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Employment law in 2021 – what can we expect?

Employment / 06 January 2021

When we published a similar update this time last year, none of us could have foreseen what 2020 had in store for HR teams and those advising on employment law.  The employment issues arising from the pandemic have been unprecedented – complex in nature and vast in scope – and employers have had to adapt to new, agile working conditions whilst at the same time considering detailed health and safety obligations in ways they have never had to do before.  With the news of the latest lockdown last night, it is clear that Covid-19 is still likely to play a major part in employment law issues over the coming months.

The Government’s Budget for 2021 is expected on 3 March, and we wait to see what impact that will have on employers.  In the meantime, we have set out below a summary of further key employment law changes that we are expecting to see in 2021.

Coronavirus Job Retention Scheme (“CJRS”)

On 17 December 2020, the Government further extended the CJRS until 30 April 2021. Until that date, employers are still able to claim 80% of employees’ wages, capped at £2,500 per month for hours not worked, and must pay the national insurance and employer pension contributions on employees’ furlough pay.  It remains to be seen what will happen to the CJRS from May 2021 onwards – there have been calls from some corners for it to be extended to the end of June 2021.  We also wait to see whether either of the withdrawn Job Retention Bonus or Job Support Schemes will be re-introduced.


The European Commission and the UK government reached a trade deal on 24 December 2020.  The end of the transition period on 31 December 2020 means the end of free movement between the UK and the EU.  The UK has now implemented its new points-based immigration system which applies to both EU and non-EU nationals.  These changes are significant – and employers who wish to hire from outside the UK (excluding Irish citizens) should therefore seek specialist advice at an early stage.

There are unlikely to be any significant changes to UK employment law in the near future as a result of Brexit.  Potential areas for change include to some of the rules relating to collective redundancies, TUPE, holiday pay and discrimination law, although there are no definite plans for any changes at the moment.

The new rules around the interpretation of EU case law are complex.  In summary, the UK courts will not be bound by any decisions made by the ECJ after 31 December 2020.  Both the Supreme Court and the Court of Appeal have the power to depart from “retained” EU case law in decisions made after 31 December 2020.

Off-payroll working rules

Significant changes to the off-payroll working rules (known as “IR35”) will come into force for large and medium-sized companies in the private sector on 6 April 2021.  The changes will have important implications for businesses engaging contractors.  For further details of the proposed changes, see our earlier update here.

National living wage (“NLW”) and national minimum wage (“NMW”)

The following new rates will take effect from 6 April 2021:

– NLW for workers aged 23 and over will be £8.91 per hour (note that the NLW has been extended to 23 and 24-year-olds for the first time).

– NMW will increase as follows:

– for ages 21 and 22 – from £8.20 to £8.36 per hour;

– for ages 18 to 20 – from £6.45 to £6.56 per hour; and

– for ages 16 and 17 – from £4.55 £4.62 per hour.

– Apprentice rate will increase from £4.15 to £4.30 per hour.

Post-employment notice pay (“PENP”)

From 6 April 2021, new legislation will amend the current formula for PENP to avoid unfair outcomes if an employee’s pay period is defined in months but their contractual notice period is expressed in weeks.  The changes will apply to those individuals who have their employment terminated and where the termination payment is received on or after 6 April 2021.

Non-compete clauses

The Government is currently consulting on measures to reform non-compete clauses in employment contracts.  The key proposals include requiring employers to pay compensation for the duration of the non-compete or banning non-compete clauses altogether.  Complementary proposals have also been put forward including the options of requiring employers to confirm the detail of a non-compete covenant in writing before an employee starts work and having a statutory limit on the length of a non-compete.  The consultation closes on 26 February 2021 and we await the outcome with interest.

Exclusivity clauses

The Government is currently consulting on extending the ban on exclusivity clauses in employment contracts.  The aim behind the proposal is to prevent employers from contractually restricting low-paid employees (i.e. those earning under £120 a week) from working elsewhere.  The consultation closes on 26 February 2021.

Employment status

We are expecting the judgment of the Supreme Court in Uber BV and others v Aslam and others which is an important case for employment status and the gig economy.  The Court of Appeal has previously ruled that Uber drivers are workers for the purposes of the Employment Rights Act 1996, the National Minimum Wage Act 1998 and the Working Time Regulations 1998 finding that there was no contract between drivers and passengers and that the drivers were actually working for Uber.  Will the Supreme Court agree?

Working time

The Supreme Court will hear the case of Flowers and others v East of England Ambulance Trust in June 2021 and decide whether holiday pay under the Working Time Directive should include regular voluntary overtime.

In November 2021, the Supreme Court will also hear the appeal in Harpur Trust v Brazel which is an important case for employers in the education sector.  The Court will be looking at whether an employment tribunal was wrong to find that “part-year workers” (i.e. those working only part of the year) should have their annual leave entitlement capped at 12.07% of annualised hours.

Sexual harassment

The Government consulted on significant proposals affecting workplace sexual harassment in 2019.  A response to the consultation was expected in 2020 but has not yet been published.  The proposals include a new mandatory duty on employers to prevent harassment in the workplace and new rules relating to third-party harassment (amongst others).  Employers will need to take careful note of any new obligations as and when they come into force.

Modern Slavery

Last year, the Government consulted on the issue of supply chain transparency.  The response to the consultation made various proposals including extending the reporting requirement in the Modern Slavery Act 2015 to include public bodies, legislating for the content of slavery and human trafficking statements and introducing a new statutory single reporting deadline.  We understand that the legislative changes will be made “when parliamentary time allows”.

New Employment Bill

We had been expecting news of the new Employment Bill in 2020 having first been announced in the Queen’s Speech back in December 2019.  We await details during 2021 of any consultations which cover the following proposals:

— the right to request a more predictable contract, which was previously mentioned as part of the Government’s Good Work Plan;

–extension of the period of redundancy protection from the point an employee notifies their employer of their pregnancy until six months after the end of their maternity leave;

— a new right to neonatal leave and pay to support parents of premature or sick babies; and

— making flexible working an employer’s default position (unless the employer has a good reason to do otherwise).

We will continue to bring you analysis of important legal developments as and when they happen.  In the meantime, do get in touch if we can assist your organisation with any of these issues.


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This update is for general purposes and guidance only and does not constitute legal or professional advice. You should seek legal advice before relying on its content. This update relates to the prevailing circumstances at the date of its original publication and may not have been updated to reflect subsequent developments. If you have general queries about our updates, please email:

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