employees contributing enough to achieve a moderate or comfortable level of retirement pension? Can you do more to ensure your employees have the information they need to make informed choices, such as by reviewing the performance of your pension provider in achieving employee engagement and by inviting them to hold staff presentations? Have you considered setting up a governance committee to oversee on an ongoing basis the performance of your workplace pension and its success in engaging and supporting your workforce? A recent survey by Aviva revealed that half of over 50s regret not saving into their pension sooner. Another survey undertaken by the provider of the People's Pension found that, in more than 50% of cases, the minimum level of pension contributions was being paid, but only 7% of those savers understood that these contributions were insufficient to achieve a moderate or comfortable retirement. Helping your employees to understand these issues from an early age will aid their retirement planning and your workforce planning.

If you would like to discuss any aspect of the above in more detail, please speak to your usual Osborne Clarke contact or Claire Rankin, Partner in our Pensions team.