What changes do we need to make to our contracts, ready for new starters in April?

The headline changes from 6 April 2020 to Statements of Employment Particulars are not rocket science – but the devil is most definitely in the detail of the legislation. We look at what the changes mean for “workers”, for new employment contracts as well as existing ones, and where the pitfalls lie.

Employers need to be getting ready their new contracts/statement of employment particulars now in order to be compliant with a number of changes required under Section 1 Employment Rights Act 1996 (ERA 1996) which take effect from 6 April 2020. With only 7 weeks to go, decisions to be made as to how to approach the changes, and the requirement for new statements to be given on day 1 of the job, it’s important to start the process now so that contracts/statements are ready and HR teams know what the rules are.

Who needs to be given a new-style section 1 statement or contract, and when?

All employees and “workers” starting on or after 6 April 2020 need a new-style statement from day 1 of the job.

“Workers” are those without full employment status, but who contract to do the work personally. So it may include freelancers and those who consider themselves self-employed, but who are unable to send a substitute to do the work on their behalf. There are a number of employment status tests to determine whether or not someone is a “worker”. The fact that they may be taxed as “self-employed” does not necessarily mean they are not “workers” under Employment law. “Workers” do not have the right to claim unfair dismissal, but they are entitled to holiday pay and rest breaks etc under the Working Time Regulations 1998, the National Minimum Wage and potentially to be auto-enrolled into a pension scheme. They are also entitled not to be discriminated against under the Equality Act 2010.

Currently “workers” have no right to a statement of employment particulars. Employers need to take advice and establish who in their organisation are “workers” under Employment law. This could be a sea change for organisations who engage casual workers and others without the full rights of an employee. However, the statement will need to be carefully drafted to ensure it does not point to employee status. This is not easy in the light of ERA requirements to include information in the section 1 statement about disciplinary and grievance procedures (which in themselves pose risks of becoming contractual entitlements if not dealt with carefully), as well as any benefits and paid leave, which are potential pitfall areas.

For employees starting on or after 6 April 2020, organisations will need to review current template statements/contracts of employment and add in the additional requirements discussed below. There is no longer a grace period of 2 months for the statement to be given to the employee, so almost all documentation must be ready from day 1 of the job.

What about our existing employees and workers?

Employees whose employment began before 6 April 2020 do not need to be given a new-style statement/contract. However, they do have the right to ask for one on or after 6 April (and at any time up to 3 months after the end of their employment). If they do so, they must be given the statement/contract within 1 month, and it needs to include all the additional information of a new-style statement discussed below. They are only able to ask for this once.

Workers who started a job before 6 April 2020 do not have a corresponding right to get a new-style statement on request.

However, for both employees and workers, if an employer makes changes to their terms and conditions on or after 6 April which involves one of the new requirements (e.g. details about benefits or training), then the employer will need to make both workers and employers aware of those changes (even if it is not something currently mentioned in an existing employee’s statement/contract). This must be done in the normal way: at the earliest opportunity, and in any event within one month of the change. Employers will have to determine whether they would rather issue a new statement/contract with the changes incorporated, or simply notify staff of the change. In either case, it continues to be important that documentation draws a distinction between workers and employees to ensure that documents given to workers do not point towards employee status (although what happens day-to-day in practice is also a factor to take into account as well as any contract wording).

What does the new-style section 1 statement or contract need to include that is different from before?

There are a number of new requirements to be added. However, whilst most of them must be in the statement/contract itself from day 1, the legislation specifies certain types of information where details can be contained in another document, but which must still be given on day 1, and other types of information where details can be contained in another document, but can be given within 2 months of starting the job. In addition, if there is nothing to say about certain types of information, for the most part that fact must also be stated. This is where it is important to get advice on drafting to ensure that all the correct pieces of information are included in the statement/contract from day 1 (in one document), the correct additional documents are also given on day 1, and the other information that may be given within 2 months is noted and complied with.

The new additional requirements not previously in Section 1 statements are:

1. In addition to hours of work and normal working hours, the days of the week the employee/worker is expected to work and whether hours/days are variable and how.
2. Eligibility for other types of paid leave e.g. paid maternity leave, paternity leave, SPL, compassionate leave if paid, bereavement leave and anything else. However, great care needs to be taken in drafting to avoid making discretionary paid leave into a contractual entitlement when including it in the statement/contract. In addition, employers will need to be thinking about how any compassionate leave or bereavement entitlements and/or policies tie in with the new right to statutory Parental Bereavement Leave and Pay. Additional care also needs to be taken to ensure that workers are not treated as employees in their statement/contract.
3. Any probationary periods, including duration and conditions. A probationary period is defined as a temporary period starting at the beginning of the job intended to assess the worker’s suitability; again care needs to be taken to ensure a statement/contract for workers does not look and sound like a statement/contract for employees.
4. Any remuneration or benefits which may not otherwise be specified – not just pay, so including e.g. vouchers, free lunches etc. Again, employers who do not normally mention all benefits in the statement/contract should take advice on drafting in order to avoid creating contractual entitlements if discretion is meant to be retained, and what is included for worker statements should be considered carefully;
5. Any training entitlements or requirements by the employer (including where the employer will not bear the cost). Oddly, a distinction is made between entitlements and requirements in this regard which are treated differently.

Don’t forget that the ERA 1996 already specifies certain pieces of information which must be included in the statement/contract – i.e. a single document, and not instalments, and others which can be given separately within 2 months (e.g. information about pensions).

What do employers need to do now about section 1 statements and employment contracts?

Employers should:

• Take advice on who in their organisation may be a worker so they are given a compliant statement which is not like an employee’s statement/contract
• Conduct employment contract reviews to add in the new additional requirements into the contract, whilst avoiding inadvertently creating new contractual entitlements, and taking into account those specified types of information which may be included in separate documents and those which may not (i.e. which must be in the statement/contract itself)
• Consider whether existing employees will be given a new-style statement/contract anyway to harmonise documentation across the organisation, or whether this will create employment relations or contractual difficulties especially where there have been previous TUPE transfers
• Ensure HR teams understand who needs to be given the new-style statement/contract including any related documentation and when
• Ensure HR teams understand what to do if existing employees ask for a new-style statement
• Be aware of the new requirements for any future changes to terms and conditions which may have to be notified to existing staff even though they do not appear in their current contracts.

Our Employment law team is on hand to help advise you on all the above and conduct document reviews/produce “worker” templates where required. Having scoped the work involved, we would be pleased to agree a fixed fee with you for conducting this work. Please do not hesitate to get in touch with your normal Employment team contact or another member of the team.