Dealing with the COVID-19 pandemic was the government’s main focus in 2020 and this has led to fewer employment law changes in 2021 than normal and for other employment law changes to be delayed. In this article, we highlight the employment law changes that will still happen in 2021 and those that have been delayed.
Right to work in the UK
Freedom of movement for EU nationals (except for Irish nationals) ended on 31 December 2020. Employers should remind any employees who are EU nationals that they have until 30 June 2021 to apply to remain in the UK under the EU Settlement Scheme.
New immigration rules for non-EU nationals also came into force on 1 December 2020. These rules will apply to EU nationals from 1 January 2021. Employers should familiarise themselves with the new rules before recruiting someone from another country.
In terms of checking someone’s right to work, employers can still rely on a passport or ID card until 30 June 2021 for EEA nationals. After 30 June 2021, employers will need to also check the individual’s immigration status.
Extension of IR35 to the private sector
To address non-compliance with IR35 in the private sector (which prevents tax avoidance by contractors), the off-payroll working rules that apply to the public sector will be extended to the private sector from 6 April 2021. This means that:
– Businesses that engage contractors will be responsible for determining a contractor’s employment status for tax purposes; and
– Liability for employment taxes will shift from the contractor to the business if the contractor is found to be an employee for tax purposes.
The IR35 rules include a small business exemption which applies if certain requirements are met. If the small business is a company then it will qualify for the small business exemption if it satisfies two or more of the following requirements: its annual turnover is not more than £10.2 million; its balance sheet total is not more than £5.1 million, and it has not more than 50 employees.
The small business exemption should exclude most small businesses from the IR35 rules, but small businesses can still be liable for contractor employment taxes when it is found that a contractor should have been treated as an employee for tax purposes. This is because the HMRC will require employers to make good any tax and National Insurance shortfall unless the employer can show: (1) it took reasonable care to comply with PAYE regulations and (2) that the failure to deduct the excess was due to an error made in good faith. Even if the small business does not have to make good any shortfall in employee taxes, it may still have to pay employer National Insurance contributions.
Getting employment status right will avoid unexpected employment tax liability. It is also important to avoid employment status disputes and employment tribunal claims which are costly and time-consuming. All businesses should therefore consider employment status when engaging contractors. Employment status disputes can be avoided by ensuring contracts are always be drafted to reflect the actual working relationship between the worker and remembering that working relationships can change over time.
The COVID-19 pandemic has led to a number of proposed employment changes to be delayed or shelved, some of which are detailed below. These employment law changes have therefore not been implemented and may not be implemented.
– Non-disclosure agreements. Proposals to prevent the misuse of confidentiality clauses or non-disclosure agreements (NDAs) in the settlement of workplace harassment or discrimination, including new requirements for the limitations of a confidentiality clause to be clear to those signing them, as well as for mandatory independent legal advice on a settlement agreement to include the limitations of any confidentiality clause.
– Neonatal leave and pay. A proposal to introduce statutory neonatal leave and pay for up to 12 weeks for parents of babies requiring neonatal care was expected to be implemented.
– Leave for unpaid carers. A proposal to give employees who are unpaid carers one week’s unpaid leave per year to support those who struggle to manage to provide long-term care to others with their own employment.
– Post-termination non-compete clauses. Proposals to limit the scope of post-termination non-compete clauses. The consultation on these proposals closes in February.
– Extending the ban on exclusivity clauses. A proposal to extend the ban on exclusivity clauses (which prevent workers from working for other employers) to cover those earning under the Lower Earnings Limit, currently £120 a week. At the moment, the ‘ban’ only prevents employers from enforcing exclusivity clauses against workers on zero-hour contracts.
– Preventing sexual harassment. A proposal to introduce a mandatory duty on employers to prevent harassment in the workplace and increasing the time limit for bringing a discrimination claim from three to six months.
– Ethnicity pay reporting. A proposal to require organisations with more than 250 staff to provide ethnicity pay reporting, which would be similar to gender pay reporting model.
– Extending redundancy protection for women and new parents. A proposal to prohibit redundancy during pregnancy and maternity leave and for six months after the end of the pregnancy or maternity leave.