Key 2018 legal changes every SME should know about

Employers are being urged to ensure their businesses are prepared for forthcoming legal changes before the New Year kicks in – or risk falling foul of the law.

Employment law and corporate and commercial solicitors at Kirwans law firm have issued a warning prior to a raft of new legislation taking effect next year, reminding business owners of the dangers of ignoring the legal updates.

Lindsey Knowles, employment solicitor at Kirwans said:

“We know that 2018 is going to be a key year for businesses, and it’s vital that owner/managers are prepared.

“While large companies will have their own HR and legal teams which will have been planning for these changes for many months, smaller enterprises may not have had the opportunity to prepare.

“That’s why we’re calling for business owners to take stock now, and ensure that they’re well-equipped to deal with the new legislation and regulations that 2018 will bring.”

Here, Lindsey and her colleague, corporate and commercial solicitor James Pressley, run through the key changes expected in 2018.

Publication of gender pay reports

Under the Equality Act 2010 (Gender Pay Gap Information) Regulations 2017, all private and voluntary sector employers in England, Wales and Scotland with at least 250 employees will be required to publish information about the differences in pay between men and women in their workforce by April 4, 2018. The information shared will be based on a pay bill ‘snapshot’ date of April 5, 2017.

It is believed that the Equality and Human Rights Commission could investigate employers who fail to publish the data.

The Government Equalities Office and ACAS have produced joint guidance on pay gap reporting and the Gender Pay Gap reporting website can be found here –

Changes in the Tax Treatment of Termination Payments

Under existing rules, the first £30,000 of a genuine termination payment for loss of employment can be paid free of income tax, with the balance being subject to income tax but free of employer and employee NICs.

From April 2018, a termination payment that falls within the income tax exemption will, after it hits the £30,000 limit, be liable for both income tax and employer NICs. There will, however, continue to be an unlimited employee NICs exemption for payments relating directly to the termination of employment.

All payments in lieu of notice (PILONs) will also be subject to income tax and employer and employee NICs from April 2018. The new rules will apply whether the payment is contractual or whether it is made on a purely compensatory basis due to an employer’s failure to serve proper notice.

The changes mean that any payments which would have been treated as earnings if the employee had worked their notice period, including other salary-related payments, benefits and expected bonuses, will also be subject to income tax and employer and employee NICs.

In addition, payments on termination for ‘injury to feelings’ in relation to death, disability or injury will, from next April, no longer be eligible for exemption from tax and NICs. The exemption will only apply where there is an injury or disability of a physical or psychological nature that is sufficient to cause the employee to be unable to perform his or her job properly.

A payment made for injury to feelings for discriminatory acts which take place prior to termination of employment remains outside these reforms and can continue to be paid free of income tax and NICs.

Restriction of employment allowance for illegal workers

Since April 2014, businesses have been able to claim a reduction of up to £3,000 a year on their employers’ NICs. From April 2018, however, employers will be excluded from claiming the allowance for one year if they have:

• Employed a worker who was subject to immigration control;
• Been penalised by the Home Office;
• Have exhausted all appeal rights against the penalty.

Tax- Free Childcare

Tax-Free Childcare was introduced on April 21 2017, and has been gradually rolled out this year, with parents of children aged under four (as of August 31 2017), and parents of disabled children aged under 17 able to enter the scheme first. The scheme is also available to eligible parents of all children under the age of 12.

Tax-Free Childcare doesn’t rely on employers offering the scheme, unlike the current scheme Employer-Supported Childcare, and any working family can use Tax-Free Childcare, provided they meet the eligibility requirements.

However, employees are not required to switch to Tax-Free Childcare if they don’t wish to. Employer-Supported Childcare will continue to accept new entrants until April 2018, and parents registered by this date can continue to order vouchers beyond 2018 for as long as their employer continues to run the scheme or until their child is 15-years-old, or 16 if disabled – whichever is sooner.

Changes to the National Living Wage

The recommendations of the Low Pay Commission have been accepted by the Government, which means that from April 2018 the National Living Wage will increase from £7.50 to £7.83 per hour. The National Minimum Wage, which applies at varying rates to employees aged under 25, will also rise as follows:

• Age 21 to 24 – from £7.05 to £7.38 per hour
• Age 18 to 20 – from £5.60 to £5.90 per hour
• Age 16 to 17 – from £4.05 to £4.20 per hour
• Apprentice rate – from £3.50 to £3.70 per hour

General Data Protection Regulation (GDPR)

The GDPR is an EU law which applies to the UK from May 25, 2018, and even though the UK is leaving the EU, the regulation will still be implemented.

The GDPR will supersede current legislation to protect people’s personal information, introducing tougher fines for non-compliance, and giving people more control over how companies use their data.

GDPR will provide individuals with easier access to their own data, as well as a right to know when high risk personal information has been hacked, such as information about health, religious belief or genetic data. It will also mean that people have a right to be forgotten.

The new rules will mean that, rather than simply ticking a box to opt out of receiving marketing information, individuals will have to give explicit consent for their data to be processed. This can be seen in the cases of website visitors being asked to check a box agreeing with a specific statement such as ‘I DO want to receive marketing information’ or, ‘I DO NOT want to receive marketing information’.

Data controllers must then keep a record of how and when that consent was given. The individual can also withdraw that consent at any point.

The new regulations mean that any business that has been running a soft opt-in system will be unable to use that database of customers from May 25, 2018.

Penalties for failure to comply, or for breach of regulations will be tough, with the amount of fines being handed down reaching as high as 4% of turnover, or €20 million, whichever is greater.