No Jab, No Sick Pay – Ikea’s Controversial New Policy
Since 16 August 2021, people who are double-jabbed and are without symptoms or a positive test do not need to self-isolate if they come into contact with someone who has tested positive for coronavirus. This was a major step to help ease the serious supply chain shortages that followed the “pingdemic” during the summer of 2021 which saw up to 700,000 per week self-isolating in England and Wales as contacts of positive cases.
Whilst many people are unable to get the vaccination for medical issues, all adults in the UK have now been offered the vaccine. This means that the people who are unvaccinated are either due to medical reasons, or have chosen not to be.
Ikea has argued that employees who refuse to get the vaccine are causing disproportionate financial losses to businesses. Whilst Ikea’s 10,000 plus workers receive an average of £400 a week salary, the furniture retailer said unvaccinated workers will only receive statutory sick pay of £96.35 a week where they are absent for a Covid-related reason (but full-pay if they test positive, as with vaccinated staff).
Given that Ikea is such a high-profile company, it is almost inevitable that other employers will follow suit and many will be monitoring the fall-out of this new policy. In fact, Next is the latest employer to announce it intends to adopt the same approach.
Some have argued that this policy is potentially discriminatory against employees refusing to be vaccinated on the grounds of religion or belief under the Equality Act 2010. Whilst this argument is generally considered unlikely to be successful, to avoid claims employers will need to consider each circumstance on “a case-by-case basis”, which Ikea has also confirmed it will do. This is necessary as applying similar policies without exemptions could be discriminatory against employees are unable to be vaccinated (e.g. those with disability-related medical reasons or pregnant employees).
As well as considering the implications on staff who are unable to be vaccinated, employers considering varying their sick pay entitlements also need to be careful to ensure that they won’t fall foul of any contractual responsibilities, where sick pay forms part of an employee’s contract of employment. It will be important to check the terms before any such measures are introduced.
Perhaps most significantly, employers will need to consider the public response to any policy change in such a highly divisive area before taking any steps.
Finally, if an employer is considering introducing a similar measure in respect of sick pay, a key issue will be the communication to the staff, setting out the reasons for the change and the exceptions that might apply. It may well be that the approach may give rise to some complaints from those employees who are directly affected.
Any employers considering introducing policies which target unvaccinated staff should act with caution and take legal advice in advance to ensure that savings in sickness payments now don’t turn into much larger costs defending claims from unvaccinated staff down the line.
Please contact Emma or the team for more information.
IR35 – May the force be with you
“IR35” – it could almost be mistaken for a character from the latest Star Wars film, and whilst IR35 is not a new concept, it will be hitting the private sector in 2021*. If your business currently engages consultants or contractors operating as part of a personal service company, this is a premiere that you ought not to miss.
What is “IR35”
“IR35” refers to existing legislation that was designed to close a tax loophole whereby an individual could in theory, work as if an employee of an end user client but seek to avoid being subject to PAYE deductions by supplying their services through an intermediary, usually a personal services company. Like the Hokey Cokey, you were either ‘in’ or ‘out’. If inside IR35, you were caught and the individual should be paid via PAYE. If outside of IR35, then the arrangement was regarded as genuine self-employment for tax purposes.
So, what has changed?
Firstly, the old regime required the consultant / contractor to determine their own status for tax purposes, and they generally bore the risk of getting this wrong. With effect from April 2021, and in respect of the private sector, the onus passes to the entity engaging the individual, which in many cases will be the end user who receives the services. The engaging entity will therefore have to satisfy themselves as to whether the consultant / contractor is inside or outside of IR35.
In addition, if the consultant / contractor is inside IR35, and the new rules applies to the entity engaging the individual (see below), then in principle that entity becomes responsible for accounting to HMRC for tax and national insurance in respect of the payments made to that individual. The situation becomes more complicated if a recruitment business is involved, where it supplies the individual to the end user entity and pays the individual directly.
This change of approach already applies to the public sector and insofar as the private sector is concerned, it only applies to engaging entities that are not “small”.
A “small” company is one which satisfies two or more of the following requirements:
- Its annual turnover is not more than £10.2 million.
- Its balance sheet total is not more than £5.1 million.
- It has not more than 50 employees.
How do you know whether a consultant / contractor is ‘in’ or ‘outside’ of IR35?
HMRC have an online questionnaire, known as CEST, which is designed to give you a definitive answer to this conundrum. If the questions are answered honestly, then it can be relied upon in the event of a later dispute. However, some of the questions are difficult to answer, and a possible outcome of CEST is that it is unable to make a determination on the matter!
As it happens, the test under IR35 is similar to (but not the same as) that which applies in employment law, in determining an individual’s employment status. This means that particular focus will be placed on the extent to which the end user controls the consultant / contractor, the extent to which the services need to be performed personally by the consultant / contractor (as opposed to having a right to substitute) and the extent to which mutuality of obligation exists between the parties. It also means that the label that the parties attach to the arrangement is far from determinative.
What should you do?
If you engage consultants / contractors, we would recommend you take the following steps:
- Review those arrangements and consider utilising CEST;
- Ensure that you have a written contract that formalises the arrangement, and is drafted to best protect your business;
- Take specialist advice – your accountant on the tax side, and an employment lawyer on the legal side.
It follows that if you decide that somebody is ‘inside’ IR35 and will be treated as an employee for tax purposes, that equally will make it more likely they will be regarded as an employee for legal purposes, and that carries its own separate implications.
*As of 17th March 2020, the Government announced the delayed introduction of IR35 to the private sector to April 2021.