Employment law developments in 2021

The coronavirus pandemic has dominated the lives of those in the UK and around the world for much of 2020 and now extending into 2021. This has not only generated new law, but also pushed back other proposed reforms in UK employment law.

The regulations underpinning the current lock down in England have been extended to 31 March, and last month the Chancellor announced that the Coronavirus Job Retention Scheme (CJRS) will be further extended until 30 April 2021. Under this scheme employers will remain able to claim 80% of employees’ wages, capped at £2,500 per month for hours not worked (with the cap reduced in proportion to the hours not worked).

Following the announcement on 4 January 2021 of the further lockdown in England individuals should only attend their workplace when they cannot reasonably work from home and stay at home unless they have a "reasonable excuse" not to do so. Government guidance has been published on issues such as who are critical workers who cannot work from home, how employers maintain health and safety in the workplace and the rights of furloughed workers to sick pay or holiday pay.

The transition period ended on 31 December 2020 and the UK is no longer an EU member state. The UK and EU have published their Trade and Cooperation Agreement (TCA) which provides that the neither party must weaken or reduce the level of employment rights which existed on 31 December 2020 in a manner which would affect trade or investment. This includes by failing to effectively enforce their law and standards in fundamental rights at work, health and safety standards, fair working conditions, employment standards, information and consultation rights at a company level; and the restructuring of undertakings.

Although the TCA reduces the UK's ability to make major changes to employment law this extends only in so far as when this would affect trade or investment. Amending or removing working time or agency worker legislation would therefore be tricky; but more minor changes such as removing commission payments from holiday pay for example may be possible without compromising the TCA's provisions.

The UK launched revised general immigration rules on 1 December 2020 which also apply to EU citizens (except Irish citizens) moving to the UK from 1 January 2021. Those seeking to work or study in the UK will need prior approval to do so. The rules changed, and in some cases, relaxed the UK's visa processes. This new points-based system sits alongside the settled and pre-settled status process announced previously for EEA nationals who have established residence in the UK by 31 December 2020. More details can be found in our recent e-alert: New post-Brexit immigration rules published: what UK employers need to know.

The off payroll working rules (known as “IR35”) for the private sector were due to come into force on 6 April 2020. They were deferred due to the coronavirus pandemic but are now coming into force on 6 April 2021.

Large and medium-sized businesses in the private sector that engage independent contractors via an intermediary (usually a personal service company "PSC") will become responsible for assessing whether the IR35 rules apply after making a "status determination". They must then notify relevant parties of the outcome and provide an opportunity to challenge the assessment.

If the IR35 rules apply, then the client (or fee payer if different) becomes responsible for deducting income tax and NICs and paying employer’s NICs on payments to independent contractors.

Where clients are based wholly overseas (meaning no UK establishment or residence), IR35 rules will not apply to them, meaning if they use UK contractors with PSCs, it will not be the client's responsibility to deduct tax or determine status.

For more details sign up to our upcoming webinar: 20 January 2021: IR35: What do businesses need to know?

The delayed off-payroll rules will impact businesses from 6 April 2021. Many have delayed their IR35 implementation strategies due to the economic impact of the coronavirus pandemic. In this timely webinar, our team of employment and tax specialists will guide you through what you need to do now to prepare for the planned changes. We will focus on key issues for businesses including:

• Reviewing and reducing risks in existing arrangements that will straddle the changes.
• Practical points on assessing employment status and the impact on contractors' tax position.
• Risk-proofing engagements.
• Action planning for disputes with contractors and those in the contracting chain.
• Retaining an audit trail for HMRC enquiries.

The government has accepted the Low Pay Commission's recommended increases to the national living wage (NLW) and national minimum wage (NMW) rates, to apply from 6 April 2021. The NLW, which currently applies only to workers age 25 or over will be extended to 23 and 24-year-olds for the first time. The new rates will be:

• Age 23 or over (NLW rate): £8.91 (from £8.72)
• Age 21 to 22: £8.36 (from £8.20)
• Age 18 to 20: £6.56 (from £6.45)
• Age 16 to 17: £4.62 (from £4.55)
• Apprentice rate: £4.30 (from £4.15)
• Accommodation offset £8.36 per week (from £8.20).

The government has announced that from 6 April 2021 it is proposed that weekly rates of statutory sick pay will increase to £96.35 (currently £95.85) and from 4 April 2021 weekly rates of statutory family leave (maternity pay, paternity pay, shared parental pay, adoption pay and parental bereavement pay) will rise to £151.97 (currently £151.20).

BEIS has opened two consultations which close on 26 February 2021.

Firstly, it seeks views on proposals to reform post-termination non-compete clauses in employment contracts. These proposals include requiring employers both to continue paying compensation to employees for the duration of a post-termination non-compete clause and confirm in writing to employees the exact terms of a non-compete clause before their employment commences. Other proposals are to introduce a statutory limit on the length of non-compete clauses or banning the use of post-termination non-compete clauses altogether.

Secondly BEIS is seeking views on measures to extend the ban on exclusivity clauses in employment contracts to cover those earning under the Lower Earnings Limit, currently £120 a week so that such employees can work for more than one employer.

