Mind the gap: Employment law changes 2021

Are you aware of the key employment law changes in 2021 which might impact your business?

Below are tips for you as an employer, business owner or manager to take note of. It is important you don’t fall behind, or find yourself on the wrong side of these legal changes.

  1. Gender pay gap reporting extended to October 2021

Does your business have 250 or more employees?

If yes, you are legally entitled to report of the difference in earnings between your male and female workers. This allows you as a business owner to understand the extent of the gender pay disparity. It also gives insight to develop strategies to narrow the gender pay gap.

Are you a private business or public authority?

Most public authority employers were originally expected to report this gender pay gap information by 30th March 2021. Private and all other public authority employers were expected to do so by 4th April 2021. This has now been extended by 6 months, with reporting for all employers to be provided by the latest of 5th October 2021.

Justine Watkinson, Partner and Head of Employment Law at Hillyer McKeown says:

Understandably, the current situation has led to delays yet this is creating a knock-on problem in terms of equality and the perceived value of some employees. Effectively, progress has been set back for some workers subject to gender inequalities. People understand that this is unfair, and now is the time to act.

This April 2021 – even more so than in other years – was a busy month for employment law updates. There are a few key changes that will have come into play in the next month, which might impact business owners moving forward.

  1. Furlough scheme extended until the end of September

Chancellor, Rishi Sunak, confirmed in the budget announcement on 3rd March 2021 that the scheme will now continue up until the end of September 2021.

The existing scheme will continue until the end of June 2021. Until this date:

  • Employers using the scheme will still receive 80% of employee wages for hours not worked (capped up to £2,500 per month).
  • Employees can be continuously furloughed or placed on flexi-furlough (allowing them to work part of their normal hours)
  • As the employer, you will still need to pay employer National Insurance contributions (NICs) as well as employer pension contributions.

From July 2021, employers still using the scheme will have to contribute 10% towards the furlough wages, increasing to 20% in August and September (with the government topping up the amount to reach the 80% threshold).

We recommend being prepared for the tapering furlough scheme. Consider, will your business be financially prepared for September, when government furlough support will end?

  1. 1st April 2021 employment law changes: wage increases

The National Minimum Wage is the minimum hourly pay most workers are entitled to. Statutory pay rates are reviewed and updated each April. In 2021:

  • The National Living Wage (the minimum wage that usually applies to workers aged 25 and over) has increased by 2.2%, up to £8.91 an hour.
  • Unusually, this year the National Living Wage has been extended to 23 and 24 year-olds for the first time, providing a substantial pay rise for employees, of almost 9%.
  • Apprentices aged 19 and over who have completed their first year must be paid at least the minimum wage rate for their age bracket.

Are you assured that your company paying the employees?

Some companies can end up paying employees incorrectly, and it is important to pay the right rates. Working with an external payroll department or accountant will help to get it right in light of these changes, as to not cause detrimental impact for your business.

4. Other rates of statutory pay have increased

New statutory pay rates for 2021/22 change the amount of other types of pay that your employees might be entitled to:

  • Maternity Pay, Paternity Pay, Adoption Pay, Shared Parental Pay, and Parental Bereavement Pay have all increased from £151.20 to £151.97 (or equivalent to 90% of employee’s average weekly earnings).
  • The Statutory Sick Pay (SSP) rate has increased to £96.35 per week. This rate depends on the number of ‘qualifying days’ the employee works each week. Use the UK Government’s SSP calculator to help you to work out SSP entitlement.
  • Statutory redundancy payments apply since the 6th April 2021. The maximum amount of a week’s pay (used to calculate a redundancy payment) must be £544, increased from £538 last year.

As a business owner, you will need to ensure that all these statutory pay changes are reflected in your payroll. It will further need to be reflected in the information regarding the benefits you provide as a company to your employees.

5. Employment law changes 6th April: IR35 ‘off-payroll’ worker changes hit the private sector

As you may be aware, IR35 tax reform changes will be coming into effect, after being postponed from April 2020 due to the challenges of the coronavirus pandemic. The new IR35 reforms will apply where services are provided via a personal services company, and where a consultant is providing their services personally as an individual. These reforms will largely affect large and medium sized businesses in the private sector, which engage with independent contractors through intermediaries like this personal services companies.

Does this sound familiar or like your business?

If you use ‘off-payroll’ workers it is essential that you not only know about IR35, but also how the changes will impact on your business.

Since the 6th April, there has been a shift in responsibility for the payment of tax and National Insurance contributions (NICs) from the contractor to the business hiring them. This is where the end user or business hiring the contractors is classed as medium or large under the Inland Revenue rules. This means that business owners will need to be more cautious when hiring contractors and deciding appropriately upon their status.

To strengthen your IR35 position, we recommend that you review your current contractual and working relationships with an accountant and professional employment law specialist. This in depth review will allow better assessment of employment risks, and any unnecessary contractual relationships. End users who ignore these new IR35 rules will otherwise end up with significant extra tax liabilities and penalties.

More information on IR35 reforms

6. Changes to guidance for clinically vulnerable workers

From the 1st April 2021, those individuals who were advised to shield are now no longer being advised to do so.  As a result, these workers are no longer being eligible for SSP or Employment and Support Allowance on the basis of being of being advised to shield. However, as an employer it is still your responsibility to ensure the welfare of your employees and be sure that their needs and employment law rights are acknowledged.

Where possible, working from home for clinically vulnerable workers should be advised. Where this is not possible, employers must be sure to take extra precautions to reduce the risk of transmission in the workplace, particularly for these members of staff. Otherwise, if employees demonstrate significant welfare related issues in regards to returning to work, these workers are still eligible for the furlough scheme. And as such, this option should be considered.

Be sure to offer the conversation with your workforce, and be sure that as the employer you demonstrate a balance between their needing to work, and their wellbeing.

What can I do to maximise running my business?

HM’s employment law experts want to help you stay one step ahead.

From furlough extensions and statutory pay rate increases, to tax rules changing – knowing you have legal support can help. We can help you to make sense of these employment law obligations, and provide the right advice. It is important to adapt to this raft of changes with the minimal impact and cost on your business and employees.

We hope that this information has helped inform you of key legal changes in 2021. For further information specific to your business, call our employment lawyers on 01244 318131.