The Big Questions for Employers in the UK for 2021

King & Spalding
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2020 was a year of exceptional change for employers and their staff. As the pandemic unfolded, businesses navigated their way through adjusting to a remote workforce to furloughing to creating COVID-secure workplaces and keeping up to date with government guidance. We saw the introduction of some significant changes in employment law in response to the pandemic. Most notably the establishment of the novel Coronavirus Job Retention Scheme (also known as the furlough scheme). Other emergency measures included adapting Statutory Sick Pay to the unique circumstances and the increased rights to carry over holiday.

While the government and employers had their hands full dealing with the myriad of challenges created by the pandemic, many other anticipated changes were understandably delayed. While the start of this year is still being dominated by COVID-19, this alert takes a look at what else is on the horizon for employers in 2021.

WHAT HELP WILL THE GOVERNMENT CONTINUE TO GIVE BUSINESSES WITH FURLOUGHED EMPLOYEES?

The furlough scheme is currently set to run until the end of April 2021. The government will continue to pay 80% of an employee’s normal pay for hours not worked, up to a cap of £2,500 per month. Employers will remain responsible for NICs and pension contributions. There is currently no suggestion that employers will be asked to contribute more, as they were when the original scheme was winding down last summer, and the government contribution decreased to 60%.

From 1 December 2020, employers can no longer claim for any time that an employee was serving a contractual or statutory notice period. This has somewhat removed a rush to implement redundancies before the scheme ends as employers will bear the full cost of the notice period whether the redundancy occurs before or after 30 April.

In other furlough news, HMRC will be publishing the names of employers claiming under the scheme from 1 December 2020 until 30 April 2021. The initial list of employer names was published this month, with further details of the value of the claims expected in February and then published on a monthly basis. Large employers are likely to face a public backlash if it is perceived they took advantage of the scheme in circumstances where it was not warranted. Many employers are also preparing for an audit by HMRC to see if claims for furlough payments were appropriately made.

Before the reinstatement of the furlough scheme in November 2020, employers who had brought back workers from furlough were eligible to receive a £1,000 bonus per employee (subject to them remaining in employment until the end of January 2021). The bonus was scrapped in November with a statement that a retention incentive would be “deployed at the appropriate time”.

The Chancellor is expected to announce the next phase of his plan to protect jobs in the Budget on 3 March 2021.

WILL ENGAGING A CONTRACTOR BECOME EVEN RISKIER?

Delayed from 6 April 2020, the changes to IR35 are now due to take effect on 6 April 2021. The changes affect contractors using a personal service company (PSC) to provide their labour and will shift the responsibility for assessing whether IR35 applies in respect of these contractors to the end-user client. IR35 applies when the contractor would ordinarily be regarded as an employee if they were hired directly by the client, rather than via an intermediary such as a PSC. In these circumstances, PAYE and NICs must be paid in respect of the fees received by the PSC for the services. The responsibility for these employment taxes currently sits with the contractor.

From 6 April 2021, all medium and large clients in the private sector will be required to:

  • assess the employment status (for tax purposes) of self-employed contractors who provide labour through PSCs; and
  • where IR35 applies, deduct income tax and employee NICs from any payments made to the PSC and pay employer NICs.

Contracts and working arrangements will need to be updated to reflect the new regime.

DO NON-COMPETE CLAUSES HAVE A FUTURE?

On 4 December 2020, BEIS opened a consultation on measures to reform post-termination non-compete clauses in employment contracts. The consultation seeks views on whether employers should provide compensation for the restricted period, the possibility of placing statutory limits on the length of non-competes or whether the use of non-compete clauses should be banned altogether. The consultation closes on 26 February 2021. Any changes may require employers to amend existing employment contracts.

WHAT IS IN THE NEW EMPLOYMENT BILL?

It is expected that a new Employment Bill will be introduced this year to incorporate some of the proposals identified in the government’s Good Work Plan. The new legislation was first promised in the Queen’s Speech in December 2019 but was delayed due to COVID-19. The bill is expected to include:

