Budget 2021- Employment Law Issues

29th March 2021 The Chancellor of the Exchequer, Rishi Sunak, delivered his second Budget on the 3rd March 2021. Delivering the Budget during the lockdown alone made it an unusual Budget.

As the Chancellor said in his speech, “The damage coronavirus has done to our economy has been acute.” The Chancellor noted that GDP shrank by 10% in 2020, and that economic recovery will take a long time. The Office of Budget Responsibility (OBR) estimates that the borrowing for the current tax year will be £394 Billion, which is the highest figure in peacetime in the UK. However, the Chancellor said that “We will continue doing whatever it takes to support the British people and businesses through this moment of crisis.” The Budget this year therefore has covered a broad range of issues that have a direct impact on employers and workers. In this article we summarise some of the essential details that have an impact on employers and employment law in the UK.  

The Coronavirus Job Retention Scheme (known as the Furlough Scheme)

During the past year the Government introduced the Furlough Scheme, which has supported the wage costs of millions of people, and provided help to thousands of businesses. However, the wage bill is not the only cost that a business has to cover, and the substantial drop in trade that many businesses have suffered, due to having to be closed to the public due to the lockdowns and tier requirements, has resulted in the loss of many businesses which previously were perfectly viable. In turn, with the collapse of many businesses, and the need for many other businesses to make staff redundant in order to help the business survive, has led to a significant rise in unemployment, and an equally significant increase in cases being commenced in the Employment Tribunals.  

There are currently over 4 million people on furlough in the UK. While this is lower than the number on furlough at its height, this is still a huge number. There are still thousands of businesses that have some or all of their staff on furlough leave. In the Budget, the Chancellor announced that the furlough scheme is being extended to the end of September 2021. Back in December the Chancellor had announced the extension of the scheme to the end of April 2021. However, the details of the payments that the scheme will cover will change between now and the end of September, adopting the same approach that had been proposed last year.

The scheme will cover the following percentage of the normal salary of each individual:-

80% until the end of June 2021 – subject to the maximum of £2,500 per month, per individual.

This will be followed by gradual reductions to the percentages as below:-

70% in July 2021,
60% in August and September 2021.  

Employers will be expected to pay the difference up to the 80% figure, so 10% of wages in July and 20% in August and September. In addition, employers will still be required to fund the employer’s National Insurance Contributions, and the mandatory minimum automatic enrolment pension contributions.

The Chancellor has also extended eligibility for staff under the furlough scheme. For periods starting on or after 1st May 2021, employers can claim for employees who were employed on the 2nd March 2021, so long as a PAYE Real Time Information (RTI) submission was made between the 20th March 2020 and 2nd March 2021, notifying a payment of earnings for that employee.

Employers must of course pay their workers their full normal rate of pay for hours that are actually worked, and they can top-up the furlough payments for any unworked hours if they wish.

Apprenticeships and traineeships

The government has announced it will provide an additional £126 million in England for high quality work placements and training for 16 to 24 year olds in the 2021/2022 academic year. Employers that provide trainees with work experience will continue to be funded at a rate of £1,000 per trainee.

Employers that hire a new apprentice between the 1st April 2021 and the 30th September 2021 will receive £3,000 per each newly hired apprentice (but this is limited to £2,000 for those apprentices aged 24 and under).

Income tax exemptions for COVID-19 test and home office expenses

The Government has announced that it will extend the income tax exemption and National Insurance Contributions disregard for COVID-19 antigen tests provided by employers and for employer-reimbursed expenses covering the cost of home equipment to the 2021-2022 tax year. This is significant in light of the Government’s continuing advice for people to work from home if at all possible.

Statutory Sick Pay Rebate Scheme

Small and medium sized businesses across the UK will continue to be able to reclaim up to two weeks of eligible SSP costs per employee. The scheme was introduced as a temporary COVID-19 measure, intended to support employers while levels of sickness absence are high. The Government has said that it will publish details of the steps to closing the scheme in due course.   

Self-Employed Workers

The fourth Self-Employed Income Support Scheme (SEISS) grant for February, March, and April 2021 will cover 80% of monthly profits up to a maximum of £2,500 per month.

People who became self-employed in the 2019/20 tax year, and have filed a 2019/20 tax return, will also be eligible for the fourth and fifth grants. This step is estimated to help an additional 600,000 workers.

A fifth grant will be available, covering May, June and July 2021. The grant will cover self-employed workers whose turnover has fallen by 30% or more, and will continue to pay 80% of monthly profits up to £2,500 a month. For self-employed workers whose turnover has fallen by less than 30%, the grant will pay 30% of monthly profits up to £2,500 per month.

National Living Wage and National Minimum Wage

The National Living Wage (currently payable to those aged 25 and over) will increase by 2.2%, and is to be extended to 23 and 24 years olds. For workers aged under 23, the Government has announced a smaller increase in the National Minimum Wage in recognition of the substantial risks to youth employment which the current economic situation poses. As many redundancy selection procedures still focus on a “last in first out” approach, young employees are often at an increased risk of redundancy compared to their colleagues.

From the 1st April 2021 the new rates will be as follows:-

£8.91 per hour for those aged 23 years and over,
£8.36 per hour for those aged 21-22 years,
£6.56 per hour for those aged 18 to 20 years,
£4.62 per hour for those aged under 18 years

The apprentice rate for apprentices under 19 years old, and those aged 19 and over in their first year of apprenticeship will be £4.30 per hour.

It is particularly important for employers with staff that are now aged 23 and 24 years to note the enhanced increase in their rate of pay due to them being covered by the National Living Wage from April 2021.

If you need any further advice on any matter raised in this article do not hesitate to contact us at Hallett Employment Law Services Ltd.