Employment law 2021: What to expect


2020 has been an extremely busy year for employment law, with the impact of the Covid-19 pandemic placing both employers and employees in uncharted territory. This year saw many employers needing to get to grips with the new concept of ‘furloughing’, keep up to date with ever-changing Government guidance and adapt to homeworking (a change likely to remain for many in the post-pandemic world).

Employers updated their contracts of employment to ensure compliance with new obligations to provide extended written statements of terms to all workers and the ‘Black Lives Matter’ campaign served as a “call to action” in ensuring racial diversity and equality in the workplace.

As a result, a number of anticipated employment law changes were delayed this year. However, various changes are expected to take effect in 2021, including on the 6th of April, which is always a busy day in the employment calendar.


The Chancellor recently announced that the Coronavirus Job Retention Scheme (CJRS) has been extended to 30 April 2021. The Job Support Scheme, which had been announced as the successor to the CJRS, has therefore been postponed.

The CJRS grant will cover 80% of wages for the hours not worked by employees who are furloughed or flexibly furloughed. The amount of support being offered will not decrease over the months, as seen in previous versions of the CJRS. Employers will not be required to contribute to or ‘top up’ wages for the hours that a furloughed employee does not work; however, they will still need to pay employer National Insurance Contributions and pension contributions for these hours.

A wider Covid-19 economic support budget, which will set out the next phase of economic support, is due to be announced on 3 March 2021. The current extension of the CJRS will provide some certainty for businesses to plan the coming months, at a time when they are increasingly being impacted by local tiered restrictions. It will also give businesses enough time to consult on any potential redundancies before the end of the CJRS.


Millions of workers in the UK will receive an increase in pay from April 2021 following a rise in the National Minimum Wage (‘NMW’) and the National Living Wage (‘NLW’).

In his Spending Review, the Chancellor confirmed that the rate rises include a 2.2% increase in the NLW, which is the equivalent of £345 extra per year for a full-time worker. For the first time, more young people will be eligible for the NLW, as the age threshold will be lowered from 25 to 23, meaning that the NLW will be the statutory minimum wage for workers aged 23 and over (whereas this currently only applies to workers aged 25 and over).

In full, the increases are as follows:

  • National Living Wage (23+) to increase 2.2%, from £8.72 to £8.91
  • National Minimum Wage (21-22) to increase 2%, from £8.20 to £8.36
  • National Minimum Wage (18-20) to increase 1.7% from £6.45 to £6.56
  • National Minimum Wage (under 18) to increase 1.5% from £4.55 to £4.62
  • Apprenticeship Wage to increase 3.6% from £4.15 to £4.30


The off-payroll working rules (IR35) will be extended to large and medium-sized companies in the private sector with effect from 6 April 2021. This reform was originally due to take effect in 2020; however, the Government decided to postpone it for a year as one of the measures designed to help businesses during the Covid-19 pandemic.

Companies that do not fall within the small exemption will be required to carry out their own determination as to the employment status of individuals engaged through personal service companies/intermediaries, will need to provide that determination to fee payers and workers and adopt a resolution process in the event of disagreement. They will also be responsible for the payment of tax and National Insurance Contributions where there is deemed employment.

HMRC released an updated version of their online checking tool (Check Employment Status Tool, or ‘CEST’) in November 2020. As with the previous version of CEST, HMRC have stated that if this is completed correctly, they will accept the determination as given by the check.


The Government is currently consulting on the use of non-compete clauses, a type of ‘restrictive covenant’. This is part of the Government’s drive to support our economic recovery from the impact of Covid-19. Given that non-compete clauses can act as a barrier by preventing employees from working for, or establishing, a competing business, the use of this type of restrictive covenant may be restricted in the future.

The Government is considering two main proposals:

  • Amending the law so that non-compete clauses are only enforceable if the employer continues to provide compensation during the restricted period. Some employers already choose to provide this, or to use ‘garden leave’ in conjunction with a non-compete clause. Applying mandatory compensation would encourage employers to consider whether the use of a non-compete clause is necessary and reasonable for that particular role before inserting it into a contract. It would also create a financial disincentive to use non-compete clauses as standard in contracts of employment, or for an unreasonable length of time, and reduce the misuse of non-compete clauses.
  • Banning non-compete clauses completely. This would mean that such clauses could not be used in contracts of employment at all.

Either change would affect the drafting of employment contracts in the future, with many employers having to revisit or update their existing contracts of employment. The consultation will close on 26 February 2021.

The Government is also consulting on a proposal to extend the ban on exclusivity clauses to lower-paid workers (with a guaranteed income less than the Lower Earnings Limited, currently £120 per week). This will stop employers restricting such workers from working for another employer. The ban currently only applies to those working under a zero-hours contract.


The transition period which started on the ‘exit day’ (31 January 2020) will come to an end on 31 December 2020. EU nationals who started living in the UK by this date can apply for ‘settled’ or ‘pre-settled’ status under the EU Settlement Scheme. Settled status allows the worker to stay in the UK indefinitely and will usually be granted if they have lived in the UK continuously for 5 years. If the worker has lived in the UK for less than 5 years, they can apply for pre-settled status which can become settled status at the 5 year point. The deadline for applying under this scheme is 30 June 2021.

The Government has published a policy statement detailing its plans for a new points-based immigration system from 1 January 2021. Under the new system, EU and non-EU citizens will be treated equally. The focus is on providing a route to the UK for skilled workers, and no general low-skilled or temporary work route into the UK will be introduced. Individuals wishing to come to the UK will need to be sponsored by a UK employer, who will need a licence from the Home Office in order to do so. Given that the application for a licence can take 8 weeks (or more) to process, employers who are looking to recruit outside the UK should arrange this sooner rather than later.


Finally, the Queen’s Speech in December 2019 announced that the Government is planning a new Employment Bill. Although this did not appear in 2020, it is expected to be published in 2021 and is likely to cover the following matters:

  • A single labour market enforcement agency (to ensure that vulnerable workers are aware of and can exercise their rights, and to support business compliance).
  • Tips to be distributed on a fair and transparent basis, and go to workers in full.
  • The right for all workers to request a more predictable and stable contract after 26 weeks’ service.
  • Extending redundancy protection to limit pregnancy and maternity discrimination. The Government previously announced its intention to extend 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.
  • Leave for neonatal care, to support parents of premature or sick babies.
  • A week’s leave for unpaid carers.
  • Making flexible working the default position, unless an employer has a good reason otherwise.

Several of these measures originate from the Government’s previous Good Work Plan, and we will issue a newsflash as soon as any further information becomes available to us.

If you have any questions regarding the above changes, please do contact a member of the team here.

The information on this site about legal matters is provided as a general guide only. Although we try to ensure that all of the information on this site is accurate and up to date, this cannot be guaranteed. The information on this site should not be relied upon or construed as constituting legal advice and Howes Percival LLP disclaims liability in relation to its use. You should seek appropriate legal advice before taking or refraining from taking any action.


A leading commercial law firm whose clients range from individuals and families to global businesses and government departments.

Howes Percival