A raft of legislative changes is coming into force this year, much of which will have a considerable impact on employers. This factsheet summarises some of the main reforms, including the removal of the default retirement age and the changes to the tax treatment of employer-supported childcare. We also summarise some of the main provisions included in the Equality Act 2010.
withdrawal of the default retirement age
The Government has confirmed that the Default Retirement Age (DRA) will be abolished from 1 October 2011.
The proposals allow for a six month transition from the existing regulations, meaning that the changes could begin to take effect from April 2011. Consequently, the majority of people may soon be able to work beyond age 65 if they wish.
Under the new rules, employers will be unable to issue new notifications of retirement under the current statutory procedure on or after 6 April 2011. However, during the transitional period, retirements that were already in motion can continue through to completion, provided that:
- a notification of impending retirement was issued prior to 30 March 2011
- a late notification is issued between 30 March and 5 April 2011
- the date of retirement falls before 1 October 2011
- the DRA procedure, as set out in the previous Employment Equality (Age) Regulations 2006 is followed correctly
- the other requirements of the former DRA procedure are met.
Retirements using the DRA would therefore cease completely on 1 October 2011. The provision allowing the short two week notice of retirement, will also cease on 6 April 2011, and this short notice procedure will not be permitted after this date.
However, it will still be possible for individual employers to operate a compulsory retirement age, provided that they can objectively justify it. The Department for Business gives two examples of where this might be the case – for air traffic controllers and police officers.
The Government has been working in conjunction with ACAS to provide employers with updated guidance on operating without the DRA. Further information can be found at www.acas.org.uk/retirement
employer-supported childcare – restriction of higher rate relief
From 6 April 2011 there will be significant changes to the tax treatment of employer-supported childcare.
Under the law as it currently stands, employer-supported childcare in the form of childcare vouchers or directly-contracted childcare is exempt from tax up to £55 per week (plus any associated costs of providing the vouchers or childcare). Relief is given at the employee’s marginal rate of tax, meaning that the exemption is worth £11 per week to a basic rate taxpayer, £22 per week for a 40% taxpayer and £27.50 per week for a 50% taxpayer.
However, from 6 April 2011 higher rate relief will not be available to those who join employer-supported childcare schemes on or after that date. Those employees already receiving vouchers or employer-supported childcare; or who join schemes before 6 April 2011, will continue to benefit at the higher rates where applicable. The effect of this measure is that the tax exemption will be worth the same in monetary terms regardless of the employee’s marginal rate of tax.
practical application
Where an employee joins an employer-supported childcare scheme on or after 6 April 2011 and receives either childcare vouchers or directly-contracted childcare, the employer is required to estimate the employee’s employment income before the tax year starts and whether the employee is likely to be a basic rate, 40% or 50% taxpayer. This estimate determines the value of the childcare exemption in monetary terms to which the employee is entitled, as shown in the table below.
| Employee’s marginal rate of tax |
Monetary value of the exemption |
Tax saving as a result of exemption |
| Basic rate (20%) |
£55 per week |
£11 (£55 x 20%) |
| Higher rate (40%) |
£28 per week |
£11.20 (£28 x 40%) |
| Additional rate (50%) |
£22 per week |
£11 (£22 x 50%) |
From a tax perspective, the exemption is worth virtually the same to all taxpayers.
The rules apply equally where the vouchers or childcare are provided as part of a salary sacrifice arrangement.
other changes
flexible working
The right to request flexible working was due to be extended from 6 April 2011 to parents of all children under the age of 18. However, the Coalition Government has subsequently announced that it will delay the extension to help ease the burden on businesses.
additional leave for new fathers
As announced by the previous Labour Government, a new right to additional statutory paternity pay (ASPP) applies to fathers of children due or matched for adoption on or after 3 April 2011.
The new right essentially allows women who qualify for statutory maternity leave to transfer a proportion of their leave to their partner, by offering men up to 26 weeks of leave to care for their child if the mother returns to work before the end of her allowed leave period.
Women are currently entitled to take up to 39 weeks of paid maternity leave, followed by an additional 13 weeks of unpaid leave. Under the new system, fathers are entitled to take the final months of the mother’s leave entitlement on her return to work. If taken before the final three months of the maternity pay period, the relevant part of the father’s leave will be paid at the statutory rates.
On 6 April 2011 the standard rate of statutory maternity, paternity and adoption pay increases from £124.88 to £128.73.
A consultation is taking place to consider how the extension will be implemented and to examine a new system of flexible leave.
the right to request ‘time to train’
A new statutory right for employees in England to request ‘time to train’ came into force in April 2010, in respect of employers with 250 or more employees. It was due to be extended to all employees working in organisations of all sizes from 6 April 2011. However, following consultation with business and employee groups, the Government has delayed implementation to allow further discussions to take place.
the equality act 2010
While many of the provisions in the Equality Act 2010 came into force on 1 October 2010, some of the new laws, including measures relating to positive action in recruitment and promotion, take effect from April 2011. Here we provide an overview of the some of the main points:
Single equality duty for employers – The Act extends existing anti-discrimination legislation, to apply to the ‘protected characteristics’ of race; gender; disability; sexual orientation; age; religion or belief; pregnancy and maternity; and gender reassignment.
Employment tribunals – Employment tribunals may make recommendations in discrimination cases that benefit the whole workforce, rather than only the individual concerned. This widens the scope of tribunals, as in many cases the claimant has already left the organisation.
Positive action in recruitment and promotion – From 6 April 2011 new measures will allow employers to select an individual from an under-represented group, when choosing between equally suitable candidates. However, positive discrimination (based on underrepresentation alone, regardless of merit) will remain unlawful.
Pre-employment health related checks – Firms are prohibited from questioning job candidates about any medical conditions, where these have no bearing on the individual’s ability to perform the job.
Gender pay reports and pay secrecy – The Coalition has relaxed previous plans to force companies with more than 250 employees to publish gender pay audits. Companies will instead only have to publish details of pay on a voluntary basis. In addition, the practice of banning employees from discussing their pay has been outlawed. However, an employer can require their employees to keep pay rates confidential from some people outside the workplace.
We can help you with all aspects of running a business. For further advice tailored to your needs, please contact us.
The content of this document is intended for general guidance only and, where relevant, represents our understanding of current law and HM Revenue and Customs practice. Action should not be taken without seeking professional advice. No responsibility for loss by any person acting or refraining from action as a result of the material in this document can be accepted and we cannot assume legal liability for any errors or omissions this document may contain
