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Essential employer update 2021

2nd March, 2021

From minimum wage rates rising to recruitment post-Brexit, 2021 brings a number of new challenges for employers. Here, Nottingham chartered accountants, Clayton & Brewill, shares an essential employer update on the latest issues in payroll, tax and employment law in 2021.

Minimum wage: easy mistakes to make this year

1. Minimum wage rates rise from 1 April 2021. Employers should check that payroll is set up for the right dates.

2. More workers will qualify for the National Living Wage (NLW), the highest wage band. At present it’s paid only to those aged 25 and over, but from April 2021, workers aged 23 and 24 qualify. It’s important to check you’re ready to comply, with details of staff dates of birth to hand.

3. If the change brings rates of pay close to minimum thresholds, there’s little headroom for error. Employers should review minimum wage compliance generally; for example, policy around deductions from wages will need consideration to be sure deductions won’t now take workers below the new limits.

4. Remember COVID-19 doesn’t take away the obligation to pay minimum wage. Even with the furlough scheme, workers should get at least minimum wage for hours worked.

Furlough scheme compliance

Having been extended multiple times, the Coronavirus Job Retention Scheme (CJRS) is currently set to run until 30 April 2021. But each new twist of the rules creates the potential for errors.

HMRC is undertaking compliance activity, backed with the power to charge penalties. Its focus is deliberate non-compliance and fraud, not inadvertent mistakes. Initially, it has been writing to employers where it believes they may need to repay CJRS monies, asking these businesses to review their claims. With the public encouraged to report suspected fraud, Gov.uk now publishes details of the most recent CJRS claims.

Employers must keep a copy of all records for six years, including the amount claimed and claim period for each employee, and claim reference number. HMRC can ask for more information, so you should be able to substantiate figures for actual hours worked, plus usual hours worked, for employees put on flexible furlough. Details of supporting calculations should also be provided where relevant.

Penalties for receiving grants you were not entitled to

Factsheet CC/FS48 explains the penalties for not telling HMRC about CJRS grant overpayments. Overpayment includes not being entitled to receive a grant, perhaps because employees kept working while furloughed. It would also apply to keeping a grant when a change in circumstances meant you became ineligible; for example, if someone leaves your employment. Such monies must be repaid to HMRC.

There are two procedures: firstly, notifying HMRC of overpayment and secondly, repayment. Time limits apply to each. Employers must notify HMRC within 90 days of receiving a grant you are not entitled to or 90 days after the change in circumstances that renders you ineligible.

Strictly speaking, the penalty is for non-notification, but the repayment period and any penalty are both determined by whether failure to notify is treated by HMRC as deliberate. Where you didn’t know you had overclaimed a grant when it was received – or when your circumstances changed such that you were no longer eligible, and the grant is paid back within particular time limits – HMRC won’t charge a penalty. For sole traders and partnerships, this means by 31 January 2022. For companies, this means by 12 months from the end of your accounting period.

If you’re worried that you’ve overclaimed and are unsure what to do next, please get in touch with the Clayton & Brewill team and we will be happy to advise you on what to do next. Further government guidance on repaying CJRS monies can also be found here.

Getting redundancies right

Redundancy is a specific form of dismissal, occurring where a business ceases, or a particular job is no longer required. Employers have an obligation to act fairly and reasonably throughout the process. This means warning employees of your plans, consulting with them, and implementing fair selection procedures.

Special rules apply where 20 or more employees are dismissed. However, best practice would suggest following a similar process no matter how many staff are involved. Breach of the rules, particularly around redundancy consultations, has the potential to lead to a claim for unfair dismissal at an Employment Tribunal. The Advisory, Conciliation and Arbitration Service (Acas) offers a range of guidance outlining the steps involved in managing staff redundancies.

Alternatives

Redundancies should be a last resort when other options are exhausted. These typically include voluntary redundancy, early retirement, flexible working, limiting overtime, short-time working and temporary lay-offs. There is also a requirement to offer suitable alternative work (if you have it) to someone who would otherwise be made redundant. Staff may ask why redundancy is proposed while the furlough scheme is in operation, so be prepared to explain that furlough is not cost-neutral for employers.

Consultation

Redundancy consultation should be ‘meaningful. It should allow you to communicate the business rationale for redundancy and allow employees to make suggestions. For fewer than 20 redundancies, there’s no set time period for the consultation to last. For 20-99 redundancies, you must consult for at least 30 days before any dismissals take effect.

Document each stage

It’s important to show why decisions have been made. Selection for redundancy should not discriminate with regard to protected characteristics like age, disability, sex, or race, so the more transparent the selection procedure, the better. A points system, scoring candidates for redundancy against agreed criteria, can be valuable here. In all, good workforce communication and careful compliance are key.

Brexit transition: how to recruit beyond the UK now

The EU exit transition period finished on 31 December 2020, meaning workers no longer have an automatic right to move between the UK and the EU. The UK now applies broadly the same immigration rules to all prospective arrivals, whether from the EU or elsewhere.

Two sets of rules

The EU Settlement Scheme (EUSS) rules apply to EU citizens in the UK before 1 January 2021. The UK’s new points-based immigration system (PBS) applies to anyone arriving in the UK after this.

Brexit for employersEUSS: key messaging for staff

The government has materials available to help employers provide information to staff, though you are under no legal obligation to do so.

The EU Settlement Scheme (EUSS) applies to EU, EEA or Swiss citizens already living in the UK by 31 December 2020 (and in some circumstances, to family members of Northern Irish individuals, whether or not EU, EEA or Swiss citizens). It provides a route to allow them to continue living and working here, and helps protect social security rights.

As we near the June deadline, a judicious reminder to staff may be appropriate. Employing an EU national without lawful status in the UK after that date potentially leaves you in breach of the rules on legal working.

Applications can be made here. Successful applicants are awarded either settled or pre-settled status, depending on how long they have lived in the UK. Different rights attach to each. The application cut-off date is 30 June 2021, with only minor exceptions.

As shown in this employer update, 2021 brings lots of new challenges for employers. Please do remember, the Clayton & Brewill team is always on hand to help with any area of planning, tax or compliance. Call us on 0115 950 3044 or send an enquiry here.

 

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