05.01.2021
The year 2020 was, for many, one of immense uncertainty and hardship. As the effects of Covid-19 emerged and then continued to unravel, both businesses and their staff were forced to grapple with huge logistical, financial and emotional challenges – while keeping up to speed with evolving Government guidance and restrictions aimed at curbing the spread of the virus and providing financial support – and sadly those difficulties are not yet past.
Although vaccines are now being rolled out across the UK, 2021 (the first part, at least) looks set to be as hard as, if not harder than, 2020, with England, Wales, Scotland and Northern Ireland all now under some form of lockdown (although the precise rules differ across each of the four nations). In his televised briefing on 4 January, the Prime Minister instructed everyone in England to stay at home (save for limited exceptions – see the 'National lockdown: Stay at Home' guidance) and warned that the coming weeks would be the ‘hardest yet’. Under the new rules in England, those who are clinically extremely vulnerable have once again been advised to ‘shield’ and schools have closed to most pupils, placing significant strain on working parents, as they seek to juggle the competing demands of home and work.
The Government has stated that England's current rules will be reviewed on 15 February; Scotland's will be reviewed at the end of January; the Welsh Government is expected to make an announcement about the anticipated duration of the lockdown there on Friday (although the First Minister has warned that the restrictions are likely to remain in place for the rest of January); and in Northern Ireland, the lockdown rules are to be reviewed in late January.
Furlough available until the end of April 2021
The extended Coronavirus Job Retention Scheme (which we refer to as the Extended CJRS) is currently due to continue until the end of April 2021. Under this regime, the Government will continue to contribute 80% of furloughed employees’ salary for hours not worked (subject to a monthly cap of £2,500 for employees who are fully furloughed and a pro rata amount for those who are flexibly furloughed), with employers able to choose whether to top up this furlough pay. Employers are required to cover the cost of employees’ wages, National Insurance Contributions (NICs) and pension contributions for hours worked, but only NICs and pension contributions for hours not worked.
The Government has indicated that schools in England will not reopen until after February half term. Employers should keep in mind that it is possible to furlough employees who are unable to work because they are experiencing childcare difficulties, as well as clinically extremely vulnerable employees who cannot work from home, provided other eligibility criteria are met. For further details, see our FAQs on the Extended CJRS.
Other developments
Inevitably, managing issues relating to Covid-19 (such as staff self-isolation and furlough) will keep HR busy over the coming months. But what about the other issues normally facing HR during non-Covid times? With the dawning of a new year, what issues should you be aware of within the employment sphere? Below, we look at what lies in store for the months ahead.
New Brexit trade deal and the right to work
The UK has now completed its formal separation from the EU meaning we stopped following EU rules with effect from 23:00 GMT on 31 December 2020.
Moving forward, the ‘UK-EU Trade and Cooperation Agreement’ (which is over 1,200 pages long and referred to here as the ‘new deal’) applies, which sets out rules for how the UK and EU will live, work and trade together. Make UK has welcomed this development, as a no deal outcome would have caused catastrophic damage to manufacturing in Britain.
HR will be particularly interested in the new requirements for EU and UK nationals. As freedom to work and live between the UK and the EU has now ended, UK nationals travelling to the EU now need a visa if they want to stay in the EU for more than 90 days in a 180-day period. The UK has implemented a permanent settlement scheme for EU nationals who were residing in the UK before the end of the transition period, meaning such EU nationals have kept all the rights they previously had in the UK as citizens of the EU, for example to work, study and have access to public services. For further details about EU nationals settling in the UK, see the people section of our EU hub. The new deal also includes some shared rules and standards on issues such as workers' rights.
As adequacy decisions have not yet been adopted, the Government has also announced that the new deal will allow personal data to flow freely from the EU (and EEA) to the UK, for no more than six months. This will enable businesses and public bodies across all sectors, including manufacturing, to continue to freely receive data from the EU (and EEA). See here for the ICO’s response to that announcement.
For further details on the new deal, see this summary and our EU hub on the Make UK website.
Gender pay gap reporting by 4 April 2021
The next gender pay gap (GPG) reporting deadline is 4 April 2021 (for the 2020/2021 reporting year), and (unlike for the 2019/2020 reporting year) there has been no suggestion that this will be delayed. This means that organisations with 250 employees or more in Great Britain should be making plans to report on their GPG (i.e. the difference in average pay between their male and female employees) by 4 April 2021.
