Key employment law trends to watch out for in 2021

Anna Cope and Molly Grace outline some of the main issues that will feature high on the HR agenda this year

Brexit trade deal

The UK is free to depart from EU employment law subject to ‘level playing field’ provisions in the Brexit trade deal, although significant immediate change is unlikely. However, changes to the free movement of workers means EU citizens living in the UK before 1 January 2021 can live and work in the UK – but need to apply under the EU settlement scheme. 

EU citizens who now wish to move to the UK must apply for a visa. Employers that wish to sponsor employees to come to the UK on a skilled worker visa need to obtain a sponsor licence.

Off-payroll tax rules 

The long-awaited reforms to the off-payroll tax rules (known as IR35) take place on 6 April 2021, affecting medium and large companies in the private sector that hire contractors providing services through an intermediary.

Workforce wellbeing

2020 has highlighted a critical need for workforce wellbeing to be a key focus area for businesses. Employers have legal duties surrounding the health and safety of their workforce, including both their physical and mental health wellbeing, and to assess the risks posed in the workplace.

Ethical business

The cultural shift driving ethical business is set to continue into 2021. Ethical business practices are by their nature multi-faceted, but some areas of focus include an organisation’s environmental impact, its corporate social responsibility initiatives and its supply chains. Of rising importance is a ‘speak up, listen up’ culture, where individuals feel comfortable raising complaints or ‘blowing the whistle’ without fear of retribution.

Inclusion and diversity

Recent social movements, such as #MeToo and Black Lives Matter, placed an increased focus on inclusion and diversity in the workplace. With racial diversity on the government’s agenda, businesses may soon be required to report ethnicity data. While we await legislation, voluntary actions by many organisations and certain investors have led to some progress in ethnic diversity. 

Technological and business transformation

Reliance on technology, and its development, was a trend for 2020 and remains on the 2021 agenda, alongside adjustments to cost bases and restructuring for many organisations. 

Businesses that have been unable to rely on direct human interactions have found new ways to deliver goods and services. The Covid-19 pandemic has highlighted the fragility of a human workforce, with many organisations being challenged by absences resulting in reduced productivity or closures, and the associated costs. 

Future-facing businesses are continuing to explore automation and artificial intelligence technologies – not only to increase productivity and efficiency, but to improve many other aspects of their operations.

Future ways of working

Organisations are grappling with the concept of what the future world of work may look like. The government has actively encouraged businesses to allow those who can effectively work from home to do so and this has resulted in a significant adjustment. For many, remote working has become ‘the new normal’ and some businesses have taken the step of disposing of their office space either partially or entirely, while others are planning for adjustments when employees return. 

Each organisation’s response will vary based on business need and culture as well as individual preference. Businesses will have to be mindful of individual flexibility, talent recruitment and retention, team cohesion and collaboration, performance management and cost implications. Organisations should ensure that their policies and procedures are updated to reflect future ways of working. 

Remuneration in a remote world

Changes to the way employers engage staff and where they work will bring about many changes. One key issue will be workers’ remuneration. Pay scales are often structured with a link to a worker’s geographic location, reflecting factors such as the cost of living and comparative recruitment market and, for those based in the south-east of the UK, may include a London weighting. But if the workforce becomes more agile, should businesses maintain a remuneration structure based on geographic location?  

Before any changes are made to pay structures, organisations should consider the legal and employee relations implications. In almost all cases, it will be a breach of an employee’s contract of employment to unilaterally reduce their pay. Unequal pay for the same or comparatively similar job roles creates the risk of equal pay claims. Discretionary pay awards can maintain flexibility for organisations but can create legal risk around the exercise of any discretion.

Anna Cope is an employment partner and Molly Grace an associate at CMS