UK Employment Law Coffee Break | Autumn statement, redundancy selection and our HR immigration spotlight

What did the Autumn Statement say for employers?

On 17 November 2022, the chancellor of the exchequer, Jeremy Hunt, delivered the Autumn Statement; recognising that it is a time of "significant economic challenge" for the UK and global economy, the statement is based around three priorities of "stability, growth and public service".   

Asking those on the highest incomes to pay larger share

As the "fairest way to restore the public finances", the statement looks at asking "everyone to contribute a little, with those on the highest incomes and those making the highest profits paying a larger share". In practice, this sees the additional rate threshold for income tax decreasing from £150,000 to £125,140 from 6 April 2023 impacting those in the highest income householders.

As expected, although the chancellor did not raise the rate of income tax, the four-year freeze in the personal tax allowance of £12,570 and higher rate income tax threshold (of £50,270), which was due to end in April 2026, has been extended a further two years to April 2028. Similarly, the national insurance contributions upper earnings and profits limit, which were aligned to the higher rate income tax threshold £50,270, will also remain frozen until April 2028. The result is that millions more people will be brought either into the tax system for the first time or into the higher or additional rate bands. The statement recognises steps that have already been taken to "help households with the rising cost of living through the tax system in the short term" with the raising of the threshold at which workers start paying national insurance contributions in July from £9,880 to £12,570 and the reversal of the previously proposed Health and Social Care levy.

Dividend tax

Recognising that individuals work through different models and that a "fair tax system ensures that individuals doing similar work pay a similar amount of tax", the chancellor has also cut the tax-free allowance on dividend income from £2,000 to £1,000 from April 2023 and then further to £500 from April 2024.

Electric vehicles

Vehicle excise duty will be introduced on electric vehicles from April 2025 in light of consumer behaviour, but the government has set company car tax rates until April 2028 to provide longer-term certainty and at a level to incentivise the take-up of electric vehicles.  

Minimum wage commitments

The statement confirms the government's commitment "to tackling low pay" announcing that from 1 April 2023 the statutory National Living Wage for those aged 23 and over will increase by 9.7% to £10.42 an hour, which is expected to benefit over 2 million workers. Employers should also have in mind that the government's "ambitious target" remains for the NLW to reach two thirds of median earnings by 2024 and for the age threshold to be lowered to those aged 21 and over.

The government has also accepted the Low Pay Commission's recommendations for the following National Minimum Wage rates to apply from April 2023:

• Increasing the rate for 21-22 year olds by 10.9% to £10.18 an hour
• Increase the rate for 18-20 year olds by 9.7% to £7.49 an hour
• Increase the rate for 16-17 year olds by 9.7% to £5.28 an hour
• Increasing the apprentice rate by 9.7% to £5.28 an hour; and
• Increasing the accommodation offset rate by 4.6% to £9.10 an hour. 

Back in September, it was announced that the "Real Living Wage" (RLW) rates, set by the Living Wage Foundation, were  rising to £11.95 in London and £10.90 across the rest of the UK with immediate effect. The wage increase reflects what the LWF considers people need to earn to cover everyday needs. The LWF states that over 11,000 employers voluntarily pay the RLW. The RLW is not the same as the National Living Wage which is set by the government (following recommendations from the Low Pay Commission).

While the rise in the national minimum wage rates is welcome for employees, concern has been expressed that this places an additional burden on businesses with a high number of workers on these rates and who will now be under additional pressure to meet these increased costs.

Employee share plans

As expected, the chancellor did not make any new announcements specifically in relation to employee share plans. He confirmed the previously announced reforms to the tax-advantaged Company Share Option Plan (CSOP), namely that the government is increasing the generosity and availability of CSOP.

Ensuring people have the 'skills that businesses' need  

The government is looking to grow the economy by "increasing labour supply and increasing productivity" which will be facilitated by investing in ensuring that people have the skills that businesses and public services need. To support this, it is taking steps to ensure the education system provides the skills current and future employers need (for example through T-levels, higher technical qualifications, skills bootcamps and apprenticeships) and recognising the importance of supporting upskilling throughout people's lives: it is introducing the Lifelong Loan Entitlement from 2025 to provide more flexible finance for adults to study. 

