What changes in employment law do employers in the property and construction industries need to be aware of in 2021? ask Sybille Steiner and Jo Moseley.
New lockdown restrictions come into force on Wednesday 6 January in England and restrict when people can leave their homes. The government has said that all employees should work from home unless they cannot “reasonably” do so and that employers should provide suitable IT equipment to facilitate this. Anyone who can’t work from home – such as construction workers – can continue to work as normal.
End of furlough
The current furlough scheme will end on 30 April 2021 unless the government elects to extend or replace it with something else. The chancellor announced just before Christmas that the government will continue to pay up to 80% of a furloughed worker’s wage and that businesses won’t have to contribute towards this (something it said it was considering). This means that employers only have to pick up the national insurance and pension contributions of staff who are fully furloughed.
New immigration rules
Changes to the UK’s immigration rules will make it much more difficult and expensive for the property and construction sectors to recruit anyone from outside the UK.
As of 1 January 2021, free movement has ended and anyone, other than Irish citizens, who wants to work in the UK will have to comply with the new points-based immigration system.
This system is designed to attract “skilled workers” whose roles are on the skilled occupation list. Workers must be able to speak English, have at least A-level or equivalent qualifications, have a job offer from a licensed sponsor and earn at least £25,600 per year.
However, employers recruiting any skilled workers from the shortage occupation list can pay them slightly less than this. The current list includes engineers, architects and quantity surveyors, but not plumbers, electricians and bricklayers.
These requirements will exclude many property and construction workers and there isn’t a general low-skilled or temporary work route available.
You will also need a sponsor licence to recruit non-UK workers. If you don’t have one, you’ll need to apply (and pay the fee) as soon as possible as the process takes around eight weeks. You will also have to pay a fee of £199 for every sponsorship licence you issue, plus £1,000 per skilled worker for the first 12 months, with an additional £500 charge for each subsequent six-month period. You cannot pass these costs on to the worker.
Temporary arrangements for EU citizens
You can continue to employ EU citizens until 30 June 2021, without worrying about the points-based system provided they are already living or working in the UK by 31 December 2020. However, they will need to obtain settled or pre-settled status to work here from 1 July 2021 and, if they don’t have this (and haven’t applied by 30 June), you will not be able to continue to employ them as they will become illegal workers.
If you employ EU staff and wish to retain them beyond 30 June 2021, we suggest that you encourage them to apply to remain in the UK and explain to them what will happen if they lose the right to live and work here. The Home Office has an employer toolkit to help explain the process, which includes a template letter you can adapt to send to EU staff.
IR35/off-payroll workers
Huge changes to employment tax take place from 6 April 2021. The off-payroll working rules – commonly known as IR35 – have been around since 2000. They were introduced to ensure that individuals, who work like employees, pay broadly the same employment taxes as employees, regardless of the structure they work through. The rules apply to anyone who provides their services to another person or organisation through an intermediary, such as a personal service company.
Currently, organisations in the private sector can engage contractors using personal service companies or other intermediaries without worrying too much about the contractor’s tax status because it’s the responsibility of the PSC to correctly determine this and account for any underpayment to HMRC. However, from 6 April 2021, the organisation engaging the contractor becomes responsible for determining the contractor’s tax status and assessing whether IR35 applies. And, if it decides the contractor is an employee for tax purposes, it becomes responsible for paying PAYE and National Insurance contributions on the fees paid to the PSC.
HMRC has an online tool – Check Employment Status for Tax – to help organisations determine the tax status of contractors, but it’s not perfect.
These rules will apply to any payment made on or after 6 April 2021.
The rules don’t apply to small organisations that don’t meet at least two of the following criteria:
- Annual turnover of more than £10.2m
- Balance sheet total of more than £5.1m
- More than 50 (full-time equivalent) employees.
If you are caught by the rules, you need to identify any service provider that you need to provide a status determination on. This can be time-consuming as many organisations don’t already hold information about those providing services to them through limited companies or partnerships.
