8 Important Employment Law Changes for UK Employers in 2021

Many notable changes to the United Kingdom’s employment laws have or will likely take effect in 2021. Because compliance should be an ongoing process for all employers, we’ve compiled a list of the most recent and important legislation changes that must be top of mind for UK employers as they continue to pivot and execute their business strategies for the coming year. Employers should act accordingly on the updates to prevent rule violations, avoid costly fines and lawsuits, and create a stable work environment for employees to perform at their best. 

Here are eight UK employment law updates that are currently in effect or will likely be implemented this year:

1. Wage Increases Effective 1 April 2021

Around 2 million workers in the UK will soon benefit from the National Minimum and Living Wage increases. Most notably, the age threshold for the national living wage will be lowered so that 23 and 24 year-olds can reap the benefits of a 2.2% increase, up from £8.72 to £8.91. This is the equivalent of £345 extra annual income for full-time workers. 

The 2021 national minimum wage increases are:

• Ages 21 – 22: from £8.20 to £8.36
• Ages 18 – 20: from £6.45 to £6.56
• Ages 16 – 17: from £4.55 to £4.62  
• Apprenticeship Wage: from £4.15 to £4.30 

2. End of Furlough Scheme

On 3 March 2021, the Chancellor of the Exchequer announced in the Budget that the Coronavirus Job Retention Scheme (CJRS), or furlough scheme, will be extended for a further five months until 30 September 2021. Employers will now contribute 10% of wages for hours not worked in July and August 2021, rising to 20% in September 2021. The government will contribute 70% and 60% respectively. Employers will also continue to pay all NICs and pension contributions for all unworked hours.

3. New European Immigration Rules

EEA (European Economic Area) nationals must comply with the new immigration points-based system that prioritizes skills and talent over where a person comes from. Businesses may continue to employ EU citizens outside the points-based system until 30 June 2021 so long as they were already living or working in the UK by 31 December 2020. However, they must obtain settled or pre-settled status to work in the UK from 1 July 2021 or will otherwise be considered illegal workers. Check out the UK government’s site for a helpful employer toolkit.

4. Changes to Off-Payroll Workers

The off-payroll working rules (IR35) ensure that individuals who work like employees pay the same employment taxes as direct employees no matter what structure they work through. The rules apply to anyone who offers their services to another organization or person or through a liaison, such as a personal service company.

Starting 6 April 2021, the duty of choosing whether an individual lands under IR35 will be decided by the client employing the individual. If it is decided that the contractor is an employee for tax purposes, the business will then withhold and account for income tax and National Insurance contributions through the Pay-As-You-Earn (PAYE) system. Check out the online tool from HMRC to help determine the tax status of contractors.

5. Increased Protection for Whistle-Blowers

The Public Interest Disclosure (Protection) Bill includes plans to create an independent body to enforce specified standards when dealing with those who come forward to raise concerns in the public interest. In addition, it introduces criminal sanctions for those who cause whistle-blowers harm or fail to respond appropriately to a disclosure. 

6. Return of Gender Pay Gap Reporting

The COVID-19 pandemic put a brief hold on the penalties for not reporting on the 2019/20-year gender gap for qualifying employers. However, The Equal Pay Bill will resume on 4 April 2021 and includes a provision to lower the necessary threshold for qualifying employers to report gender pay disparities from 250 to 100 employees. It has been heard unofficially that workers who were furloughed during the reporting period need not be included in the report. However, any employees on furlough will need to be included when calculating: 

• The percentage of men and women receiving bonus pay
• The mean gender pay gap using bonus pay
• The median gender pay gap using bonus pay 

7. Pregnancy and Maternity Protection

The current position on the Pregnancy and Maternity (Redundancy Protection) Bill is that expectant and new mothers must be considered for ‘suitable alternative’ employment in priority to others who are at risk of redundancy. The bill proposes to expand this protection (which presently ends once a woman returns to work) to the period from when the employer is first informed of the pregnancy to the six-month period following the return to work.

8. General UK Health and Safety Rules

A recently published amendment draft of the Employment Rights Act 1996 (Protection from Detriment in Health and Safety Cases) (Amendment) Order 2021 protects workers for leaving their employer, refusing to return to their workplace, or protecting themselves due to conditions which they believe put themselves or others in serious or impending danger. The Order is expected to come into force on 31 May 2021.