While unemployment is close to its lowest rate in 50 years, there is concern that participation in the labour market is falling; there are now 630,000 more working age economically inactive individuals because of long-term sickness than there were before the Covid-19 pandemic, with the decrease in participation "seen particularly acutely within those aged over 50". The ONS has noted in its report that a range of factors could be influencing this recent increase but that "more understanding is needed about the impact of NHS waiting times, long Covid and the ageing workforce" and the government has now called on the Department for Work and Pensions to "thoroughly review workforce participation" with the intention that this work will conclude in early 2023.  

The government is also bringing forward a nationwide rollout of its In-work Progression offer from September 2023, which will mean that "over 600,000 Universal Credit claimants that are in work will be required to meet with a dedicated work coach so that they have support to increase their hours or earnings".

Retained EU law

We recently saw the introduction of the Retained EU Law (Revocation and Reform) Bill which as drafted would see the automatic "sunset" of retained EU law on 31 December 2023 unless specific legislation is introduced to preserve it. The sunset may be extended for specified pieces of retained EU Law until 2026. With the recent change in prime minister, the autumn statement confirmed that the government remains "committed to reforming retained EU law" and that "as part of this programme the government will move rapidly to review retained EU Law in key growth industries - including digital technology, life sciences, green industries, financial services and advanced manufacturing – to identify changes that can be made over the next year which have the greatest potential to unlock growth".

We will continue to track the progress of the bill, which has potentially significant implications for employment law.

What does this mean for employers?

While the chancellor has sought to reassure businesses and individuals that the government is managing the economic challenges the UK is facing, employers remain under pressure to ensure they have the right staff with the right skills for their business to grow successfully.

In the current economic downturn many employers are looking at ways to save costs and it is feared that one casualty of this could be continued investment into employee wellbeing programmes and other measures to support employees' physical and mental health. With Public Health England (now the UK Health Security Agency) having reported that the total economic cost of sickness absence, lost productivity through worklessness, informal care-giving and health-related productivity losses are estimated to be over £100bn annually, it is likely to be a false economy to cut back on the assistance available.

Getting the approach to both long-term and short-term sickness absence right requires more than just a clear policy. A consistent approach should be taken to managing sickness absence so far as possible with flexibility and other support measures implemented to keep employees able to continue working. Where an employee has a disability, reasonable adjustments will need to be explored and put in place.

As well as the direct costs of sickness absence, such as sick pay and temporary cover for the role, the broader impact of the absence (on other employees, management time and HR issues, as well as the effect on client service and productivity) is considerable. Proper support from managers and access to wellbeing programmes increases the likelihood of the employee successfully returning to work and decreases the overall direct and broader costs of sickness absence. Training and guidance for managers on both the legal framework and practical measures to take when employees are off work sick is critical to ensure employees are supported in returning to work at the appropriate time.

While the government has committed to continuing support for the most vulnerable with energy costs, many may well continue to struggle. Businesses are increasingly looking at a range of approaches to support employees through the current crisis, for example through a one-off payment to reflect increased living costs. Care must be taken to ensure that the terms on which such payments are being made are clearly set out and understood. Other ways that businesses may support their workforce include: considering flexible working requests, which may, for example, help ease childcare costs; supporting employees with the skills and expertise to progress through the business in higher paid roles; and considering other financial benefits such as hardship loans or company sick pay.

Where it is considered appropriate for cost savings to be achieved through changing terms and conditions of employment and/or the need to make potential redundancies, it is important to remember that these actions raise a number of legal and practical challenges for businesses. Even where changes to non-contractual benefits are proposed, employers should not underestimate the impact on employee relations and the risk of arguments that such benefits are in fact contractual through custom and practice. The use of "fire and re-hire" as a mechanism for changing terms and conditions has been headline news and employers should ensure that as well as complying with their legal obligations, consideration is given to new Acas guidance on this practice. We are currently waiting for a statutory Code of Practice to be published.  

