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Legal changes

Two Minute update: Five Employment Law changes for Spring 2021

We highlight the five key employment law legal changes which have now come into affect.

1. ‘Off-payroll’ working rules are now in force

After being pushed back 12 months due to the pressure of the pandemic, reforms to the rules on ‘off-payroll’ working in the private sector (commonly known as IR35) finally came into effect on 6 April 2021. Similar provisions have been in force in the public sector since April 2016.

In summary, IR35 applies to organisations engaging contractors through intermediaries (such as ‘personal service companies’ or PSCs). The changes require the private sector organisation to assess whether, but for the presence of the intermediary personal service company or agency, the contractor or consultant providing the service would be an employee of that organisation. If so, PAYE deductions must be made to amounts owing to them. Formerly the onus fell on the intermediary/contractor itself to make this assessment, but that burden has now shifted to the private sector employer. Changes to contracts of employment and some internal processes may be required. For further guidance please contact IR35 expert Michael Ryley.

2. Losing a discrimination claim might cost you more…

When an employee brings a successful discrimination claim against their employer, they will be entitled to compensation for ‘injury to feelings’, which can be challenging to calculate as it does not relate to any tangible financial losses. To ensure consistency, the Court of Appeal the case of Vento v Chief Constable of West Yorkshire Police set clear guideline tiers of compensation, known as the ‘Vento bands’ which are increased periodically to keep pace with inflation. From 6 April 2021, the bands will increase as follows:

  • Lower band - £900-£9,100 (less serious cases, or ‘one-off’ acts)
  • Middle Band - £9,100-£27,400 (more serious cases)
  • Upper band - £27,400-£45,600 (the most serious cases or a ‘campaign’ of discrimination).

3. …and so will making an employee redundant

New, increased upper limits on statutory pay apply to redundancy dismissals taking place on or 6 April 2021. Any employee with more than two years’ continuous service who is dismissed for redundancy must be paid a statutory amount based on the employee’s weekly pay, length of service, and age. Weekly pay is capped for these purposes – and that cap increased from £538 to £544 on 6 April 2021. This means that the maximum statutory redundancy payment has increased to £16,320 (£544 x 1.5 x 20 years’ service). Remember to factor this increased cost into any planned redundancy exercises and to update any redundancy calculators your organisation may use.

4. Calculating Post Employment Notice Pay just got (slightly) easier

Calculating an employee’s ‘post-employment notice pay’ (PENP), for example as part of termination package, is notoriously tricky, especially where the employee’s pay period is defined in months, but their notice period is not a whole number of months. A new formula has been introduced into the relevant legislation to simplify this situation, where the termination payment is received on or after 6 April 2021. Rather than using the number of days in the pay period, the figure 30.42 (being the mean average number of days in month) can be used instead. This also means that PENP will not vary according to which month termination takes place. So, working out PENP is still confusing – just very slightly less so! If you need any support with calculating PENP, or working out an employee’s broader termination package, please contact your usual Weightmans advisor.

5. Gender pay-gap reporting: More time to comply

Another consequence of the COVID pandemic, the deadline for providing your organisation’s gender pay gap report has been pushed back. Public sector bodies and private sector employers would usually have been required to submit their gender pay gap reports by 30 March and 4 April respectively. This year, exceptionally, the EHRC has agreed that enforcement will be suspended until 5 October 2021, effectively giving employers an extra 6 months to comply. If you need any support or assistance, please contact your usual Weightmans advisor.

If you need help or guidance on an employment issue, contact our employment law solicitors.

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