2021 trends in employment law - what is impacting the people agenda?

United Kingdom

Following a year of unexpected and unprecedented change in the world of work, we start 2021 looking ahead at ten employment law trends and legislative changes which we anticipate will have a significant impact on the 2021 people agenda. 

In this article, we consider the impact of Brexit and the upcoming changes to the off-payroll working rules, as well as business priorities such as workforce well-being and reliance on technological transformation. We also explore the rise of a “speak up, listen up” culture, the increased importance of ethical business practices and discuss how diversity and inclusion is taking centre stage.

1. Brexit trade deal

Whilst Brexit has been firmly on the agenda since the referendum was announced back in 2015, on 31 December 2020 the transition period came to an end.  The terms of the trade deal mean that from 1 January 2021, the UK is free to depart from EU employment law subject to the “level playing field” provisions – reciprocal commitments not to reduce the level of protection for workers or fail to enforce employment rights in a manner that has an effect on trade (with issues on this to be subject to a bespoke panel of experts procedure). We do not anticipate any significant imminent changes to employment law as a result of the trade deal because the government’s focus in the short term is likely to be on the COVID-19 pandemic.

However, there is an immediate change to the free movement of workers between the UK and the EU. EU citizens living in the UK before 1 January 2021 continue to be able to live and work in the UK but need to apply under the EU Settlement Scheme by 30 June 2021. EU citizens who now wish to move to the UK, since 1 January 2021, need to apply for a visa, and employers who wish to sponsor employees to come to the UK on a skilled worker visa need to obtain a sponsor licence. For further information on the new immigration system, please see our update on Life after Brexit.

2. Off-payroll tax rules (IR35)

The long-awaited reforms to the off-payroll tax rules (known as IR35) will take place on 6 April 2021. These changes will apply to medium and large companies in the private sector in relation to individuals providing services through an intermediary (usually, but not necessarily, a personal service company).  You can hear more about the reforms in our recent webinar Preparing for IR35 (again) – and other upcoming employment law changes.

Many businesses impacted by the changes will have already undertaken preparatory steps, including to audit their workforce and, if necessary, re-negotiated contractual arrangements. If your organisation is still in the planning stages, or requires further support, please get in touch with your usual CMS contact.

3. Business re-organisations, restructures and rightsizing

Many businesses have been adjusting their cost bases and will continue to need to ensure that their future business model is fit for purpose and rightsized. Restructuring can create significant risks for businesses, both from a legal and employee relations perspective, and can result in complaints and grievances from disgruntled employees and their representatives, as well as legal claims.

Despite the government’s Coronavirus Job Retention Scheme being extended further until 30 April 2021, with no immediate return to the workplace for many staff into 2021, the need for remote consultation about changes to terms and conditions and redundancies is likely to continue to present challenges for employers.

4. Workforce wellbeing

The events of 2020 have brought into sharp focus the business-critical need for workforce wellbeing to be a key focus area for all businesses. The significant effect that the COVID-19 pandemic has had on many people both physically and psychologically has been widely reported, with restrictions leading to increased anxiety and isolation, which is set to continue into 2021.

Employers have legal duties in relation to the health and safety of their workforce, which includes their mental health and wellbeing, and to assess the risks posed in the workplace (whether that is an office, factory, or the employee’s home). HR professionals have a crucial role in supporting the wellbeing of the workforce. More information on the steps organisations may consider can be found in our article The impact of COVID-19 and returning to work on mental health.

5. ‘Speak Up, Listen Up’ culture

In recent years, particularly in regulated sectors, workforce wellbeing has also focused on the promotion of a ‘safe’ organisational culture, where individuals feel comfortable raising complaints, without fear of retribution. Developing and sustaining such a ‘speak up, listen up’ culture has proved to be particularly challenging for many organisations in a remote working environment.

Throughout 2020, we saw a significant increase in workers ‘blowing the whistle’, not only in relation to usual business practice, but also in connection with the COVID-19 pandemic, for example, about their employers’ alleged misuse of the Coronavirus Job Retention Scheme or complaints surrounding the health and safety measures that may, or may not, have been put in place.

From both a legal and risk management perspective, and in order to promote a ‘speak up, listen up’ culture, maintaining and implementing robust policies and processes which appropriately deal with any concerns that are raised are key.  We considered the impact of remote working and the likely rise of both health and safety concerns and ‘tactical complaints’ in our article COVID-19 and whistleblowing - a double whammy for a positive speak up listen up culture?