Employers should also take steps to ensure that their workplace remains accessible to older workers – creating a supportive culture recognising the particular demands these workers may face and the benefits of most value to them – and that appropriate skills and training are put in place to avoid losing valuable staff. Age discrimination is an area where we are seeing increasing Employment Tribunal activity and where employers need to be particularly alert to claims from workers across all ages. 

You can read our fuller Insight on the tax measures which were announced.  

Tribunal rules on age discrimination and selection for redundancy

With redundancies on the rise, a recent decision of the Glasgow Employment Tribunal has issued a timely reminder of the careful considerations needed around selection criteria. In this case the claimant, who was cabin crew for an international travel operator, succeeded in her claim for unfair dismissal, indirect age discrimination and breach of contract where, following consultations with the trade union, the employer devised a selection process described as a "productivity tool" which included an analysis of individual productivity, attendance records, length of service and live sanctions. Due to challenges with this selection criteria, it was reduced to simply include sickness absence triggering the internal absence process, live sanctions (of a disciplinary or performance nature) and length of service.

Following the application of the selection criteria, the claimant was identified at risk of redundancy, but she felt that she was discriminated against on the grounds of age given that the reliance on length of service meant that she could never be safe from redundancy and that all those that were safe were over the age of 45. The employer argued that the parameters applied were not just length of service but also attendance and live sanctions, however, on the facts none of the employees in the pool had been scored down for live sanctions and none had met the attendance triggers meaning that length of service was the sole criterion which had any bearing on the selection.

The trade union brought a collective grievance on this point and while it was accepted that seniority was used by the respondent in, for example, promotions, the union's position was that it should only be used in these circumstances as a tie-breaker after other criteria were applied. The grievance was not upheld and the employer failed to address the question as whether, in practice, the absence of employees being scored down on the other two criteria meant that length of service was the sole predominant criteria in the vast majority of cases.

The tribunal found this approach to amount to unlawful age discrimination. It was mindful of the fact that due to the different tests which apply, a dismissal tainted by discrimination may nonetheless be fair. The tribunal concluded, however, that it was not within the range of reasonable responses for the respondent to persist with the application of a selection process which was manifestly discriminatory without attempting to address the concerns raised, to identify any alternative criteria which may have been applied, or at least seek to provide objective justification.

With many employers currently faced with considering potential redundancies, it is essential to give careful consideration to any selection criteria applied and to ensure that it does not have an unintended discriminatory effect. Here, the use of length of service as the defining criteria had a disproportionately adverse impact on younger people and, in particular, those under the age of 45, and was therefore indirectly discriminatory on the grounds of age.

Before commencing any redundancy selection process an employer should first ascertain whether there are any contractually agreed selection criteria (which may include though custom and practice). Even where this is the case, an employer should still give fresh consideration as to whether previously used criteria could have a discriminatory effect.

Length of service used to be a popular selection criteria used by employers due to its objective nature, however while it still may be fair within the context of broader selection criteria, it does pose potential risks of being indirectly discriminatory on the grounds of age, particularly in the context of an ageing workforce and sex. More generally selecting on this basis does not take into account the skill and aptitude of the employees being retained or selected for redundancy and therefore does not enable the employer to keep its most productive and talented employees.

As well as having fair criteria, it is important to remember that the criteria must be applied fairly in practice and it is important for all those involved in the process to understand the criteria they are applying and to monitor for any unintended discriminatory impact created when the criteria are applied in practice.  

Immigration spotlight: UKVI sponsor licence audits – how to remain compliant

Sponsor licence audits, both pre- and post- licence, are on the rise. How should you stay compliant and what do you need to know about an audit by the UK Visas and Immigration compliance team? Join our immigration team at our webinar on 30 November as we review the duties and responsibilities associated with being a licenced sponsor, the importance of compliance and the cost of getting it wrong. We will also be looking at a practical, real life, case study to show you what to expect on an audit and how to prepare for it. Remember failure to comply with your obligations as a licence holder can lead to your sponsor licence being revoked; compliance consistency is key. 

Click here for the latest edition of our immigration quarterly update covering: general update: digital status, approvals, delays and good news for sponsors; changes to the Right to Work check – what you need to know; sponsor licencing: the delays continue; and immigration policy – where are we now?