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Employment Law Developments in 2006 and Beyond

23 November 2005

To bring businesses up to date and to highlight some areas of your own policies and procedures that might need a review, here is a brief overview of some of the key changes planned for 2006 and beyond into 2007.

Pension reforms “A-Day”

The Government has been increasingly concerned about declining pension provision and lack of confidence in pensions. Its answer is to simplify the existing tax regime and to increase protection for existing benefits, with effect from the new tax year on 6 April 2006 (“A-Day”). Whilst it seems unlikely that either move will encourage employers to provide additional pension provision, the changes may influence existing benefit design and change the way that employers view liabilities in their pension schemes. It will also provide considerably greater flexibility for employees in planning for their retirement.

TUPE reforms

Long awaited reforms to the Transfer of Undertakings (Protection of Employment) Regulations 1981 will come into force in April 2006. The proposals include; clarifying the position in cases of transferring labour intensive service contracting operations, for example office cleaning, catering, security guarding and refuse collection, a requirement on a transferring business to notify the transferee of transferring employment liabilities, clearer guidance on when employers can lawfully make transfer related dismissals and negotiate transfer related changes to terms and conditions of employment, and introducing flexibility in relation to the transfer of an insolvent business.

Age discrimination

For the first time, in October 2006 legislation outlawing age discrimination is to be implemented into the UK. When implemented the Employment Equality (Age) Regulations 2006 will prohibit discrimination on the grounds of age in employment and vocational training, unless the discriminatory aspect can be shown to be objectively justified. The test of objective justification will require the employer to show that it was a proportionate means of achieving a legitimate aim. There is little doubt that, the new laws will have a material impact in the way that businesses manage recruitment, selection and promotion and in their future structures and designs relating to pay and benefits. Workers over the age of 65 will be entitled to bring claims for unfair dismissal and redundancy. There is to be a ‘default’ retirement age of 65, which means that employers with a lower retirement age may need to increase it to 65, unless they can objectively justify a lower age. There will also be a new procedure for employers to follow when dismissing an employee on the grounds of retirement. This will require the employer to advise the worker of their right to request working beyond the “planned” retirement age between six and 12 months prior to the planned retirement date. Failure to do so could render the dismissal unfair.

Minimum Wage

Should economic conditions permit, the National Minimum Wage is likely to increase again in October 2006. Currently, the adult rate is £5.05, the development rate is £4.25 and the young workers rate is £3.00 per hour. The Low Pay Commission will prepare a report for the Government in February 2006, in which it will make any appropriate recommendations for changes to the rates. It is anticipated that the recommendations will include an increase in the adult rate to £5.35 and the development rate to £4.45 per hour.

Information and Consultation of Employees Regulations

The regulations, which came into force in 6 April 2005, set out minimum rights for employees to be informed and consulted by their employers from the planning stage in respect of workplace issues; for example the business economic situation, employment prospects, redundancies and proposed company purchases/sales. Currently, the regulations apply to businesses with 150 or more employees. This will be extended in April 2007 to businesses with 100 or more employees and again in April 2008 to businesses with 50 or more employees. The regulations contain complicated recognition arrangements, but generally (and subject to existing recognition arrangements); consultation and information must take place with employees if at least 10% of the workforce, subject to a minimum of 15 employees requests it. In response to the regulations, recent years have seen the growth of works councils and employee representative groups. This growth will continue with the extension of businesses covered by the regulations, with effect from 2007/2008.

Forthcoming Family Friendly Changes

Recent years have also seen the implementation of a number of domestic employment measures aimed at enhancing the work life balance in the UK. These include extensions to maternity leave and pay, new rights to paid adoption leave, paid paternity leave, parental leave, the right for employees to take time off work to deal with family emergencies and the introduction of a new right to request flexible working hours for parents with children under the age of six or disabled children under the age of 18.

Further changes are planned for April 2007 to include amongst others; extending the period for paid maternity and adoption leave to nine months, currently six months, with a view to moving to a year by 2010, the introduction of additional paternity leave for fathers for up to six months, also enabling them to benefit from leave and statutory pay if the mother returns to work after six months, but before the end of her maternity leave period and extending rights to flexible working arrangements to employees who ‘care’ for elderly or disabled relatives. Further guidance will be provided on the forthcoming changes during 2006.

There is little doubt that the forthcoming year will be another busy year of developments in employment law! We will naturally keep you abreast of the important developments in this column!! Merry Christmas and a Happy New Year.

For more information please contact Andrew Masters, Partner & Head of Employment.
 

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