New Brexit trade deal and the right to work

The UK has now completed its formal separation from the EU meaning we stopped following EU rules with effect from 23:00 GMT on 31 December 2020.

Moving forward, the ‘UK-EU Trade and Cooperation Agreement’ (which is over 1,200 pages long and referred to here as the ‘new deal’) applies, which sets out rules for how the UK and EU will live, work and trade together.  Make UK has welcomed this development, as a no deal outcome would have caused catastrophic damage to manufacturing in Britain. 

HR will be particularly interested in the new requirements for EU and UK nationals.  As freedom to work and live between the UK and the EU has now ended, UK nationals travelling to the EU now need a visa if they want to stay in the EU for more than 90 days in a 180-day period. The UK has implemented a permanent settlement scheme for EU nationals who were residing in the UK before the end of the transition period, meaning such EU nationals have kept all the rights they previously had in the UK as citizens of the EU, for example to work, study and have access to public services.  For further details about EU nationals settling in the UK, see the people section of our EU hub. The new deal also includes some shared rules and standards on issues such as workers' rights.  

As adequacy decisions have not yet been adopted, the Government has also announced that the new deal will allow personal data to flow freely from the EU (and EEA) to the UK, for no more than six months.  This will enable businesses and public bodies across all sectors, including manufacturing, to continue to freely receive data from the EU (and EEA). See here for the ICO’s response to that announcement.

For further details on the new deal, see this summary and our EU hub on the Make UK website.

Gender pay gap reporting by 4 April 2021

The next gender pay gap (GPG) reporting deadline is 4 April 2021 (for the 2020/2021 reporting year), and (unlike for the 2019/2020 reporting year) there has been no suggestion that this will be delayed.  This means that organisations with 250 employees or more in Great Britain should be making plans to report on their GPG (i.e. the difference in average pay between their male and female employees) by 4 April 2021. 

Some employers may experience difficulties in analysing their pay data due to the impact of Covid-19.  Since the start of the pandemic, many businesses have furloughed staff (often reducing their pay) and experienced higher levels of sickness absence, meaning their 2020/2021 reporting data is likely to be skewed.  Given the uncertainties of 2020 (and now 2021), many employers may also have failed to progress initiatives to reduce the GPG in ways they had originally planned.  

Government guidance confirms that employers should exclude any staff whose pay has been reduced due to being on furlough during the relevant pay period from their GPG (hourly) calculations and when identifying the proportion of men and women in each pay quartile.  However, any employees who have been on furlough will need to be included when it comes to calculating: (i) the percentage of men and women receiving bonus pay; (ii) the mean GPG using bonus pay; and (iii) the median GPG using bonus pay. Many employers may decide to publish a voluntary narrative alongside their GPG data, to explain the impact the pandemic has had, e.g. if they have had to exclude significant numbers of furloughed employees from their calculations, or they have not made the progress they had hoped to in reducing their GPG.  

It’s also worth noting that a Private Members’ Bill has been introduced in the House of Commons, aiming to extend GPG reporting obligations to employers with only 100 or more employees (although the primary focus of the Bill is on equal pay, rather than gender pay).  Although this Bill is unlikely to become law for now (a second reading in the Commons will take place in January 2021), this proposal would significantly increase the number of employers covered by the GPG Regulations.

Changes to IR35 obligations from 6 April 2021

Changes to HMRC’s IR35 and the off-payroll working rules (together, the IR35 tax regime) which had been due to take effect from April 2020, will now come into force from 6 April 2021.  

Under the new regime, clients in the private sector (who do not fall within a small business exemption) will need to determine the employment status (for tax purposes) of each of their contractors who provide their services via an intermediary (usually a personal service company or ‘PSC’).  To date, the contractor’s PSC has been responsible for this assessment.

Under the new rules, clients will need to take ‘reasonable care’ when determining a contractor’s employment status and produce a ‘status determination statement’ (SDS) which sets out its conclusion along with the reasons for the determination. The SDS must be passed to the individual contractor (and any person or organisation that the client contracts with such as an agency). The client must also keep detailed records of any SDS, including reasons for the outcome and fees paid, and have processes in place to deal with any disputes that arise from the determination.

If the outcome of the SDS is that the contractor is a deemed employee of the client for tax purposes, the engagement will be ‘inside’ the IR35 tax regime. Subject to any labour supply chain being involved, the client is likely to be the ‘deemed employer’ who will then be responsible for deducting tax and NICs (and, where relevant, the apprenticeship levy) and paying those to HMRC.

Minimum wage increases from 6 April 2021