Extending redundancy protection for pregnant women and new parents featured in the Employment Bill 2019-20 but may now be introduced under the Pregnancy and Maternity (Redundancy) Protection Bill 2019-21, if passed. This would prohibit redundancy during pregnancy and maternity leave and for the six months after the return to work, except in limited circumstances. Currently an employer must offer women on maternity leave a suitable alternative vacancy if one is available but there is no added protection once employees return to work. Similar extended protection is proposed for employees taking adoption leave and shared parental leave. 

Following consultation on introducing 12 weeks' neonatal leave, in March 2020 the government responded stating that it intends to introduce a new statutory right of up to 12 weeks’ paid leave for employees whose babies spend an extended period in neonatal care. A new entitlement would be implemented via the Employment Bill.

We are waiting for the Government's response to consultation which closed in August 2020 on introducing one week’s unpaid leave per year for employees with unpaid caring responsibilities. The consultation closed in June 2020. This would have the aim of supporting those who need to manage providing long-term care to others with their own employment. 

The Conservative Party's manifesto set out that the government intends to make flexible working the default position unless employers have a good reason not to allow it. This is still subject to consultation, but if agreed to, would also be contained in the Employment Bill. Given that this was proposed prior to the increase in flexible working practices due to the coronavirus pandemic it would seem now more likely that this commitment could become law.

The Government Equalities Office suspended enforcement of gender pay gap reporting for the 2019/2020 period because of the unprecedented pressure and uncertainty facing businesses due to the COVID-19 pandemic. However, the 2020/2021 deadline of 4 April 2021 to report and publish their gender pay gap information is now just three months away. The government has confirmed in Guidance that although employees furloughed on the snapshot date for the calculation (5 April 2020) are relevant employees they are not full-pay relevant employees where they were receiving less than full pay because they were on furloughed leave under the CJRS. This means that any furloughed employees must be counted when establishing what the employer headcount is (for the purpose of reaching the threshold of 250 or more employees). However, they would be excluded from calculations of the gender pay gap (unless their salary was topped up to normal levels while on furlough) but they would be included in bonus pay calculations.

The government has already committed to undertake a review of gender pay gap reporting in 2022, so they may decide on further reform. We also await further developments on proposals around ethnicity pay gap reporting.

It looks set to continue to be a very busy time for pensions. Substantial legislation that was left on hold before Christmas (the Pension Schemes Bill) is now due to be heard again in the House of Lords on 19 January and will most likely be enacted shortly. Most of that relates to occupational pension schemes (those which are set up under a trust by the employer and run by trustees) and some of it will be very significant.

For example, in relation to defined benefit pension schemes, there will be new criminal penalties, the grounds for which have been drafted very widely and broadly relate to certain actions which adversely affect the pension scheme. If you operate such a pension scheme or are or have been in a corporate group involved with one, we would suggest seeking urgent advice on these provisions and how they might affect you and your business.

Other aspects may affect employers as a by-product. So, measures designed to produce a pensions dashboard where individuals can see their pensions information online in one place, and changes in how transfers operate may, in time, require some information provision from HR teams. Others may interest employers looking at alternative pension provision in the new collective defined contribution regime which is designed to give employers certainty of cost, whilst pooling risks between members.

Many of the measures may give rise to increased queries from employees. That is particularly so in relation to what is being widely termed as 'ESG' – environmental, social and governance issues. It is increasingly a prominent theme for pensions (and, we suggest, generally), with the Government recognising the huge 'buying power' that pension schemes have given their substantial assets, and celebrities such as Richard Curtis being a founding member of the 'Make My Money Matter' campaign as a drive for ethical fund investment. Employees may raise more queries about whether the pension provision made for them has the opportunity for investing in ESG funds and what steps the employer has taken in that respect. It would be worth employers understanding what their arrangements provide and, where necessary, reviewing these with providers. For employers that have occupational pension schemes there are more detailed obligations in this area and we would recommend seeking specific advice on these.

Auto enrolment obligations continue for all employers who must bear the cost of their required contributions under these in full (so there is no scope for any reimbursement of these under the CJRS as there was with respect to the first few months of the CJRS last year). Not only is the Pensions Regulator still very active in dealing with non-compliance, the Pensions Ombudsman continues to receive complaints from employees especially where contributions have not been paid properly, so employers should remain vigilant about meeting their obligations. In addition, the 'standard' range of earnings upon which contributions are based (between £6,240 and £50,000 for the 20/21 tax year) and the earnings trigger (£10,00 for the 20/21 tax year) are reviewed annually and so employers should note the new levels (if any) which will apply for the 21/22 tax year so that contributions can be calculated and payroll adjusted accordingly.

Update: We understand that the Pensions Schemes Bill has now passed through the House of Lords and is to receive Royal Assent.  We will keep you informed of further detail and developments where appropriate.

After an unprecedented year, join us as we explore the significant challenges we face in 2021. We will cover what you need to know and do in relation to the challenges arising from the impending Brexit transition, coronavirus and the return to the workplace; changes around independent contractors and worker status & potential changes to the rules on non-competes.

Sign up here