Board members – an update on legal requirements


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From this April some changes are being made to the Employment Rights Act 1996 (ERA 1996) which are likely to apply to your non-executive directors.

Review board member agreements!

The government is introducing new regulations that affect workers on 6 April.  These provide that a written statement of terms must be given to workers as well as employees.  If you pay your board members, our view is that even if non-executive, board members will generally be considered to be workers.  As such you should review your board member service agreements to ensure that they are legally compliant.

The Regulations amend the Employment Rights Act 1996 (ERA 1996) to provide that a written statement of terms must be given on or before the first day of employment, rather than within two months of employment starting.  This right (formerly just applicable to employees) will now apply to workers as well as employees.  It will apply to all new joiners on or after April 2020.

Under the ERA 1996 the information that must be given in the written statement has also been extended and now includes far more detail, including details of the days of the week the worker is required to work, whether the working hours may be variable and how any variation will be determined. Other details relevant to board members include the obligation to set out any paid leave to which the worker is entitled; any training entitlements provided by the employer, including whether any training is mandatory and/or must be paid for by the worker and the notice periods for termination by either side. This can vary according to the contract, your constitutional documents and in different circumstances, and it's a good opportunity to ensure that notice periods are aligned.

What about IR35?

How many of your board members have a portfolio career, providing their services via their own personal service company (PSC)?  The extension of IR35 to the private sector on 6 April serves as a timely reminder that where an individual provides their services via an intermediary they may be caught by the legislation.

IR35 will apply if an individual provides their services in this way but would be classed as an employee for tax purposes if they were engaged directly.  Housing providers engaging board members in this way should assess if the IR35 rules apply to the engagement.

How we can help

We can provide you with the support and advice to update your contract and to manage the introduction of IR35. We can offer the following for fixed fees:

  • A review of your board member agreement for services;
  • A checklist of factors to consider when deciding if an individual falls within IR35, to supplement your use of the HMRC CEST tool;
  • A template IR35 status determination statement; and
  • A template contract with a PSC or a review of your existing contract.
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