As a UK employer, you will be following the development of the Employment Rights Bill and asking what it means for you. There's a lot in it, including the creation of the Fair Work Agency.
So what can you do to ensure you are ready for that? The Fair Work Agency will be a new state enforcement agency covering a wide range of employment rights.
It will take over enforcement of national minimum wage from HMRC and will also cover statutory sick pay, modern slavery and holiday pay.
Its introduction is anticipated to be a marked shift in enforcement approach for employment rights in connexion to pay, and one that employers need to get ready for. So why is that?
Firstly, for the first time, all of the pay a worker is entitled to, whether they're working or on a period of leave, will be enforced by the same body.
Whilst national minimum wage is currently enforced by HMRC, holiday pay, sick pay and other rights have relied on an individual or their union making a claim to the Employment Tribunal.
And given the complexity of payroll calculations, employees often don't realise they've been underpaid in the first instance or lack the knowledge or resources to pursue a claim.
So enforcement is expected to increase. Secondly, lots of points as to how the Fair Work Agency will operate are unknown at the moment, creating uncertainty.
Will the agency run joint reviews across national minimum wage, holiday pay and sick pay? Will there be nudge campaigns in the same way as the RAFA tax? And what skills will the agency's team have?
Tax, national minimum wage, data analytics, employment legal?
So whilst unknown, it's expected enforcement will become more visible to employees and the wider business through these reviews.
Thirdly, there's more uncertainty as to whether the financial and reputational cost of non-compliance will increase.
Will there be an extension of the national minimum wage penalty regime of a maximum of 200% penalties? Will the national minimum wage naming and shaming regime be extended to other areas?
So non-compliance is expected to become more costly.
So based on the above, what we can be certain of is that it's critical to be ready for when the Fair Work Agency arrives and to make sure you're on top of your pay-related compliance obligations.
So how can you start to do this?
Well, firstly, it's recommended that you identify current risk areas in national minimum wage, holiday pay or sick pay compliance, either through process reviews to highlight control gaps or data analysis to highlight variances. You can then identify any changes required to safeguard against future compliance failures.
And given recent focus on minimum wage in particular, you may have done some of this previously, so now could be a good time to revisit any lessons learnt or recommended improvements.
Secondly, reviewing any upcoming planned payroll, time or HR system changes or projects so they are future-proofed across all areas of pay compliance prior to them being introduced.
Thirdly, use any opportunity to revisit pay policies or remuneration structures to ensure they meet all compliance obligations and would support increased scrutiny from this new regulatory body.
And finally, if you have a tax team, draw on their expertise of working with HMRC, any tax principles or policies they may have.
To conclude, whilst a lot is unknown, a lot is in your control to be ready for the new enforcement body. Get in touch for more advice.
