Further to our previous article on the 2021 employment law changes, we now provide a full round up of the April 2021 rate changes.
April 2021 Rate Changes
The first of the April 2021 rate changes took place on the 1st April 2021, with the increases in the national minimum wage and national living wage taking effect. The new rates are as follows:-
- For workers aged 23 and over (i.e. the National Living Wage), the rate will increase from £8.72 to £8.91 per hour
- For workers aged 21-22 inclusive, the rate will increase from £8.20 to £8.36 per hour
- For workers aged 18-20 inclusive, the rate will increase from £6.45 to £6.56 per hour
- For workers aged 16-17 inclusive, the rate will increase from £4.55 to £4.62 per hour
- The apprentice rate will increase from £4.15 to £4.30 per hour
Apart from the rate changes, the main change in relation to the national minimum wage and the national living wage is that the scope of the national living wage has been extended from all those aged 25 and over, to all those aged 23 and over. Hence, those aged 23-24, who prior to the 1st April 2021, were being paid the national minimum wage of £8.20 per hour, are now following the change being paid at least the national living wage of £8.91 per hour from the 1st April 2021, an increase of 8.7%.
Increases in statutory maternity pay, statutory paternity pay, shared parental pay, statutory adoption pay, maternity allowance, and statutory parental bereavement pay, all followed on the 4th April 2021. The rate for all increased from £151.20 to £151.97 per week.
On the 6th April 2021, statutory pick pay (SSP) increased from £95.85 to £96.35 per week. On the same date, the statutory cap on a weeks pay for the purposes of calculating the basic award and statutory redundancy pay, increased from £538.00 to £544.00.
IR35 Changes
Apart from the April 2021 rate changes, another major employment law development that has taken place this month has been the extension of IR35 to medium and large sized businesses in the private sector, which took effect from the 6th April 2021. The change has been described as potentially “catastrophic for the economy“.
A full explanation of what IR35 (aka the off-payroll working rules) is, is set out here and here.
With effect from the 6th April 2021, IR35 has been extended to businesses with 50 or more employees in the private sector. This followed its earlier implementation into the public sector on the 6th April 2017, a step that some have alleged has had a disastrous impact on the public sector, with 80% of the respondents stating that it had had a negative impact according to a survey by Harvey Nash Recruitment Solutions of 500 contractors
In essence, the Government's objective with the IR35 changes has been to clamp down on so called 'disguised employment', where those who are in reality employees are disguised as self-employed contractors (often using personal services companies) in order to avoid paying the additional taxes and national insurance contributions that come with being an employee. Accordingly, those who ultimately are managed and directed in how they carry out their duties and responsibilities, and who use the equipment of those that have hired them, will be deemed to be employees and they will need to go on to the PAYE payroll
Nevertheless, critics argue that one of the key competitive advantages of the UK economy has been its flexible workforce, and the fact that contractors could be taken on and let go as and when required, thereby making the resourcing and implementation of projects more viable and manageable, and creating incentives to invest in new ventures. Critics suggest that the IR35 changes will completely undermine this to the detriment of the economy, with many becoming more cautious and risk averse when making decisions to invest and hire, especially where IR35 will increase the cost of hiring by a projected 14.3%.
The April 2021 Rate Changes And IR35 Extension Come Into Force
As with the April 2021 rate changes, the extension of IR35 has now come into force. Only time will tell what the impact will be re IR35. However, the Director of Policy at IPSE, Andy Chamberlain, fears the worst. He states: "The changes to IR35 [will] do serious harm to the self-employed sector at the best of times, but now they are adding drastic, unnecessary damage to the financial carnage of the pandemic – undermining the UK’s contractors at the worst possible time. The crucial problem with IR35 is still its complexity: in fact, it is so complex that HMRC has lost the majority of tribunals on its own legislation."
Mr Chamberlain adds: "Now the changes to IR35 are shifting this complexity from contractors themselves onto their clients. The result is clear: chaos. Many clients are pushing all their contractors inside IR35 – against the rules of the legislation. Many more are only engaging contractors through umbrella companies, while others are scrapping their contractor workforces altogether – just when, as the economy opens up, they will need them most."
