Important – do not forget
Notwithstanding the impact that Coronavirus is continuing to have on the economy, organisations and individuals, the Government have not been entirely pre-occupied with vaccination and Brexit. However, it is important not to forget that there are some new statutory changes effective soon. Here are the main changes that the Government has now confirmed additional to the already published new National Minimum Wage rates (including the National Living Wage), new Statutory Sick Pay and Statutory Family Friendly Pay rates.
The annual increase in compensation limits has just been announced. The limits apply to dismissals, including redundancies, occurring on or after 6th April 2021.
- £544.00 – the maximum amount of a week’s pay for calculating statutory redundancy pay and the basic award; (up from £538);
- £16,320.00 – the maximum statutory redundancy payment or basic award, i.e. 30 weeks (up from £16,140);
- £89,493.00 – the maximum compensatory award which can be made for unfair dismissal (up from £88,519) or one-year’s gross pay whichever is the lower;
These increases mean that the maximum total unfair dismissal award is now £105,813.00; although uplifts can add a further 25%.
Employees may be entitled to receive guarantee payments for up to five days of lay off in any three-month period. The maximum amount of such a Statutory Guarantee Payment will remain at £30.00 for any one day. In the current climate, this may be more than just ‘interesting’ if your business is adversely impacted by the Coronavirus, and a loss of customers, parts etc.
The new rates take effect where the ‘appropriate date’ for the cause of action (such as the date of termination in an unfair dismissal claim) falls on or after 6th April 2021.
With effect from April 2021, the new IR35 regime will apply to large and medium-sized businesses in the private sector who engage contractors (End Users). This will apply where an individual (contractor) provides their services through an intermediary (such as their own limited company – often referred to as a personal services company or PSC) in circumstances where the nature of the engagement would, absent the intermediary, have the characteristics of an employment relationship for tax purposes. They will be required to determine whether a contractor who is suppling their labour via their own intermediary, would be an employee of the End User if engaged directly by the End User. If the End User determines that IR35 applies, the Fee Payer – the entity that has the direct contractual relationship with the contractor’s own intermediary – must operate PAYE/NICs as appropriate. This means that it will be the ‘employer’s’ duty to determine status, not that of the individual who runs a personal service company. Businesses could be liable for PAYE or NI contributions if a contractor is deemed by HMRC to fall within the scope of the IR35 rules.
According to Grant Thornton, only six in ten employers are ready for the upcoming changes, despite organisations having had an additional year to prepare for the extension of updated IR35 rules into the private sector.
Despite much fanfare, speculation and hype, there is not much else changing in the world of new employment legislation. The Government will probably put forward an Employment Bill. It will probably contain proposals to extend redundancy protection to pregnant employees, and for up to six months after the return from maternity leave. There could be a new right for parents to take statutory leave of up to 12 weeks for neonatal care, a new right for carers to take unpaid statutory leave and making flexible working the default.
What may impact other clients is that HMRC, who are charged with enforcing the NMW, are taking an aggressive approach to investigating alleged or potential ‘technical’ breaches of the Regulations. To guarantee that workers are paid correctly, HMRC regularly uses its authority to conduct civil investigations.
Research has revealed that NMW investigations increased from 2,807 (2018) to 3,561 in 2019. Investigations such as these can be costly for employers. Penalties can reach up to 200% of arrears owed to workers – which is a maximum of £20,000.
It is easy for businesses to inadvertently fail to comply with the national minimum wage. Employees can be on the minimum wage or a bit more but if they stay on a bit late or come in a bit early, then that may take their hourly rate below the threshold. Many employers have fallen foul by failing/overlooking to give young people their age-related rates following a birthday. Be diligent.
Whilst the sums HMRC fine businesses are often modest, the consequences of being named and shamed for a business can be devastating. They may first try a telephone ‘fishing trip’, so be very wary of your answers. It is important that if you are investigated by HMRC you seek advice from the outset.
Clients are welcome to raise any concerns with their Consultant, who will be pleased to advise you on any element of the issues arising from this newsletter.