With Brexit, Covid, and new tax rules for the self-employed, this year sees a plethora of significant changes in the field of employment law. Here is a recap of what you need to know.
1. End of furlough scheme
The current furlough scheme will end on 30th April 2021 unless the government decides to extend it or replace it with something else. The chancellor announced just before Christmas that the government will continue to pay up to 80% of a furloughed worker’s wage and that businesses won’t have to contribute towards this, meaning employers just have to pick up the national insurance and pension contributions of staff who are fully furloughed.
2. New immigration rules
Changes to the UK’s immigration rules will make it more difficult and more expensive for the construction sector to recruit anyone from outside the UK.
From 1st January 2021, free movement to and from mainland Europe will end and anyone wishing to come to the UK to work (including all EU citizens not already in the UK, apart from Irish citizens) will have to comply with the new immigration ‘points based’ system.
This system is designed to attract ‘skilled workers’ whose roles are on the skilled occupational list. Workers must be able to speak English, have at least ‘A’ level or equivalent qualifications, have a job offer from a licenced sponsor and earn at least £25,600 per year. However, employers recruiting any skilled workers from the shortage occupational list can pay them slightly less than this. The current list includes engineers, architects and quantity surveyors, but not plumbers, electricians and bricklayers. These requirements will exclude many construction workers and there isn’t a general low skilled or temporary work route available.
You will also need a sponsor licence to recruit non-UK workers. If you don’t already have one, you’ll need to apply and pay the fee as soon as possible as the process takes around eight weeks. If you decide to sponsor workers under the points based system, you will also have to pay a fee of £199 for every sponsorship licence you issue, plus £1,000 per skilled worker for the first 12 months, with an additional £500 charge for each subsequent six month period. You can’t pass these costs onto the worker.
3. Temporary arrangements for EU citizens
You can continue to employ EU citizens until 30th June 2021, without worrying about the points-based system provided they are already living or working in the UK by 31st December 2020. But, they will need to obtain settled or pre-settled status to work here from 1st July 2021 and, if they don’t have this (and haven’t applied by 30th June), you will not be able to continue to employ them as they will become illegal workers.
If you employ EU staff and wish to retain them beyond 30th June 2021, we suggest that you encourage them to apply to remain in the UK and explain to them what will happen if they lose the right to live and work here. The Home Office has an employer toolkit to help explain the process which includes a template letter you can adapt to send to EU staff.
4. IR35/ Off payroll workers
Huge changes to employment tax take place from 6th April 2021. The off-work payroll working rules, commonly known as IR35, have been around since 2000. They were introduced to ensure that individuals, who work like employees, pay broadly the same employment taxes as employees, regardless of the structure they work through. The rules apply to anyone who provides their services to another person or organisation through an intermediary, such as a personal service company (PSC).
Currently, organisations in the private sector are able to engage contractors using personal service companies or other intermediaries without worrying too much about the contractor’s tax status because it’s the responsibility of the PSC to correctly determine the tax status of its contractors and account for any underpayment to HMRC. However, from 6th April 2021, the onus of deciding if an individual falls under IR35 will have to be decided by the client engaging them. And, if it decides the contractor is an employee for tax purposes, it becomes responsible for paying PAYE and National Insurance contributions.
HMRC have an online tool ‘Check Employment Status for Tax’ to help organisations determine the tax status of contractors, but it’s not perfect. These rules will apply to any payment made on or after 6th April 2021, unless all the contractor’s labour was provided after that date. The rules don’t apply to small organisations that don’t meet at least two of the following criteria:
- Annual turnover of more than £10.2 million
- Balance sheet total of more than £5.1 million
- More than 50 (full-time equivalent) employees
If you are caught by the rules, you need to identify any service provider that you need to provide a status determination on. This can be time consuming as many organisations don’t already hold information about those providing services to them through limited companies or partnerships.
5. National Living Wage and National Minimum Wage
From April 2021, the rate of the National Living Wage will increase by £0.19 to £8.91 per hour and will be payable to more workers because the age threshold is being reduced to 23 (currently, only workers aged 25 and above qualify). The National Minimum Wage rates are also increasing for all age groups.
6. Other changes that may come into effect in 2021
The government has said it will introduce an Employment Bill to ‘protect and enhance workers’ rights as the UK leaves the EU’. Then, despite announcing the consultation mid-January, it announced last week that the review is not going ahead.
However, the government has already committed to introducing legislation to ensure that that tips left for workers go to them in full. It has also said that it will introduce a new right for all workers to request a more predicable contract and will extend redundancy protections to prevent pregnancy and maternity discrimination. It has also said that it will give parents a new right to take extended leave for neonatal care and, additionally, give carers the right to take one week’s unpaid leave each year.
The government has indicated that it will consult on making flexible working the default unless employers have a good reason to depart from it.
These ideas have been on the back burner since January 2020 and we don’t yet have much detail on them. It is possible that some of these may become law in 2021.