chester

Chester 01244 405 555

Grosvenor Court
Foregate Street Chester
Cheshire CH1 1HG
DX: 19990 Chester

shrewsbury

Shrewsbury 01743 443043

Lakeside House
Oxon Business Park
Shrewsbury SY3 5HJ
DX: 148563 Shrewsbury 14

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Airport City, Manchester 0161 537 3324

Offices 204 and 205
Manchester Business Park
3000 Aviator Way
Manchester M22 5TG

19th March, 2021

Key Employment Changes from April 2021

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Cap on Public Sector Exit Payments Scrapped

Following an extensive review, the Government has scrapped the cap on public sector exit payments after finding it had “unintended consequences”.

The Restriction of Public Sector Exit Payments Regulations 2020, which came into force on 4 November 2020, set a £95,000 cap on exit payments for public sector authorities and offices listed in the Schedule to the Regulations.

Critics argued that the scheme had the potential to generate additional litigation as individuals could be awarded a greater amount by an Employment Tribunal. Moreover, long-serving employees could receive a lowered company pension if made redundant.

The Government has advised employees affected by the cap to contact his or her employer directly to request additional sums they would have received had the cap not been in place. Employers are also encouraged to proactively pay former affected employees the outstanding monies owed.

IR35 Regulations

The proposed reforms to the IR35 off-payroll working were postponed to 6 April 2021. It is likely that businesses will call for changes to IR35 to be delayed further, however, at the time of writing, they are still set to come into effect in April.

The new rules were introduced to tackle tax avoidance. HMRC noticed individuals were supplying their services through a personal service company (‘PSC’) in order to avoid paying income tax and national insurance contributions.

From 6 April 2021, companies engaging with PSCs in the private sector will be responsible for determining an individual’s employment status for tax purposes and must pay tax based on their self-assessment. Only companies classified as ‘large’ under the Companies Act 2006 will be caught by the new reforms.

Employers should scrutinise their self-employment contracts to ensure they reflect the true nature of the working relationship.  HMRC have created a CEST tool, found on the uk.gov website, to help employers determine an individual’s employment status for tax purposes. It is strongly recommended for affected companies to run this tool on all self-employed staff and keep a record of the results. This would act as good evidence that a company has considered an individual’s worker status.

However, it is important to note that the CEST tool is not failproof and is used for guidance in determining employment status and therefore companies should seek legal or tax advice if they are uncertain about an individual’s employment status.

HMRC CEST Tool

To learn more on how to effectively prepare for IR35 then  please see our IR35 Q&A here

Gender Pay Gap Reporting Delayed

The Equality and Human Rights Commission (ECHR) has confirmed that the gender pay gap enforcement action has been delayed for a further six months until 5 October 2021 due to the COVID-19 pandemic.

The Gender Pay Gap Regulations (‘Regulations’) require employers with 250 or more staff to report their gender pay gap – being the difference between the average earnings of men and women.

Under the Regulations, public sector and private sector employers would have been required to submit reports by 30 March and 4 April respectively.

The ECHR strongly recommend for all employees to submit their data for 2020/2021 before October 2021 where possible.

See the Government Equalities Office guidance here.

Changes to calculating Post-Employment Notice Pay

The Government has announced two new changes to the Post-Employment Notice Pay (‘PENP’) with effect from 6 April 2021.  These changes will impact the termination payments made by employers to terminated employees.

  • Non-UK resident employees employed by UK employers will now be subject to UK tax and national insurance deductions. The new measure aligns the position for UK and non-UK resident employees.
  • There is an alternative PENP calculation for monthly paid employees whose notice pay is defined in weeks, days or where employees work some but not all of their notice period. The aim is to ensure consistency across calculations.

For more guidance please visit UK Gov website.

NMW and NLW Increased

The Government has accepted the recommendations of the Low Pay Commission regarding changes to the National Living Wage (‘NLW’) and National Minimum Wage (‘NMW’) from 1 April 2021.

The NLW will increase by 2.2 % from £8.72 to £8.91. This shall be available to workers aged 23 and above as the age threshold has been lowered from 25 and above, as it is currently. Young people have been the most economically affected due to pandemic therefore the lowered threshold will offer greater protection to young workers seeking employment.

The NMW rates will also increase as follows:

  • from £8.20 to £8.36 per hour for 21 to 22 year olds.
  • from £6.45 to £6.56 per hour for 18 to 20 year olds.
  • from £4.55 to £4.62 per hour for 16 and 17 year olds.
  • from £4.15 to £4.30 per hour for apprentices.
Debbie Coyne

Employment

Senior Associate
Email: [email protected]
Tel: 01244 405 537 / 07870 365 050

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