  • Neonatal leave and pay. A new right to take statutory leave of up to 12 weeks for parents of babies requiring neonatal care;
  • Carer’s leave. A new entitlement for employees with caring responsibilities to one week’s unpaid leave per year;
  • Extending redundancy protection for pregnant employees and new parents. The government plans to extend the prioritised right to be offered suitable alternative employment to pregnant employees from the date they notify their employer of their pregnancy until six months after returning from maternity leave. The protection will also be extended to those taking adoption leave and shared parental leave;
  • Making flexible working the “default position”. This proposal stems from the Conservative party’s election manifesto, with the intention to make flexible working the default position unless an employer has a good reason not to. This will be subject to consultation;
  • The introduction of a single labour enforcement body. The Good Work Plan included a proposal for a single enforcement body for employment rights such as minimum wage, holiday pay for vulnerable workers, regulations relating to employment agencies and gangmaster licensing. Consultation on the remit of the new body closed in October 2019 and is still being considered;
  • Tips and service charges. Legislation is expected to ensure tips and service charges go to the workers, with fair and transparent distribution of these supported by a new statutory Code of Practice; and
  • The right to request a more predictable contract. The Queen’s Speech indicated that workers with irregular hours would be given a new right to request a more stable and predictable contract after 26 weeks’ service. This is intended to benefit those engaged on zero hours contracts.
WHAT NEW REPORTING OBLIGATIONS ARE ON THE HORIZON IN THE NEW EQUAL PAY BILL?

The Equal Pay (Information and Claims) Bill had its first reading in October last year. The purpose of the bill is to increase transparency in pay and expand pay reporting obligations. It proposes to:

  • expand gender pay gap reporting to organisations with 100 or employees (rather than 250 or more) and introduce a requirement for publication of an action plan to close any identified gap;
  • introduce a requirement to report on ethnicity pay gaps;
  • introduce a right to know what colleagues are paid, allowing women to obtain information relating to the pay of a male comparator; and
  • reform remedies and remove the time limits of being able to claim arrears of equal pay.
SHOULD YOU EVER USE AN NDA FOR A DEPARTING EMPLOYEE?

The #MeToo movement shone a spotlight on the misuse of non-disclosure agreements (NDAs) to “gag” and intimidate victims of sexual harassment. Following a consultation on proposed measures to prevent the misuse of NDAs in 2019, the government committed to legislation that would make NDAs void unless they complied with certain requirements, such as the employee receiving specific legal advice on them. NDAs would also be unable to include provisions that would prevent individuals from disclosing information to the police, regulated health and care professionals or legal professionals. The government also proposed to introduce new enforcement measures for non-compliant NDAs.

ACAS released guidance last year specifically stating that NDAs cannot be used to stop someone from reporting discrimination or sexual harassment at work or to the police. Employers should be mindful of this guidance and of these anticipated changes when parting ways with employees via settlement agreements this year.

DOES BREXIT HAVE ANY IMMEDIATE IMPLICATIONS FOR EMPLOYERS?

Finally, it will be interesting to see whether the UK will seek to make any changes to employment laws derived from the EU post-Brexit. Under the terms of the EU-UK trade agreement, the UK has agreed that it will not reduce employment rights below the standards that existed on 31 December 2020 if this will affect trade or investment by giving UK employers a competitive advantage. This gives the UK scope to at least make minor changes to existing EU-derived employment laws.

The UK is not required to implement future EU Directives (for example, the Whistleblowing Directive due to be implemented in member states by the end of this year) and will no longer be subject to the jurisdiction of the European Court of Justice (ECJ). This means that future ECJ decisions will not be binding on the UK courts and tribunals, but they may have regard to them where relevant. UK courts will still have to follow existing ECJ case law, unless the Supreme Court or Court of Appeal have given a contrary ruling since 31 December 2020.

WILL EXTENDED PERIODS OF HOMEWORKING CREATE ADDITIONAL PRIVACY AND DATA SECURITY RISKS?

Extended periods of homeworking create increased risk of security incidents, such as employees being encouraged to change passwords by bad actors, or to download software that contains malware, as well as physical document risks. Ensuring your incident response plan is up to date is vital to ensure that all stakeholders understand how to manage the additional security risks which arise as a result of homeworking. Also, once the lockdown is lifted, and people return to their places of work thought will need to be given either to the return of documents stored away from the office or their secure destruction at home.

Remembering these golden rules about privacy and data security risks will help to reduce risk:

  • access remotely to systems should be through multi-factor identification rather than use of a single password;
  • staff should be given access only to the data they need to perform their function and for only so long as that access is needed;
  • data security also requires employers to ensure that paper records are securely stored;
  • organisations must keep up to date with trending data security issues at these heightened times of risk; and
  • continue to train and remind your employees about your policies and procedures which support your privacy and data security framework, highlighting the specific heightened risks of extended homeworking.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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