Employment update - Summary of significant changes
30 March 2021
With the new tax year comes the annual batch of employment law changes and increases in pay rates. There have also been a number of important decisions in employment cases in recent weeks. Below is a summary of the key changes that will affect the majority of employers.
IR35
The rules on off-payroll working in the private sector that were postponed in 2020 will come into effect from 6 April 2021. Where there is ‘deemed employee’ status, the measure shifts the tax compliance burden from the worker's personal service company (PSC) to the medium and large "client" organisations that their PSC contracts with (and through which the individual undertakes the work), by treating the client organisation as an employer for income tax and NICs purposes.
Health and safety detriment protection
The Government has laid an Order before Parliament, which is due to come into force on 31 May 2021, to extend protection from health and safety detriment to ‘workers’ (i.e. not just to ‘employees’) where they reasonably believe that they are in serious and imminent danger.
The Order will confer on workers the right not to be subjected to a detriment for leaving or refusing to return to their workplace in such circumstances, or for taking steps to protect themselves. Previously, this provision was very rarely relied upon but since the start of the pandemic, it has been one of the key risk factors for employers to consider when taking action against an employee who is refusing to attend work.
National Minimum Wage review
The Government has asked the Low Pay Commission to review its current position on the exemption from the National Minimum Wage in respect of work done in an employer's family household by individuals who live in the family home of the employer and are treated as members of the family. This follows a December 2020 employment tribunal ruling (Puthenveettil v Alexander and Ors ET Case No.2361118/13) that such legislation is indirectly discriminatory against women.
Gender Pay Gap
In 2017, a requirement to publish pay gap calculations was imposed on all businesses employing at least 250 staff; however, due to the impact of Covid-19, this requirement was suspended for 2020. The Equality and Human Rights Commission has announced that private employers must resume reporting and must publish their pay gap information and written statement by April 2021 based on a snapshot date of 5 April 2020. Affected employers will have a six-month grace period, however, as enforcement will not begin until 5 October 2021.
Spring 2021 Budget and Coronavirus Regulations
The Coronavirus Job Retention Scheme (CJRS) is being extended until the end of September 2021. Furloughed employees will continue to receive 80% of their salary for hours not worked but employees will be required to make a contribution towards the cost of unworked hours of 10% in July and 20% in August and September. There will also be a temporary continuation of tax exemptions for Covid-19 tests and home office expenses, and of the Statutory Sick Pay Rebate scheme while sickness levels on account of Covid-19 remain high.
Alternative formula for post-employment notice pay
On 21 July 2020, draft legislation providing for an alternative formula for calculating post-employment notice pay (PENP) was published. This applies in cases where a payment is made to an employee in lieu of notice. The new PENP formula, which acts to prevent a scenario in which the month of termination can affect the tax treatment of what the employee receives, applies from 6 April 2021.
Supreme Court 'Mencap' decision
The Supreme Court has dismissed the appeals of two overnight care workers who contended that time spent during ‘sleep-in’ shifts ought to be remunerated at the National Minimum Wage (NMW), even for time during which they were permitted to sleep. The decision means that time during which workers are permitted to sleep will continue to be considered as remunerable work only during the time spent awake for the purpose of working.
For the care home sector this decision of the highest court in the land is a major relief, as it was facing a very significant liability had the decision gone the other way.
Supreme Court 'Uber' decision
Uber drivers have been held by the Supreme Court to be 'workers' and not self-employed and thus they are entitled to basic rights such as paid holiday, rest breaks and the national minimum wage. 'Workers' are those who are self-employed but who provide their services as part of a profession or business undertaking carried on by someone else. ‘Worker’ status is an intermediate class of worker that sits between full employee status and the genuinely self-employed.
The Court emphasised the factual circumstances which led them to reach this decision, which included, amongst other things, the fact that Uber had control over the remuneration paid to drivers, their contractual terms, and the way in which drivers delivered their services. This decision will have a major impact on the 'gig' economy and the use of the status of 'worker' generally.
National Minimum Wage annual increase
On 6 April 2021, the National Minimum Wage rates will increase:
- Rate for 23+ year olds (the national living wage) from £8.72 (previously for 25 years+) to £8.91 per hour
- Rate for 21 to 22 year olds from £8.20 (now for 21-24 years) to £8.36 per hour
- Rate for 18 to 20 year olds from £6.45 to £6.56 per hour
- Rate for 16 to 17 year olds from £4.55 (for under 18 years) to £4.62 per hour
- Rate for apprentices (in 1st year or under 19) from £4.15 to £4.30 per hour
Maternity/Paternity/Statutory Sick Pay
The same earnings related rate, i.e. 90% of the employee's average weekly earnings, will continue to apply for the first six weeks of the employee's maternity leave. However, from 6 April 2021, the prescribed rate for Statutory Maternity Pay after the first six weeks will increase (provided that it is lower than 90% of the employee's normal weekly earnings) from £151.20 to £151.97 per week.
The rate for Statutory Paternity Pay, Statutory Shared Parental Pay, Statutory Parental Bereavement Pay and the rate for Statutory Adoption Pay after six weeks will also increase to £151.97.
As of 6 April 2021, the Statutory Sick Pay rate will increase from £95.85 a week to £96.35.
ET Compensation Limits
The Employment Rights (Increase of Limits) Order 2021 (SI 2021/208) has been laid before Parliament and will revise compensation limits for certain tribunal awards and other statutory payments from 6 April 2021.
In cases involving dismissal, the following figures will apply where the effective date of termination falls on or after 6 April 2021:
- The limit on a week's pay increases from £538 to £544.
- The maximum compensatory award for unfair dismissal increases from £88,519 to £89,493.
The minimum basic award for certain unfair dismissals (including health and safety dismissals) increases from £6,562 to £6,634.
What should you do?
You should ensure that employer practices are compliant with the new requirements, which may include:
- consider whether the changes to IR35 affect your organisation, and seek advice on this if necessary;
- for employers to whom it applies, report and publish your pay gap information and written statement by 5 October 2021; and
- review your rates of pay to ensure that you are compliant with the new NMW rates and, where applicable, consider the impact of the Mencap decision.
For any queries regarding these topics and any other employment matters, please contact our Employment team.
Our fact sheet of the employment rates for 2021/2022 applicable from 6 April is available here.
