Legal Hot Topics: November 2022
Legal news and views
Reversal of the National Insurance increase this year
On 22 September, the former Chancellor of the Exchequer, Kwasi Kwarteng announced the reversal of the National Insurance increase that took place in April this year. National Insurance increased by 1.25% for employers, employees and the self-employed, as part of the Health and Social Care Levy to fund the NHS and social care. The intention behind this was to raise £12 billion per year towards easing the pressure on the NHS and to provide support to the social care system. However, the announcement of tax cuts in September has led to the rate returning to its previous level on 6 November.
The reversal affects:
- Class 1 (paid by employees and employers)
- Class 4 (paid on profits by the self-employed)
- Secondary Class 1, 1A and 1B (paid by employers)
The reversal means that the main rate for employees has returned from 13.25% to 12% and for most employers’ contributions the rate has returned from 15.05% to 13.8%. The reversal took effect on 6 November and the new rules should be applied to payments from this date onwards.
Limitations on charging for IDSP right to work checks under the Conduct Regulations
Digital right to work checks using an Identity Service Provider (IDSP) were introduced as a digital solution for conducting right to work checks for British and Irish individuals in April 2022. Now that the adjusted right to work checks have ended, checks for British and Irish candidates must be done either manually which means seeing the original document, or digitally using an IDSP. Manual checks are free of charge, however, checks done by an IDSP will be at a cost.
Whether the agency or employment business can charge the worker-seeker for the digital check, depends on the restrictions in the Conduct of Employment Agencies and Employment Businesses Regulations 2003 (the Conduct Regulations), provided there is no opt out. Under Regulation 5 an agency or employment business must not make work finding services conditional on the worker-seeker using any chargeable service from them or any person connected with their business. So, if workers register with you and you use IDSPs you should not charge an administration fee, they should be given the option to do a manual check and if they choose to use the IDSP they should pay them directly rather than via your agency or employment business.
In addition, although the agency or employment business cannot charge for finding work for the work seeker, they can charge for other services such as CV writing. The cost of an IDSP right to work check could fall within “other services”. However, in accordance with Regulation 13, notice of the charge must be given to the work seeker, including the amount or method of calculation of the fee, the identity of the person to whom the fee is or will be payable, a description of the services or goods to which the fee relates, the circumstances, if any, in which refunds or rebates are payable to the work-seeker, the scale of such refunds or rebates, and if no refunds or rebates are payable, a statement to that effect.
Our agency worker has been supplied for over 3 months but is now off sick and the client has terminated the assignment. Does this end our liability to pay statutory sick pay?
Not necessarily, you might need to give statutory notice to end the agency worker’s contract and your liability to pay SSP. Agency workers are treated as employees for statutory sick pay (SSP) purposes. HMRC enforce SSP. Case law has determined that if an agency worker has been working on assignment for three or more months, they are entitled to notice to end their contract for the purposes of SSP.
The judgment given in Brown v Chief Adjudication Officer 1997 stated that if an employee on a short-term contract has been on that or a series of contracts for three or more months then they are entitled to treat their contract as being of indefinite duration as per what is now section 86 (4) Employment Rights Act 1996. This means that the contract can only be terminated by giving notice; failure to do so, even if the assignment has ended, will mean that the contract is ongoing for SSP purposes and will allow an employee to claim SSP if they meet the qualifying conditions.
Case law from the NHS Professionals v HMRC 2012 case has extended this right to agency workers and will apply to your worker because they have worked for you for three or more months.
HMRC take the view that if the agency worker has worked for you for three or more months, provided the worker meets the qualifying conditions, unless you give statutory notice to end each of their assignments it is likely that the contract will be deemed to be ongoing, and you are likely to be liable to pay SSP.
SSP entitlement runs for a maximum of 28 weeks unless the entitlement period ends sooner i.e. the worker returns to work, the assignment ends or the period of entitlement ends for some other reason. You will be liable to pay SSP until the period of entitlement ends.
If you terminate the contract solely to avoid paying SSP it is likely that you will still face liability. It is important that you terminate for a fair reason and not solely to avoid paying SSP. If the client has terminated, you could point to this as a reason for your termination, but it may not eliminate your risk of liability to pay SSP. If in doubt, contact HMRC for a determination.
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