Employers in the Facilities Management sector: preparing for even more change and enforcement...

22 March 2019


We all know just how critical people are to businesses in the Facilities Management (FM) sector and how much experience businesses have of adapting to the ever increasing burdens that are placed on employers. Over the past few months we’ve seen a significant increase in the number of regulatory changes as well as Government enforcement activity - which makes it a good time for businesses to take a fresh look at whether they’re fit for the new world or facing compliance failures and penalties.

To help navigate the increasingly complex landscape of employment regulation, we’ve summarised below the key issues that all FM employers need to be considering - or ready for - right now.  

National Minimum Wage (NMW) and National Living Wage (NLW)

Her Majesty’s Revenue and Customs (HMRC) are currently conducting a large number of NMW reviews across employers in the FM sector. Given the technical complexities in complying with NMW we know that such reviews inevitably find breaches due to inadvertent technical failures. For example, workers having to purchase items of clothing (trousers or shoes) for their role or starting/finishing their shift a few minutes earlier or later than scheduled. Even minor adjustments can result in breaches of NMW and significant liabilities when considering the number of workers involved, a six year look back period and 200% penalties.

Given that for any reasonable sized business it’s a question of when, not if, they have a NMW audit by HMRC, FM employers should get themselves ready by completing a proactive review in advance. Given the strong likelihood that the current consultation will lead to changes in the NMW regulations, employers should take the time now to understand their potential exposure and whether and how this may change going forward.

Holiday pay

Recent case law has made it clear that while workers are on holiday, they’re entitled to their ‘normal remuneration’ inclusive of regular additional payments, and this has been confirmed in recent Government guidance. Legislation from April 2020 means that employers will have to look at workers’ average earnings across a 52 week reference period (rather than 12 weeks as at present) to calculate the holiday pay due. The Government plans to enforce holiday pay compliance (likely to be in a similar way as NMW) from April 2021.  In our experience, some employers still only pay basic pay or basic contractual hours for periods of holiday and therefore are not paying workers what they are due. Even where employers have systems in place they will inevitably need to be further changes made to ensure compliance from April 2020 and avoid any costs associated with a 6 year look back for claims.

To avoid non-compliance (and associated actions/penalties when enforcement comes in) FM employers should review their holiday pay processes, policies and pay elements, and implement robust processes in line with the new legislation.

Off-payroll workers

From April 2020, all but the smallest employers will have to critically assess the employment status for any contractors providing services via a Personal Service Company (PSC).  Where necessary they will have to put the PSC on their payroll and withhold PAYE and NIC.  They will have to undertake this critical assessment even if the employers engage with their contractors via an agency. The current Government consultation indicates that the rules for the private sector will mirror what has already happened for contractors working via PSCs in the public sector. Our experience of helping public sector employers showed that there are a number of departments that need to be involved in these changes such as HR, tax, payroll, and procurement.

Employers in the Facilities Management sector should use the time now to review their supply chains to find out where PSC’s are being used either directly or via an intermediary. Once all PSCs have been identified an action plan should be agreed on how these changes will be managed across all departments and what the cost implications are of these changes especially where existing client contracts are in place.  Supply chain compliance has always been key for FM companies especially those involved in public sector bids.

The above is a brief summary of some of the issues that we know employers in the FM sector are focused on. The direction of regulation, including those under the Taylor review, means that FM businesses face an increased compliance and cost burden. The message is clear: it’s time to get proactive and manage your people-related issues now before HMRC do and they escalate into costly compliance failings.  

John Harding | Partner, Employment,
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