How Will Employment Law Changes in the New Financial Year Affect SMEs?

June 3rd, 2015

Employee Rights Employment Equality Job Businessman Corporate CoAs the new financial year gets under way, SMEs need to prepare for a series of employment law changes which could potentially affect their businesses. Here is a look at some key issues which employers need to be aware of.

Shared Parental Leave
Traditionally, mothers have been the ones to take paid time off work when their children are born. However, the system has become more flexible for parents of babies born on or after April 5 this year. The mother must still take the first two weeks off, but after that both parents can split Shared Parental Leave (SPL) between them over the first year of their child’s life.

Provided the mother and father both have enough continuous service with their employers, they can apply to take up to three blocks of leave each, taking some of this time off together if they wish. This is in addition to the existing arrangements for one or two weeks of paid paternity leave.

There are also changes to Adoption Leave, meaning new adoptive parents will now have the same rights to pay and time off as birth parents, plus a new right to attend adoption appointments.

The rules governing eligibility and implementation of SPL are quite complicated, and one survey found that more than 20% of HR staff haven’t yet made arrangements to implement the new rules. However, help is available for employers. ACAS has produced a good practice guide which explains how the whole system should work, and also sets out suggestions for an employer’s SPL policy.

Unpaid Parental Leave
As well as the introduction of SPL, the rules governing the separate system of “parental leave” also changed in April. This means each parent can take a total of up to 18 weeks unpaid time off to look after a child up to their 18th birthday. Again, there are various rules about who is eligible and how the periods of leave should be organised.

The onus is on employers to work out procedures, so it’s a good idea to discuss applications with individual parents and make sure you come up with an arrangement which will work well for everyone. This should hopefully mean you don’t have to spend a lot of time considering repeat requests.

Pensions Changes
Larger companies have already rolled out auto-enrolment for pensions, and now it is the turn of small companies. Everyone aged over 22 with an annual salary of more than £10,000 needs to be enrolled into a workplace scheme, with employers making contributions. Individuals can make a decision to opt out, but only after they have been auto-enrolled.

The vast majority of SMEs will need to comply by 2017, with “staging dates” varying – but there have been reports that many companies have delayed making arrangements, because of shortage of time or lack of information. Unfortunately, companies who miss the deadline could face fines as a result.

On top of auto-enrolment, the new ‘pensions freedom’ rules, giving over-55s the right to draw out money and invest it as they wish, could also impact small businesses which are already offering pension schemes to their staff.

Sickness Absence
Prolonged staff absence can hit small companies especially hard, because each employee represents a larger proportion of staff than for larger organisations. Now the new Fit to Work scheme is being gradually rolled out, aiming to support employers in managing employees who have been off sick for four weeks or more.

Employers will be able to seek an independent assessment of the health status of their staff member. The employee will be given free occupational health advice, with the aim being to create a Return to Work plan which will help them to return successfully. Small companies are less likely to have their own occupational health services than larger organisations, so they may find the Fit to Work scheme a helpful development.

National Insurance and Pay Rates
Changes are being made to national insurance, with employers no longer having to make payments for most employees under 21. There are also changes to the rates for various types of statutory payment, including statutory sick pay, maternity/shared parental leave pay and redundancy pay.

In addition, the national minimum wage will be rising in October. It is essential to keep your payroll arrangements up to date with all these changes, to make sure you are making the right deductions and payments.

More Changes on the Way
Following on from all these changes, there are even more in the pipeline. The Small Business, Enterprise and Employment Act, which has just been passed into law, will affect zero hours contracts, and there are likely to be more changes in the wake of the General Election.

It can be difficult for small businesses to keep on top of the constant changes to employment law and all the associated admin tasks. This means it is important to get advice, both from financial advisers and employment experts and also informally through networking and mentoring.

Basepoint provides support for its licensees through the MiBase service, which gives access to expert business mentors. It also provides a whole range of networking opportunities and seminars, offering the chance to exchange ideas with other businesses who are facing the same issues as you are.