Employment Law Update for April 2021

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.

Employment Law Update for April 2020

April is always a key time within the year where we see change to employment law.

Changes to written statement of employment particulars

There are 3 important changes that apply from 6th April 2020

  1. All “workers” employed on or after 6th April 2020 will be entitled to a written statement of employment particulars (the contract).
  2. Employees and workers must be provided with their written statement on or before their first day of employment.  This is a key change as it used to be within the first 8 weeks of employment. 
  3. There is additional information that written statements will need to contain:
    • Hours and days of the week the worker / employee is required to work, whether they may be varied and how
    • Entitlements to any paid leave
    • Any other benefits not covered elsewhere in the written statement
    • Details of any probationary period
    • Details of any training provided by the employer

Changes to holiday pay calculations

From 6th April 2020, the reference period to calculate a week’s pay for holiday pay purposes will be extended from the previous 12 weeks of work to the previous 52 weeks.

There has been lots of debate over the past couple of years with regards holiday pay and whether bonus and overtime should be included in the calculation of holiday pay.

Holiday pay should be calculated on the basis of the employee’s normal pay and recent case law means that where an employee normally works overtime, or gets paid a bonus such as commission, this should be included in the calculation of their holiday pay.

What does this mean???

Ultimately, it means that if an employee has worked a settled pattern of overtime over a period of time, payment for that overtime is pay that they normally receive and must therefore be included in holiday pay. Where there is no settled pattern of overtime, the employer should calculate average pay over a 52 weeks reference period leading up to the period of annual leave.

It will mean it becomes even more important for you to keep track of employees’ working time throughout the year. This includes overtime, to ensure they are correctly remunerated whilst on annual leave and in some cases, working out processes with third party payroll providers.

Increases in National Living Wage and National Minimum Wage

The following rates are effective 1st April 2020:

  • The National Living Wage (NLW) rate for workers aged over 25 years will increase from £8.21 to £8.72 per hour
  • The rate for workers aged 21 to under 25 years will increase from £7.70 to £8.20 per hour
  • The development rate for 18 to under 21 years olds will increase from £6.15 to £6.45 per hour.
  • The rate for under 18 years who are no longer of compulsory school age will increase from £4.35 to £4.55 per hour.
  • The apprentice rate will increase from £3.90 to £4.15 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 £148.68 to £151.20 a week.  This increase normally occurs on the first Sunday in April, which will be 5th April.  The weekly rate for statutory sick pay will rise from £92.05 to £94.25.

Statutory sick pay (SSP) is due to rise from £94.25 to £95.85 from 6th April 2020.

Parental bereavement leave and pay

The Parental Bereavement Leave and Pay Act 2018 has now been passed by Royal Assent and is expected to come into force in April.

It will give all employed parents the right to at least 2 weeks’ leave if they lose a child under the age of 18, or suffer a stillbirth from 24 weeks of pregnancy. Employees with 26 weeks’ continuous service will be entitled to paid leave at the statutory rate (still to be confirmed) and other employees will be entitled to unpaid leave.

Changes to agency workers’ rights

There are three important changes to agency workers’ rights which will apply from April 6th 2020:

  1. Abolition of the Swedish Derogation (sometimes referred to as ‘pay between assignments’ contracts). Previously agency workers could agree a contract which would remove their right to equal pay with permanent counterparts after 12 weeks working at the same assignment. From 6th April 2020, these contracts will no longer be permissible, and all agency workers, after 12 weeks, will be entitled to the same rate of pay as their permanent counterparts.
  2. All agency workers will be entitled to a key information document that more clearly sets out their employment relationships and terms and conditions with their agency.
  3. Agency workers who are considered to be employees will be protected from unfair dismissal or suffering a detriment if the reasons are related to asserting rights associated with The Agency Worker Regulations.

Changes to ICE (Information and Consultation of Employees) Regulations

From 6th April 2020, there will be a reduction in the percentage of employees required to make a valid request for an agreement on the sharing of information and consultation within the workplace. Currently it is at least 10% of the workforce who must put in a request before an employer is obliged to take steps to comply with this right. This percentage will be reduced to 2%. The requirement that at least 15 employees make the request will remain.