This month we are highlighting what to look out for in employment law in 2021
1. Brexit
The UK is obliged to adhere to EU laws in force up to 31st December 2020 under the European Union (Withdrawal) Act 2018. This converts and incorporates into domestic law, EU laws as they exist immediately before 31 December 2020.
A Trade and Co-Operation Agreement between the United Kingdom and the EU was concluded on 24 December 2020. This gives the UK tariff free trading with EU member states, on condition that there is a “level playing field” between UK and EU member states. For employment law, this means that the UK can diverge from EU derived employment legislation, only if this does not give the UK an unfair competitive advantage. If there is evidence that the UK’s divergence from EU employment law has materially impacted trade or investment, then the EU can take “appropriate rebalancing measures” which can include tariffs.
In practice, we think that this could affect the UK’s ability to change in substance the Working Time Regulations and the Agency Worker Regulations, as changes to these could give UK businesses an opportunity to reduce costs, thereby giving them an advantage over EU competitors.
The position in Northern Ireland is somewhat different to the rest of the UK, as there is a commitment in the Withdrawal Agreement that there will be no diminution of rights, safeguards or equality of opportunity enshrined in EU law in respect of Northern Ireland. This means decisions of the ECJ in relation to discrimination law will continue to be relevant in Northern Ireland.
The UK will not be required to implement new EU Directives, but if this results in a significant divergence on employment rights in a way that materially affects trade or investment (and therefore results in unfair competition) then the EU can trigger rebalancing provisions. This could include imposing tariffs. Evidence of a material affect on trade or investment would have to be shown before rebalancing measures could be effected.
From our perspective, some key questions for employers following Brexit are as follows:-
(i) If an employee lives in Donegal and works in Derry/Londonderry, how does Brexit affect this?
Northern Ireland and the Republic of Ireland are part of a Common Travel Area. This arrangement predates Brexit and is not affected by Brexit. If the employee is a national of the Republic of Ireland, he/she does not need permission to enter or remain in the UK, including a visa, or any form of residence permit or employment permit. Equally, British citizens are able to work in Ireland without an employment permit, including on a self employed basis. This continues after free movement ended on 31 December 2020.
(ii) What about employees from other EU member states?
If the individual who wants to work in UK lives in another EU state, they will need to obtain a Frontier Worker Permit no later than 1 July 2021. If an EU citizen already living and working in the UK wants to continue to do so, they will need to apply under the EU Settlement Scheme or apply for British Citizenship. The deadline to apply to the EU Settlement Scheme is 30 June 2021. EU citizens not already living in the UK will need to apply for a visa under the new points based immigration system.
Other immigration rules will apply for employees who are nationals of countries outside the EU.
(iii) What happens with holiday pay – do we still have to includes commission, overtime etc?
At the moment, yes. The Working Time Regulations will remain in force as the UK. In the UK, employers are obliged to pay holiday pay on the basis of “normal remuneration”. That can include not just basic pay, but also commission, bonuses and overtime pay. This obligation comes from decisions of the European Court of Justice, where it was asked to interpret the Working Time Directive.
This may change, as the UK Court of Appeal and Supreme Court can overturn decisions of lower courts where EU law was applied. There are three holiday pay cases due to come before the Supreme Court in 2021 which will give us an indication on the court’s attitude to diverging from EU law. Those cases are:
- Harpur Trust v Brazel, which relates to holiday entitlement for part time term time workers;
- East of England Ambulance Service NHS Trust v Flowers, which looks at whether regular voluntary overtime should be construed as ‘normal’ pay and included when calculating statutory holiday pay under the Working Time Regulations; and
- Chief Constable of the PSNI v Agnew, which concerns claim for back payments of holiday pay.
EU law will continue to impact the UK’s approach to holiday pay, as UK Employment Tribunals are likely to follow new ECJ decisions. The Trade and Co Operation Agreement provides that courts and tribunals are no longer bound to follow new ECJ decisions but may give effect to them where relevant. There is currently a lack of guidance on when the Tribunal should and should not give regard to decisions, and given that the Tribunal’s decisions may be appealed, we expect them to be cautious and follow new ECJ decisions where relevant.
The Northern Ireland Industrial Tribunal will have to give effect to ECJ decisions on equality matters, under the Northern Ireland Protocol in the Withdrawal Agreement.
2. Changes to IR35
Where an individual works for a client through an intermediary (e.g. they set up a limited company to trade through), but would be an employee if they were providing their services directly, the IR35 rules may apply. These rules are in place to make sure that where an individual would have been an employee if they were providing their services directly, they pay broadly the same tax and National Insurance Contributions as an employee. They should not be able to avail of tax advantages simply by placing an intermediary between themselves and the end client.
From 6 April 2021 there will be a duty on employers to categorise the employment status of persons they engage under the IR35 rules. From this date, the hirer/employer must decide whether that person is truly a self-employed consultant responsible for their own tax affairs, or whether the person is in fact and employee or worker, for whom PAYE and Employers National Insurance should be paid.
The new rules were due to come in to force in April 2020 but postponed due to COVID 19. They will affect medium and large organisations (turnover in excess of £10.2 million) in all sectors of the economy.
The employer/hirer must provide reasons for its determination, and the determination must be given to the individual. Until this is done, the hirer/employer is responsible for the individual’s PAYE and national insurance contributions. The employer/hirer is also under an obligation to respond to requests for information from the person they contract with, or the worker, as to whether the hirer qualifies as ‘small’ for the purposes of the new provisions.
There are a range of factors which need to be considered when deciding whether a person is self employed, employed, or has worker status, and we can advise you if you need to make a determination. At this stage it would be wise to gather information on any individuals engaged through personal service companies in order to make the determination.
3. Changes to the National Minimum Wage
The national living wage (NLW) will increase 2.2% to £8.91 from 1 April 2021 and will become available to people aged 23 and above, down from the current age of 25.
A summary of the increases is below:
| Rate from April 2020 | Rate from April 2021 | Increase | |
| Aged 25 and above | £8.72* | £8.91 | 2.2% |
| 23 to 24-year-olds | £8.20 | £8.91 | 8.7% |
| 21 to 22-year-olds | £8.20 | £8.36 | 2.0% |
| 18 to 20-year-olds | £6.45 | £6.56 | 1.7% |
| 16 to 17-year-olds | £4.55 | £4.62 | 1.5% |
| Apprentice rate | £4.15 | £4.30 | 3.6% |
| Accommodation offset | £8.20 | £8.36 | 2.0% |
4. Changes to coronavirus job retention scheme
The scheme has already been extended a number of times, most recently to the end of April 2021. We expect further announcements in the next few months in relation to the scheme which we will report on as they arrive.
5. In Northern Ireland:
Certain changes we had expected to see in 2020 did not happen, primarily due to the COVID-19 Pandemic. Although the pandemic continues, we might expect to see some of the following introduced in 2021 in Northern Ireland:
- Parental Bereavement leave
- Gender pay gap reporting obligations
- A ban on exclusivity clauses in Zero hours contracts
6. In Great Britain:
Possible changes in 2021 include:
- Neo natal leave and pay;
- A week’s leave for unpaid carers;
- making flexible working the default position for employers with 250 or more employees;
- further reforms to exit pay in the public sector;
- measures to ensure that tips left for workers go to them in full;
- a new right for all workers to request a more predictable contract; and
- an increase to the length of time required for continuity of employment to be broken.
A consultation has recently been announced looking into Restrictive Covenants in employment contracts (also known as Post Termination Restrictions).
We will report on any significant changes when legislation is announced.
If you would like to discuss any aspect of this article, please get in touch with us.
