One of the changes announced in the Chancellor’s recent “mini-budget” is the repeal of the IR35 rules regarding employment status determination that were first introduced to the public sector in 2017 and extended to the private sector in 2021.
The IR35 regime aims to prevent the avoidance of tax and NICs by the interposition of an intermediary between the client and worker. Broadly, if the IR35 regime applies, the intermediary (usually a personal service company (PSC)) must determine whether, but for the existence of the intermediary, the worker would have been an employee of the client. However, the responsibility for making the ‘employment status determination’ was transferred to the employer in 2017 (public sector) and 2021 (for large and medium private sector clients).
With effect from 6 April 2023, the rules revert to the original position and individuals supplying their services via a PSC will once again be responsible for determining their own employment status and paying the appropriate amount of tax and NICs. It is hoped that this will free up time and money for businesses that engage contractors, that could be put towards other priorities.
In the meantime, employers should continue to comply with the current IR35 rules. In advance of next year, we recommend that employers review their existing working practices and arrangements with external contractors.
The Retained EU Law (Revocation and Reform) Bill
The UK Government has published the Retained EU Law (Revocation and Reform) Bill. The Bill aims to “sunset” all remaining retained EU law* by 31 December 2023, although this can be extended until 2026. This means that all retained EU laws will be revoked automatically by this date unless specific domestic legislation is introduced to preserve or replace them.
*Retained EU law is a category of domestic law created at the end of the Brexit transition period and consists of EU-derived legislation that was preserved in the domestic legal framework by the European Union (Withdrawal) Act 2018.
Which areas of employment law are likely to be affected by the Bill?
- TUPE (The Transfer of Undertakings (Protection of Employment) Regulations 2006)
- The Working Time Regulations 1998 – including the 48 hours working week
- The Agency Worker Regulations 2020
- The Part-Time Workers (Prevention of Less Favourable Treatment) Regulations 2000
In addition, UK courts will no longer need to apply principles of EU law, including the principle of equal pay for male and female workers for equal work or work of equal value. New processes would also allow domestic courts to depart from legal precedent set by EU case law more often.
When are changes likely to take place?
The Government has not yet confirmed which areas it will choose to retain and what employment rights will expire, neither have they provided a timeframe as to when each piece of legislation will be reviewed. However, given the complexity of the task at hand during a time when the Government is also grappling with a recession and soaring energy prices, it seems likely that it will be delayed beyond 2023.
Liz Trust has also announced this week new government policy to remove ‘reporting requirements and other regulations’ in connection with workers’ rights from all businesses employing under 500 employees. The scope of this announcement is not yet clear. Watch this space for further updates.