Minimum wage thresholds and rates
From April 2021, the rate of the National Living Wage will increase by 19p to £8.91 per hour and will be payable to more workers because the age threshold is being reduced to 23 (currently only workers aged 25 and above qualify).
The national minimum wage rates will also increase as follows:
- those aged 21 to 22 will receive £8.36 per hour – an increase of 16p;
- those aged 18 to 20 will receive £6.56 per hour – an increase of 11p;
- those aged 16 to 17 will receive £4.62 – an increase of 7p; and
- apprentices under the age of 19 or in their first year will receive £4.30 – an increase of 15p.
These rates will, therefore, increase your wage bills.
Other changes that may come into effect in 2021
The government has said it will introduce an Employment Bill to “protect and enhance workers’ rights as the UK leaves the EU”.
It has committed to introducing legislation to ensure that tips left for workers go to them in full; has said it will introduce a new right for all workers to request a more predicable contract and will extend redundancy protections to prevent pregnancy and maternity discrimination. It has also said it will give parents a new right to take extended leave for neonatal care and, additionally, give carers the right to take one week’s unpaid leave each year.
The government has indicated that it will consult on making flexible working the default unless employers have a good reason to depart from it.
These ideas have been on the back burner since January 2020 and we don’t yet have much detail on them. However, it is possible that some of these will become law in 2021.
Key decisions to look out for in 2021
Holiday pay: are the “rules” which limit a series of deductions correct?
In 2019, the Northern Ireland Court of Appeal held – in Chief Constable of the Police Service of Northern Ireland and others v Agnew [2019] NICA 32 that the decision in Bear Scotland Ltd and others v Fulton and others (UKEATS/0047/13/BI), which prevented workers from claiming underpaid holiday was incorrect. The employers have appealed to the UK Supreme Court with the hearing due in June 2021. Its decision will be binding on all UK employers and may mean workers in England and Wales can recover underpaid holiday going back two years.
Holiday entitlement of term time and other part-year workers
In Brazel v The Harpur Trust [2019] EWCA Civ 1402, the Court of Appeal decided that an employee engaged on a term time-only contract was entitled to 5.6 weeks holiday per year, even though she did not work for the whole year. It couldn’t be pro-rated to reflect the number of weeks she actually worked, nor could the employer apply the 12.07% “formula” for working out her holiday entitlement. The employers have appealed to the Supreme Court, with the hearing due to take place on 9 November 2021.
National minimum wage – what rates apply to “sleep-in” shifts?
In Royal Mencap Society v Tomlinson-Blake [2018] EWCA Civ 1641, the Court of Appeal said under the National Minimum Wage Regulations 2015 (as amended), workers are either available for work or actually working. Those who provide sleep-in cover are only available for work and only have to be paid at appropriate NMW rates if they have to get up during the night to help a patient or do other work. The Supreme Court heard the case on 12-13 February 2020 and its judgment is awaited.
Collective bargaining – when can organisations negotiate directly with staff?
In Kostal UK Ltd v Dunkley and others [2019] EWCA Civ 1009, the Court of Appeal held that trade unions with collective bargaining rights cannot prevent employers approaching staff directly to try to agree temporary changes to their terms of employment where negotiations have broken down. The Supreme Court will hear the union’s appeal on 18 May 2021.
Worker, employee or self-employed?
Employment law recognises three categories of person: “employee”, “worker” and “self-employed”. It is important to know the status of your workers because employees and workers have important employment rights that are not available to those who are self-employed. In Aslam and others v Uber and others [2018] EWCA Civ 2748, Uber has argued (so far unsuccessfully) that it is a technology platform and that its drivers are self-employed. This decision will provide guidance for other organisations operating “gig” arrangements. The Supreme Court heard Uber’s appeal on 21-22 July 2020 but hasn’t yet published its judgment.
Sybille Steiner is a partner and Jo Moseley is a senior associate and PSL in the employment team at Irwin Mitchell
