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Wednesday, March 10, 2021
As usual we provide here below the key updates and figures that take effect next month.
National Living Wage/National Minimum Wage
These rates apply from 1 April 2021.
| Category of worker | Hourly rate |
| Aged 23 and above (national living wage rate) | £8.91 |
| Aged 21 to 22 inclusive | £8.36 |
| Aged 18 to 20 inclusive | £6.56 |
| Aged under 18 (but above compulsory school leaving age) | £4.62 |
| Apprentices aged under 19 | £4.30 |
| Apprentices aged 19 and over, but in the first year of their apprenticeship | £4.30 |
Statutory Maternity/ Paternity
These rates apply from 4 April 2021.
| Type of payment or recovery | 2021 to 2022 rate |
| SMP – weekly rate for first 6 weeks | 90% of the employee’s average weekly earnings |
| SMP – weekly rate for remaining weeks | £151.97 or 90% of the employee’s average weekly earnings, whichever is lower |
| Statutory Paternity Pay (SPP) – weekly rate | £151.97 or 90% of the employee’s average weekly earnings, whichever is lower |
| Statutory Adoption Pay (SAP) – weekly rate for first 6 weeks | 90% of employee’s average weekly earnings |
| SAP – weekly rate for remaining weeks | £151.97 or 90% of the employee’s average weekly earnings, whichever is lower |
| Statutory Shared Parental Pay (ShPP) – weekly rate | £151.97 or 90% of the employee’s average weekly earnings, whichever is lower |
| Statutory Parental Bereavement Pay (SPBP) – weekly rate | £151.97 or 90% of the employee’s average weekly earnings, whichever is lower |
| 92% if your total Class 1 National Insurance (both employee and employer contributions) is above £45,000 for the previous tax year | |
| SMP, SPP, ShPP, SAP or SPBP – proportion of your payments you can recover from HMRC |
103% if your total Class 1 National Insurance for the previous tax year is £45,000 or lower |
Statutory Sick Pay (SSP)
The same weekly SSP rate applies to all employees. However, the amount you must actually pay an employee for each day they’re off work due to illness (the daily rate) depends on the number of ‘qualifying days’ they work each week. Use the SSP calculator to work out your employee’s sick pay, or use these rates.
Employment Tribunal Awards
Employment Tribunal award limit changes will take effect from 6 April 2021. The new limits have yet to be announced.
IR35
The changes to the off-payroll rules were due to come into effect on 6 April 2020. This has now been delayed until April 2021 because of the spread of the coronavirus (COVID- 19) pandemic. The delay is to help businesses and individuals deal with the economic impact of COVID-19.
The delay to the introduction of the changes is not a cancellation.
April 2021 changes to off-payroll working for intermediaries and contractors
Understand and prepare for changes to the off payroll working rules (IR35) if you’re a contractor or an intermediary and your worker provides services to a client.
An intermediary (usually a limited company) will normally be a worker’s personal service company, but could also be a partnership, a managed service company, or another person. A worker is sometimes known as a contractor.
Off-payroll working rules
How the off payroll working rules are applied will change on 6 April 2021. Before 6 April 2021, if your worker provides services to a client through you:
- in the public sector, the client must decide your employment status
- in the private sector, you must decide your worker’s status
From 6 April 2021, all public sector clients and medium or large-sized private sector clients will be responsible for deciding your worker’s employment status. This includes some charities and third sector organisations.
If the off payroll working rules apply, your worker’s fees will be subject to tax and National Insurance contributions.
What the changes mean
If your worker provides services to a public sector client, or a medium or large-sized private sector client, they:
- should get an employment status determination from the client, as well as the reasons behind that determination
- will be able to dispute the determination given to them if they disagree with it
Different rules apply if your worker:
- does not get an employment status determination from the client
- provides services to small clients in the private sector
If your worker does not get an employment status determination
This may be because they are providing services to a small-sized client in the private sector, as the rules are not changing for these clients. Your worker can ask for confirmation of the client’s size and the client will have 45 days to respond.
If the client confirms it is a small-sized organisation, you as the intermediary (usually a limited company) will be responsible for determining your worker’s status to see if the off-payroll working rules apply.
Your responsibilities from 6 April 2021
Tax and National Insurance
If your worker provides services to a small private organisation and the off payroll working rules apply, you will be responsible for deducting tax and National Insurance from your worker’s fees and paying them to HMRC.
Read more about the off-payroll working rules if your worker provides services to small clients in the private sector.
The deemed employer will become responsible for deducting tax and National Insurance contributions and paying them to HMRC if both:
- a public sector, medium-sized or large-sized client makes the status determination
- the off payroll working rules apply
Paying your worker
Your income for your worker’s services will have already had tax and National Insurance contributions deducted from them if both:
- your worker provides services to a public authority or to a medium or large-sized private sector client
- the off payroll working rules apply
This means that when you pay the worker, they do not need to pay tax and National Insurance contributions again on those fees.
You can do this by either paying it as:
- a salary through your payroll – but do not deduct tax or National Insurance contributions
- dividends – these do not need to be recorded on your worker’s Self-Assessment
As the amounts have already been treated as employment income doing it this way will avoid any double payment of tax or National Insurance contributions.
What to do if your worker disagrees with the determination
The client must decide your worker’s employment status and if the off payroll working rules apply. The client must then tell your worker their determination and the reasons for it.
If your worker disagrees, they’ll need to:
- give details of the employment status determination they disagree with
- give their reasons for disagreeing
- keep copies of any records about disagreements
A disagreement can be raised until the last payment is made for the worker’s services.
The client will have 45 days from the date of receiving the worker’s disagreement to respond. During that time the fee-payer should continue to apply the rules in line with the client’s original determination.
If the employment status determination has not changed, the client will have to tell your worker. If the employment status determination has changed, the client will have to:
- give a new status determination to your worker
- confirm which date the determination is valid from
If you have any concerns regarding the changes outlined above and implications for your business or any related employment issues please feel free to drop Robert or Martha a line.
robertgibson@samuelphillips.co.uk
marthacraven@samuelphillips.co.uk
Written by Robert Gibson, Senior Consultant - Employment Law
Robert is a Senior Consultant at Samuel Phillips and specialises in employment and business matters. He advises in relation to employment and shareholder disputes, including pensions and related issues.
