2020 has presented us with many HR legislation changes that we did not have time to plan for including the Coronavirus Job Retention Scheme (CJRS), the changes to claiming statutory sick pay and not to mention the practical issues of having many employees working from home unexpectedly. As we look forward to the rest of 2021, we wanted to make you aware of what is on the horizon in terms of HR legislation and the changes that this will bring.
Increases in National Living Wage and National Minimum Wage
The following rates are effective 1st April 2021:
- The National Living Wage (NLW) rate for workers aged over 25 years will increase from £8.72 to £8.91 per hour.
- The rate for workers aged 21 to under 25 years will increase from £8.20 to £8.36 per hour.
- The development rate for 18 to under 21 years olds will increase from £6.45 to £6.56 per hour.
- The rate for under 18 years who are no longer of compulsory school age will increase from £4.55 to £4.62 per hour.
- The apprentice rate will increase from £4.15 to £4.30 per hour.
We encourage you to assess the pay of your workforce to ensure that you are paying in line with the above rates. Remember the risk for not complying is a fine of up to £20,000 and being named and shamed.
Increased statutory family and sick pay rates
Statutory maternity (SMP), paternity (SPP), adoption (SAP) and shared parental pay (ShPP) is expected to rise from £151.20 to £151.97 a week. This increase normally occurs on the first Sunday in April, which will be 4th April.
Statutory sick pay (SSP) is due to rise from £95.85 to £96.35 from 6th April 2021.
Extension of IR35 to the private sector
The IR35 rules prevent contractors who are performing similar roles to employees, and working through Personal Service Companies (PCS), from paying less tax and National Insurance Contributions (NICs) than if they were permanently employed by the client organisation.
From 6 April 2021, deciding whether IR35 applies becomes the responsibility of all private sector employers that in a tax year that meet two of the following criteria:
- more than 50 employees
- an annual turnover over £10.2 million
- a balance sheet worth over £5.1 million
An organisation within the scope of the IR35 rules (the client) is required to assess the employment status of contractors that it engages via an intermediary to provide its services.
To meet its IR35 responsibilities, the client must carry out an assessment and issue a status determination statement before making payment for the contractor’s services (ie. before the first payment after 6 April 2021, for services provided on or after that date).
The HMRC have created an online assessment tool Check employment status for tax – GOV.UK (www.gov.uk).
In practical terms, the status assessment should be carried out before the engagement begins, as part of the process of agreeing the contract. An assessment that the engagement is inside IR35 (ie the contractor would have had employee status had they been engaged directly rather than through their intermediary) may mean that the contractor seeks to renegotiate their fee, to compensate them for the deduction of tax and national insurance.
If a Company fails to take reasonable care to adhere to the revised IR35 rules, it will be liable for the contractor’s tax and NICs as well as the employer NICs and apprenticeship levy, with interest charged for late payment. HMRC also has the power to issue penalties, set at a percentage of the tax and NIC liability, depending on whether the non-compliance was careless or deliberate.
HMRC has published guidance on the new rules (Prepare for changes to the off-payroll working rules (IR35) for clients – GOV.UK (www.gov.uk)) and we would advise you speak with your Payroll team/provider for further support and guidance. We can assist with providing template status determination statement once an assessment has been completed.
Gender Pay Gap Report – from 4th April 2021
This is more for information at this stage, as it is applicable to private and voluntary sector employers with at least 250 employees, but it gives a sense of what is likely to be required of smaller companies at some point in the future. These employers will be required to publish information about the differences in pay and bonuses between men and women in their workforce, based on a “snapshot” date of 5th April every year.
A couple of other things to make you aware of:
1st January 2021 – New Immigration Law in force. As we made you aware of at the time, from this date, a new immigration system that applies equally to EU and non-EU citizens came into effect. There are several changes to the former points-based system, including:
Replacement of the Tier 2 General category with a Skilled Worker route (requires a job offer in an eligible skilled occupation from an approved sponsoring employer)
- Abolition of maximum six-year stay for workers in this category
- Gross basic salary must be a minimum of £25,600
- Skill level must be equivalent to A-levels
- Applicants must have an intermediate-level ability to communicate in English.
EU workers already resident in the UK on 1 December 2020 have until 31 June 2021 to apply for settled status enabling them to remain here. Last year we provided you with an advisory memo to send to any current EU or Swiss national employees that gave guidance to them on how to do this. There is no requirement for employers to carry out retrospective right to work checks for existing EEA and Swiss national employees to confirm that they have settled or pre-settled status. In other words, if you have conducted a compliant right to work check for an EEA or Swiss national before 1st January 2021, it does not need to be repeated.
No date as yet – Extending pregnancy protection from redundancy
Currently, an employee at risk of redundancy while on maternity, adoption, or shared parental leave has the right to be offered any suitable alternative vacancy that is available (without having to be put through any selection process such as interview or scoring criteria).
The government is proposing to extend this protection to:
- pregnant employees, once they have told their employer of their pregnancy
- employees returning from maternity or adoption leave within the previous six months
- parents returning from shared parental leave (although how the limits on this right will operate is still to be worked out).
The proposals are in response to a consultation earlier in the year on pregnancy and maternity discrimination. The government has said that legislation will be brought forward when Parliamentary time allows. We will keep you updated on this as more information emerges.