In addition to navigating a post-COVID world, there are a number of areas covered by the recent Budget which employers need to get to grips with. In this week’s Insight, we take a brief look at the new IR35 provisions as well as Government initiatives in respect of apprenticeships and traineeships, and increases to the National Minimum Wage.
Off-payroll working in the private sector
New tax rules are soon to come into force for individuals who provide their personal services via an “intermediary” to a medium or large business. The new rules apply to payments made for services provided on or after 6 April 2021.
The off-payroll working rules apply where an individual (the worker) provides their services through an intermediary (typically a personal service company) to another person or entity (the client). The client will be required to make a determination of a worker’s status and communicate that determination. In addition, the fee-payer (usually the organisation paying the worker’s personal service company) will need to make deductions for income tax and NICs and pay any employer NICs.
There is an exemption from these new tax rules for a small company which is defined as one which meets two of these criteria:
- a turnover of £10.2 million or less
- having £5.1 million on the balance sheet or less
- having 50 or fewer employees.
If the business receiving the work of the individual is not a company, it is only the turnover test that will apply.
The Status Determination Statement (SDS) is a key part of the status determination procedure. The client must provide the SDS to the worker and should include not only the decision of the client but also the reasons underpinning it. The client must take ‘reasonable care’ in coming to its conclusion. If it doesn’t, the statement is not a valid SDS.
In the Budget the government announced minor technical changes to improve the operation of the rules, in response to feedback from stakeholders, which will be legislated for in Finance Bill 2021. The government will make changes to the rules regarding provision of information by parties in the labour supply chain.
These changes will make it easier for parties in a contractual chain to share information relating to the off-payroll working rules by allowing an intermediary, as well as a worker, to confirm if the rules need to be considered by the client organisation.
Apprenticeships and traineeships
High quality traineeships for young people
The government will provide an additional £126 million in England for high quality work placements and training for 16-24 year olds in the 2021/22 academic year. Employers who provide trainees with work experience will continue to be funded at a rate of £1,000 per trainee.
Payments for employers who hire new apprentices
The government will extend and increase the payments made to employers in England who hire new apprentices. Employers who hire a new apprentice between 1 April 2021 and 30 September 2021 will receive £3,000 per new hire, compared with £1,500 per new apprentice hire (or £2,000 for those aged 24 and under) under the previous scheme.
This is in addition to the existing £1,000 payment the government provides for all new 16-18 year-old apprentices and those aged under 25 with an Education, Health and Care Plan, where that applies.
Supporting apprenticeships across different employers
The government will introduce a £7 million fund from July 2021 to help employers in England set up and expand portable apprenticeships. This will enable people who need to work across multiple projects with different employers to benefit from the high quality long-term training that an apprenticeship provides.
National Living Wage (NLW) and National Minimum Wage (NMW)
The National Living Wage will increase by 2.2% and will be extended to 23 and 24 year olds for the first time. For workers aged under 23, the government has announced smaller increases in NMW in recognition of the risks to youth employment which the current economic situation poses.
From 1 April 2021, the new hourly rates of NLW and NMW are:
- £8.91 for those 23 years old and over
- £8.36 for 21-22 year olds
- £6.56 for 18-20 year olds
- £4.62 for under 18s
- £4.30 apprentice rate for apprentices under 19, and those 19 and over in their first year of apprenticeship.
The extension of the NLW to 23 and 24 year olds may catch out some employers. Employees in this category, if they are on the NMW rate, are currently being paid £8.20 an hour.
If you would like to discuss any of the above, please get in touch.