Step 4: Estimating minimum payments and banded hours after the Employment (Miscellaneous Provisions) Act 2018

The Employment (Miscellaneous Provisions) Act 2018, (the Act) is one of the most significant pieces of employment legislation in a generation. The government’s key objective in drafting the Act was to improve the security and predictability of working hours for employees on insecure contracts and those working variable hours. To achieve this objective, the Act imposes a range of new employment law compliance requirements on employers. In this, the last in our series of guidance notes, we take a look at the financial consequences you might face under the new banded hours provisions and the requirement to provide minimum payments. There are three more guides covering the new legislation. You can read about these below:

• Step 1: Statement of core terms.
• Step 2: Reviewing existing employment documentation.
• Step 3: Review the types of employment your business has.

The Act is scheduled to come into effect from 4^th March 2019.

Estimate the financial impact of minimum payments and banded hours

Introduction of a minimum payment to employees not called into work Under the Act, employees who are not called into work on a certain week will be entitled to receive a minimum payment. For example, if you called six people into work on a certain week and then decided only three were needed, the three employees not required to work that week would be entitled to 25% of their weekly contractual hours. The weekly payment must not be less than 3 x National Minimum Wage (NMW) hourly rate or 3 x Employment Regulation Order hourly rate (where it applies). The same rule applies to employees who have been asked to work less than 25% of their weekly contractual hours. It should be noted that if the employee is being paid more than the minimum wage, the minimum payment may still be calculated using the relevant NMW hourly rate.

Banded hours’ payments

Depending on the outcome of the review of the average hours worked by casual employees over the previous 12-month reference period (see our third guidance note by clicking here), you may also be required to pay employees for the minimum number of hours in whatever band they fall into.

Practical steps to take

We recommend that you:

1. Identify the frequency with which employees on variable hours are not required to work on certain weeks. Assess the financial consequences of having to make a minimum payment to any such employees who are frequently not required to work.
2. Identify what band (set out below) employees on variable hours are likely to fall into by reviewing their hours worked over a 6 to 12-month period. Calculate the average weekly hours worked by the employees over the reference period. Identify the relevant band their average weekly hours over the reference period falls into and assess the financial impact of having to pay employees for the minimum number of hours in the relevant band.

3. If you employ persons under the age of 20, are you aware of the new NMW rules? The new rates increased with effect from 1 January 2019 and will impact any minimum payments you are required to make either under the minimum payment provisions or the banded hours provisions (where employees are on minimum wage).
4. The NMW rules are also changing under the Act. An Experienced Adult Worker will now mean any worker aged 20 or over. Employees who are aged 20 or over will be entitled to 100% of the NMW regardless of whether it is their first or second year of employment. Likewise, the 80% and 90% rates will no longer be linked to work experience but will instead be linked to age. From 4^th March, 18 year olds must receive at least 80% of the NMW rate and 19 year olds must receive at least 90%.

To find out more about how to prepare your business for these new employment law requirements, call our 24-hour advice line on 0818 923 923.