HR briefing - September 2022

03 October 2022

Welcome to this month's briefing for HR teams and in-house employment counsel – bringing you this month’s employment law highlights in an easy-to-read package.

Budget – important changes coming soon

Clients will have, no doubt, been glued to their screens last week, as the new Chancellor, Kwasi Kwarteng, announced a series of very dramatic policy shifts. For employers and HR teams, the key points are:

IR35 and off-payroll working

The recent changes to the "off payroll worker" rules (commonly referred to as IR35) are going to be reversed from 6 April 2023. This will be a welcome change for businesses that have grappled with the requirement to make employment status assessments, and will be well received by contractors who consider that their status as independent third parties (generally without employment-type rights) should be rewarded with favourable tax treatment.

This does not mean that the employment status question goes away, but it does mean that if a contractor engages with a company (an "end user") through a personal services company, it will be the responsibility of that personal services company to make an assessment as to the employment status of the contractor (for tax purposes). This means that the end user is not exposed to PAYE or National Insurance contributions if the employment status assessment is incorrect. Any such amounts are instead payable by the contractor/their personal services company.

It remains to be seen whether the HMRC "check employment status for tax" (or CEST) tool will remain available to contractors. The Treasury estimates that this change will cost over £6bn over the next four tax years, but say that the driver behind the reversal is to "simplify the tax system". In practical terms, companies and (in particular) contractors should review indemnity wording in contracts to ensure that they are adequately protected in the event of an employment status challenge. Companies should also not take this as a carte blanche opportunity to encourage workers to engage through personal service companies, in order to save on employer National Insurance contributions. If the arrangements are artificial they may be caught by other legislation and powers at HMRC’s disposal.

National insurance contributions

The 1.25% increase in National Insurance contributions announced by the previous Government, under the label the Health and Social Care Levy, is being abolished. Aside from the obvious effect on payroll, and on employees, this will also reduce the cost of severance payments on exit. The change is effective from November 2022.

Bonus payments cap removal

The other point of major significance for the financial services sector is the proposed removal of the cap on bonus payments. Legislation currently caps the ratio of fixed to variable remuneration in the sector at 1:2, and it is this ratio that the Government wants to discard. See our note for further discussion on the scrapped cap.

For a wider discussion of the legislative options the Government may be considering for the financial services sector, please see our note.


We are often asked to advise on asset sales, where the provisions of the Transfer of Undertakings (Protection of Employment) Regulations – or TUPE, for short – come into play. Clients will be aware that the essential features of TUPE are that all in-scope employees transfer along with the business in which they work, they transfer on their existing terms and conditions, those terms are difficult to amend post-transfer, and dismissals associated with the transfer are often automatically unfair.

A recent case has looked at the difficult question of how the transfer of existing terms and conditions operates where a transferring employee is part of a share option plan operated by the outgoing employer. Previous cases have not been consistent, but the most recent has imposed on the incoming employer an obligation to replace the old share option plan with something of substantial equivalence – recognising that it would be impossible for the new employer to award shares in the old employer. That approach was followed in this case – even though the entitlement to be part of the share plan was not contained in the contract of employment itself, it was sufficiently closely connected to be caught by TUPE. 

The implications for purchasers/transferees are clear – where the due diligence process ahead of completion identifies that the vendor/transferor operates a share plan or similar incentive scheme, thought must be given at an early stage as to whether the plan will transfer and, if so, how it might be replicated to give effect to the substantial equivalence rule.

UK roll-out of electronic travel authorisation programme

If you have ever travelled to the US as a visitor, you may be familiar with ESTAs. ESTA is a US government programme which allows you to complete an online form a few days before travel and pay a fee to confirm that you can enter the US without a visa (known as "visa waiver"). It is designed to speed entry at the border.

Good news: both the UK and the EU plan to introduce similar programmes in 2023.

The UK will begin to roll-out Electronic Travel Authorisation (ETA) from January 2023 on a limited trial basis with full operations expected by Autumn 2023.

The EU will also roll out a European Travel Information and Authorisation System (ETIAS) from November 2023.

Read the full article.