Employment Law Update 2021 – Including IR35, Pay Rate Changes & More…

Employee rights & disputes - KBL Solicitors

A summary of the latest employment law news and developments.

IR35 is anti-avoidance tax legislation which is designed to tax any disguised employment at the same rate as tax applied to normal employees employed directly by the client.

This means any self-employment individuals who receive payments via an intermediary such as their own personal service company and would be classed as employees if they were directly employed by the client will need to be subject to income tax and national insurance deductions by the client.

It is currently for the personal service company itself to determine the employment status of the independent contractor and to apply taxation where the contractor would not be regarded as genuinely self-employed, whereas this will change to place the liability for taxation onto the client.

Therefore, from 6 April 2021, medium and large sized businesses will require the client (not the personal service company) to determine whether the independent contractor is genuinely self-employed or not. Where the client deems that the contractor is more likely to be an employee if the contractor were directly employed by the client, then the client will be responsible and liable for deducting the income tax and national insurance contributions in the same way as if the independent contractor was an employee of its business.

The IR35 rules exempts ‘small companies’. As such, the rules will not be applied to any private company which is defined as ‘small’. A small company is defined as having:
1. an annual turnover of less than £10.2 million;
2. a balance sheet total of less than £5.1 million; and
3. less than 50 employees.
If 2 of the 3 criteria are met, then the company will be regarded as small and the changes will not apply. In other words, the tax liability will remain with the intermediary or personal service company and not with the client.

You may find the governments Check Employment Status For Tax tool (CEST) useful. The CEST tool asks a series of questions to give an indication of employment status of particular engagements.

You can listen to our Podcast on IR35 which is available on our website here.

Pay rate changes with effect from April 2021
From 1 April 2021, the national living wage rate will apply to all aged 23 and over.

The new rates are as follows:

Aged 23 and over – £8.91
aged 21 to 22 – £8.36
aged 18 to 20 – £6.56
aged 16 to 17 – £4.62
Apprentices (in their first year): £4.30

From 4 April 2021, rates of Statutory Maternity Pay, Statutory Paternity Pay, Statutory Adoption Pay, Statutory Shared Parental Pay and Statutory Parental Bereavement Pay will increase to £151.97 (or 90% of an employee’s average weekly earnings, whichever is lower).

The statutory sick pay (SSP) standard rate will also increase from 6 April 2021 to £96.35 per week.

All of these statutory pay changes will need to be reflected in your payroll from the above stated dates.

Statutory Sick Pay
New statutory sick pay regulations come into force on 6 April 2021. These provide for certain small and medium sized employers to reclaim some, or all, of their SSP costs from HMRC under the rebate scheme, to increase the maximum amounts that can be claimed in line with the increase in the SSP rate from 6 April 2021.

Coronavirus testing
On 6 March 2021, the Department of Health and Social Care announced that businesses of all sizes can now register to order lateral flow tests for their workers from 13 March 2021. Previously, businesses were required to have at least 50 employees. Businesses are encouraged to register their interest by 31 March 2021 at https://www.gov.uk/get-workplace-coronavirus-tests

Travel Declaration
Anyone travelling abroad from England must now complete a declaration form for international travel (except for travel to Ireland). This requirement will be relevant to workers travelling overseas for essential work purposes. This form can be found here.

Gender Pay Gap Reporting
Each year, employers with 250 or more employees are legally required to report on the difference in earnings between men and women. This exercise helps organisations to understand the size and causes of pay disparity and provides companies with insight which can be used to identify strategies which will narrow the gap.

Most public authority employers were originally expected to publish their gender pay gap information by 30 March 2021, and private, voluntary, and all other public authority employers by 4 April 2021. However, due to the ongoing complications caused by coronavirus, employers have been given a six-month reprieve, with the deadline now extended until 5 October 2021 for all employers.

Other changes this year
The new Employment Bill is expected to be published in 2021, which may include the right for all workers to request a more predictable and stable contract after 26 weeks of service and extending redundancy protection to include pregnancy and maternity discrimination. It could also reduce the grounds on which employers would be able to refuse requests for flexible working. It will be interesting to see if the Government also looks to make further changes to employment law now the UK has left the EU.

Watch this space for more information regarding this…