Welcome all to the February edition of the AdviserPlus newsletter.
In this month’s newsletter, we will be focusing on the latest updates on Coronavirus including the Job Retention Scheme (furlough) and rapid workplace testing.
In addition, we bring you the latest updates the new National Minimum Wage rates and changes to the National Living Wage qualifying age, the return of the gender pay gap reporting, information on how to prepare for tax changes if you engage or supply contractors and the upcoming changes to the treatment of termination payments and post-employment notice pay for Income Tax.
Coronavirus Job Retention Scheme
Whilst there is talk of the Coronavirus Job Retention Scheme (CJRS) being extended the current guidance still remains that the UK Government will pay 80% of the employees’ usual wages for the hours not worked, up to a cap of £2500 per month, until the end of April 2021. The Budget is expected to be confirmed by the Chancellor on 3rd March 2021 and is expected to set out the next phase of the government’s support plan to tackle the virus and protect jobs.
Key deadline to be aware of is:
- February claims must be submitted no later than Monday, 15 March 2021
HMRC has announced that it will start to publish details of employers’ CJRS claims from February 2021.
You can claim before or after you process your payroll. If you can, it’s best to make a claim once you’re sure of the exact number of hours your employees will work. This will mean you will not have to amend your claim at a later date.
If an employee asks to be furloughed because they have caring responsibilities resulting from coronavirus, such as caring for children who are at home as a result of school or childcare facilities being closed, you can place them on furlough and claim for them under the CRJS.
Since 1st December you cannot make a claim through this scheme for any employee who is serving their contractual or statutory notice and this includes employees who have resigned.
Employers therefore, need to bear this mind if redundancies are likely over the coming months.
Covid -19 Rapid workplace testing
The government has extended eligibility to businesses that remain open in lockdown and have 50 or more employees. Previously only employers with more than 250 employees were able to participate in the scheme.
Did you know you can now register to order rapid lateral flow tests in order to test employees with no coronavirus symptoms if your business if registered in England, employs 50 or more employees and those employees cannot work from home.
The guidance on working safely during coronavirus has been updated to reflect this change.
New National Minimum Wage rates and changes to the National Living Wage qualifying age
From 1 April 2021 the National Minimum Wage rates are increasing.
The age from which workers become eligible for the higher National Living Wage will be lowered. This means that from 1 April 2021 workers aged 23 and over will now also be entitled to be paid at least the National Living Wage.
Employers should make sure they are ready by:
- taking appropriate payroll action for all workers who are eligible
- continuing to pay their workers what they are entitled to
Return of gender pay gap reporting for private sector employers – 4 April 2021
Something many employers should be aware of is the impending gender pay gap reporting deadline. Penalties for not reporting on the 2019/20 year gender gap for qualifying employers were suspended in response to Covid-19 and are expected to return for 30 March 2021 for most public bodies and 4 April 2021 for all other organisations required to publish a report.
To assist with this fast approaching deadline, on 14 December 2020, the Government Equalities Office published new guidance on gender pay gap reporting. The guidance is split into four main steps to support employers through the reporting process (1) who is required to submit a report; (2) how to submit a report (3) what information employers must gather; and (4) how to carry out the calculations.
For employers seeking clarity on what information they are required to collate and report, this set of guidance notes will be particularly useful. For example, should furloughed employees be included in the “full-pay relevant employees”? The answer is no. Although these employees are employed by the employer, they are being paid less than their usual basic pay and therefore will not be included in such figures. These employees will still be “relevant employees”.
Where gender pay gap reporting applies, employers should be taking steps to now prepare and be ready to submit their reports. This is, of course, if you have not already done so.
The Government has launched a consultation on reforming the law in relation to post-termination non-compete clauses in employment contracts. Concern in this area was previously voiced by Government in 2016. This was in fear that non-compete clauses repressed innovation and left entrepreneurs unable to start new businesses in the UK or restricted their ability to do so. At the time, it was concluded that no changes were required as the framework provided a fair balance of the rights of employees and employers.
Government concern has recently returned due to the need to improve the economy and decrease unemployment in light of the COVID-19 pandemic. Therefore, the consultation paper suggests two main proposals for reform. These are either:
Option 1 – to make “post-termination, non-compete clauses in contracts of employment enforceable only when the employer provides compensation for the period the clause prohibits the individual from working for a competitor or starting their own business.” The Government expects this change may encourage more careful consideration by employers rather than using a standard approach to all matters and making employers think more carefully as to whether a non-compete is genuinely necessary and if so for how long. The consultation paper indicates it could be that the Government imposes limitations on the duration of non-compete clauses of up to 12 months.
Option 2 – to make “all post-termination, non-compete clauses in contracts of employment unenforceable”. This option would effectively ‘ban’ such clauses from being included in employment contracts and will mean employers will have to rely on other rights to protect the legitimate interests of their business such as their confidential information and goodwill.
Responses to the consultation close on 26 February 2021. Where this is an important issue for employers, you should be looking to engage in the consultation and share your views. We have seen non-compete clauses being used effectively, and fairly, by employers to protect their interests. Therefore, an outright ban would be a substantial change and may undermine a number of businesses. We always recommend that employers consider carefully the use of restrictions and avoid a purely blanket approach.
Prepare for tax changes if you engage or supply contractors – Off payroll working rules (IR35) Employing non UK workers
If you are a medium or large sized non-public sector organisation and you engage contractors, you should now be taking action to prepare for changes to the off-payroll working rules (IR35) coming into effect on 6th April 2021. For all contractors working through their own limited company, you need to:
- identify contractors who work in this way
- decide if they are inside or outside the rules
- inform your contractors of their status determination, and any agencies you engage with
- be ready to add them to payroll if needed
- be ready to deal with any disputes
- maintain a robust audit trail, and test your processes and systems
Changes to the treatment of termination payments and post-employment notice pay for Income Tax
Legislation is about to take effect from 6th April 2021 pending parliamentary approval.
The changes give an alternative post-employment notice pay (PENP) calculation where an employee’s pay period is defined in months, but their contractual notice period or post-employment notice period is not a whole number of months.
From 6 April 2021, employers will need to use the alternative calculation for all employees who meet these criteria. Employers have had the option of using this calculation since October 2019, on an extra-statutory basis, but from April 2021 it will be required.
These changes also align the tax treatment of PENP for individuals who are non-resident in the year of termination of their UK employment with the treatment for all UK residents. From 6 April 2021 earnings that arise pursuant to PENP will be subject to Income Tax, Class 1 National Insurance contributions and PAYE for non-residents to the extent that they would have worked in the UK during the notice period.
Note: The above guidance was correct at the time of writing this article on 25/02/21 however, you need to be fluid in your approach to coronavirus as the policy and government guidance is changing rapidly. We therefore recommend you regularly check the government official guidance on the gov.uk website and news for updates or contact us if you have any specific questions.
If you have any questions regarding the content of this newsletter, or would like more information to support your business with the changes, please get in touch.