2021 Predictions: Employment law changes on the horizon

After what can only be described as a difficult year (an annus horribilis!) for employers and employees alike, we turn our attention to 2021 and look at some of the more significant legislative changes coming into force this year.

Furlough continues

The Coronavirus Job Retention Scheme has been extended until 30 April 2021. Currently, the scheme covers 80% of furloughed employees wages for hours not worked (capped at £2,500 per month) and this now looks set to continue until the end of the scheme with employer’s covering the national insurance and employer pension contributions on employee’s furlough pay.

New immigration system

The end of the Brexit transition period means that the new points-based immigration system will apply to most EEA nationals from 1 January 2021. EEA nationals arriving in the UK from that date will need to comply with the same visa requirements as other non-UK nationals. Existing EEA employees should be advised to apply for settled or pre-settled status (if they have not done so already). Employers need to review their recruitment practices and consider whether they need to apply for a sponsor licence considering these changes, or if they have a licence already, whether they need to amend it.


The off-payroll working rules, which sit over and above the existing IR35 regime, will be extended to the private sector from 6 April 2021. These will apply where an individual (sometimes known as a contractor) provides their services through an intermediary (such as their own limited company - often referred to as a personal services company or PSC) to medium or large clients in the private sector in circumstances where the nature of the engagement would, absent the intermediary, have the characteristics of an employment relationship for tax purposes. These new rules will allocate responsibility both for determining the tax status of the individual and dealing with any disagreement over that determination to the end user client. In addition, the new rules will also allocate responsibility for making deductions for income tax, employee’s NI contributions and apprenticeship levy and paying employer’s NI contributions on fees paid for services to the fee-payer (the organisation which pays the intermediary). This liability may pass to the end user client in certain circumstances. Employers who currently engage contractors through an intermediary will need to review the arrangements to establish whether the new rules will apply and what steps need to be taken to protect the organisation.

Return of gender pay gap reporting

The requirement to publish gender pay gap reports was paused in March 2020 due to the pandemic. There is currently nothing to suggest the requirement will be paused in 2021, therefore those organisations employing 250 or more employees at the relevant snapshot date, being 30 March 2020 for public sector employers and 5 April 2020 for private sector employers, will need to publish their report. Any furloughed employees at the snapshot date will count towards the number of employees for triggering reporting duties and will need to be included in the bonus pay calculations but do not have to be included in the pay gap figures where they were receiving less than full pay during the period of furlough leave.

Statutory rates of pay

The Department for Work and Pensions has published its proposed increases to several statutory benefit payments which are expected to apply from April 2021:

  • Statutory sick pay (SSP) will be £96.35 per week.
  • Statutory maternity, paternity, adoption and shared parental pay together with maternity allowance will all be £151.97 per week.

The increase normally occurs on the first Sunday in April, which would be 4 April 2021.

National Minimum Wage (NMW) and National Living Wage (NLW)

The UK government has accepted in full the Low Pay Commission's recommended increases to the national living wage (NLW) and national minimum wage (NMW) rates, to apply from 1 April 2021.

The new rates will be:

  • Age 23 or over (NLW rate): £8.91.
  • Age 21 to 22: £8.36.
  • Age 18 to 20: £6.56.
  • Age 16 to 17: £4.62.
  • Apprentice rate: £4.30.
  • Accommodation offset £8.36 per week.

Employment Bill

The Queen’s Speech in December 2019 included bringing together several measures, many arising out of the government’s Good Work Plan, under a new Employment Bill.

These include:

  • the setting up of a single labour market enforcement agency,
  • payment of tips and service charges to go to workers in full,
  • the right to request a more predictable and stable contract after 26 weeks’ service,
  • extending redundancy protection (i.e. the right to be offered suitable alternative employment) to pregnant employees and for six months after the return from maternity leave as well as to those taking adoption leave and shared parental leave,
  • a new right for parents to take statutory leave of up to 12 weeks for neonatal care,
  • a new right for carers to take one week of unpaid statutory leave each year, and
  • making flexible working the default.

A draft of the Employment Bill is awaited and is expected to be published in 2021.

Ongoing consultations

BEIS has recently opened two consultations which will generate interest in the coming year. These propose:

  • measures to extend the ban on exclusivity clauses in employment contracts to cover those earning under the Lower Earnings Limit, currently £120 a week. This would prevent employers from contractually restricting low earning employees from working for other employers.
  • measures to reform post-termination non-compete clauses in employment contracts. The consultation seeks views on proposals to require employers to continue paying compensation to employees for the duration of a post-termination non-compete clause, requiring employers to confirm in writing to employees the exact terms of a non-compete clause before their employment commences, introducing a statutory limit on the length of non-compete clauses, or banning the use of post-termination non-compete clauses altogether.

Both consultations close on 26 February 2021.


This information is for general information purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given. Please contact us for specific advice on your circumstances. © Shoosmiths LLP 2024.



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