Some employers may experience difficulties in analysing their pay data due to the impact of Covid-19. Since the start of the pandemic, many businesses have furloughed staff (often reducing their pay) and experienced higher levels of sickness absence, meaning their 2020/2021 reporting data is likely to be skewed. Given the uncertainties of 2020 (and now 2021), many employers may also have failed to progress initiatives to reduce the GPG in ways they had originally planned.
Government guidance confirms that employers should exclude any staff whose pay has been reduced due to being on furlough during the relevant pay period from their GPG (hourly) calculations and when identifying the proportion of men and women in each pay quartile. However, any employees who have been on furlough will need to be included when it comes to calculating: (i) the percentage of men and women receiving bonus pay; (ii) the mean GPG using bonus pay; and (iii) the median GPG using bonus pay. Many employers may decide to publish a voluntary narrative alongside their GPG data, to explain the impact the pandemic has had, e.g. if they have had to exclude significant numbers of furloughed employees from their calculations, or they have not made the progress they had hoped to in reducing their GPG.
It’s also worth noting that a Private Members’ Bill has been introduced in the House of Commons, aiming to extend GPG reporting obligations to employers with only 100 or more employees (although the primary focus of the Bill is on equal pay, rather than gender pay). Although this Bill is unlikely to become law for now (a second reading in the Commons will take place in January 2021), this proposal would significantly increase the number of employers covered by the GPG Regulations.
Changes to IR35 obligations from 6 April 2021
Changes to HMRC’s IR35 and the off-payroll working rules (together, the IR35 tax regime) which had been due to take effect from April 2020, will now come into force from 6 April 2021.
Under the new regime, clients in the private sector (who do not fall within a small business exemption) will need to determine the employment status (for tax purposes) of each of their contractors who provide their services via an intermediary (usually a personal service company or ‘PSC’). To date, the contractor’s PSC has been responsible for this assessment.
Under the new rules, clients will need to take ‘reasonable care’ when determining a contractor’s employment status and produce a ‘status determination statement’ (SDS) which sets out its conclusion along with the reasons for the determination. The SDS must be passed to the individual contractor (and any person or organisation that the client contracts with such as an agency). The client must also keep detailed records of any SDS, including reasons for the outcome and fees paid, and have processes in place to deal with any disputes that arise from the determination.
If the outcome of the SDS is that the contractor is a deemed employee of the client for tax purposes, the engagement will be ‘inside’ the IR35 tax regime. Subject to any labour supply chain being involved, the client is likely to be the ‘deemed employer’ who will then be responsible for deducting tax and NICs (and, where relevant, the apprenticeship levy) and paying those to HMRC.
Minimum wage increases from 6 April 2021
- Age 23 or over (NLW rate): £8.91 (up 2.2% from £8.72).
- Age 21 to 22: £8.36 (up 2% from £8.20).
- Age 18 to 20: £6.56 (up 1.7% from £6.45).
- Age 16 to 17: £4.62 (up 1.5% from £4.55).
- Apprentice rate: £4.30 (up 3.6% from £4.15).
- Accommodation offset £8.36 per week (up 2% from £8.20).
Notably, the NLW (not to be confused with the Living Wage set by the Living Wage Foundation), which currently applies only to workers age 25 or over, will also be extended to 23 and 24-year-olds for the first time. You’ll see that the apprentice rate is due be increased the most (up 3.6%), as the Low Pay Commission ultimately aims by 2022 to fully align this with the rate for 16 to 17-year-olds. For more information and worked examples, see the BEIS guidance on 'Calculating the Minimum Wage'.
Cases to watch out for in 2021
Supreme Court cases that are pertinent to our members and due to be heard later this year include Kostal UK v Dunkley (reviewing whether a one-off pay offer to employees to bypass stalled collective bargaining with a recognised trade union was an unlawful inducement); Flowers and others v East of England Ambulance Trust (considering whether holiday pay should include regular voluntary overtime); and Harpur Trust v Brazel (looking at whether ‘part-year workers’ should have their annual leave entitlement capped at 12.07% of annualised hours). We will of course update you when significant cases are published that could impact your internal HR operations.
How we can help
For further details on Brexit, see our EU hub.
For guidance on Covid-19’s impact in the workplace, including – among other things – details of the Extended CJRS and how to manage employees who have to self-isolate, see our Coronavirus FAQs. (We are currently in the process of updating these to take into account the new lockdown restrictions.)
Click here if you are interested in attending IR35 training.
If you need help with your planning in relation to gender pay gap reporting, our HR and consultancy team can assist you (please contact Nicola Kibble, [email protected])
If you are a Make UK member, please continue to contact your adviser with any queries you wish to discuss. Alternatively, non-members are welcome to call us on 0808 168 5874, or email [email protected].