6. Ethical business

The cultural shift driving ethical business is set to continue into 2021, with many customers and investors now increasingly focused on the business practices of the organisations with which they engage. 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.

Despite the challenges presented by the COVID-19 pandemic, ethical business remains on the government’s agenda, with proposed stricter reporting requirements and harsher penalties for compliance failures under the Modern Slavery Act 2015 and increased due diligence obligations for some organisations under the Environment Bill.

You can read more about the proposed changes in relation to modern slavery and supply chains in our recent update Modern slavery: firms face tougher stance on transparency in supply chains.

7. Diversity and inclusion

Recent social movements, such as #MeToo and Black Lives Matter, have led to an increased focus on diversity and inclusion in the workplace.  Not only does it make good business sense, but there are clear cultural and social benefits of having a diverse workforce, which we consider alongside the impact of the COVID-19 pandemic on diversity in our recent series Diversity in 2020.  

Whilst the government suspended gender pay gap reporting for 2020, studies suggest that the pandemic has already had a disproportionate impact on women’s careers, with many women bearing a higher proportion of childcare responsibilities than men and being overrepresented in jobs which were furloughed. However, some businesses have taken proactive steps to prevent disadvantage and are likely to be presenting a more positive narrative. More information can be found in The gender pay gap in a COVID-19 world.

With racial diversity on the government’s agenda, we anticipate it is only a matter of time before businesses are required to report ethnicity data. Whilst we await legislation, voluntary actions by many organisations have led to progress in ethnic diversity. We have also seen public statements of intent, for example, from investors that are no longer willing to tolerate all-white boards and are not afraid to use their voting power to push for change; we considered this in our recent update Failure to improve ethnic diversity at board level carries investment risks.

8. Technological transformation

Technological development is another example of change accelerated by the COVID-19 pandemic and is firmly on the 2021 agenda for many organisations.

Throughout 2020, businesses that have been unable to rely on direct human interactions have found new ways to deliver goods and services. Once these arrangements are no longer necessary on public health grounds, many customers may continue to prefer the convenience. The pandemic has also highlighted the fragility of a human workforce, with many organisations being challenged by absences which resulted in reduced productivity or even operations being shut down, and the associated costs. Future facing businesses are continuing to explore automation and Artificial Intelligence (AI) technologies not only to increase productivity and efficiency, but to improve many other aspects of their business operations.

Despite the clear benefits of technological transformation for businesses, there are a variety of legal considerations and risks associated with adopting new ways of working, including from a health and safety perspective. Workers should be provided with appropriate training to adapt to new techniques. Significant changes to an employee’s job role or responsibilities could amount to a breach of their employment contract and a requirement for a business re-organisation which could trigger collective consultation requirements and/or a redundancy situation.

9. Future ways of working

Throughout the UK, and beyond, businesses are grappling with the challenge of what the future world of work may look like for their organisation. Driven by the COVID-19 pandemic, the UK government has actively encouraged businesses to allow those who can effectively work from home to do so. For many organisations, whilst this has meant a significant adjustment, remote working has become ‘the new normal’. Some businesses have taken the step of disposing of their office space either partially or entirely, and others are planning for adjustments when employees return to the workplace, although it remains to be seen whether this will be full time or a ‘hybrid’ model with partial remote working.

There’s no one size fits all approach and each organisation’s response will likely vary based on both business need and culture as well as individual preference, together with a multitude of other factors. Businesses will be mindful of individual flexibility, talent recruitment and retention, team cohesion and collaboration, performance management and cost implications. From a risk management perspective, organisations should ensure that their policies and procedures are updated to reflect future ways of working. We still await the publication of the Employment Bill, but the indications (even pre-pandemic) were that this would include provisions making flexible working the default position unless an employer has a good reason although, as always, the detail will be key! We have explored some of the issues regarding the future world of work in our Rebound and Remodel: future of work series.

10. Remuneration in a remote world

Changes to the way employers engage staff and where they work will undoubtedly bring about many consequential changes for organisations.  One key issue will be workers’ remuneration structures.  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, or works remotely for part or all their working time, should businesses be maintaining 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. If employers’ exercise discretion in a capricious or arbitrary way, or act in a way which is a breach of the mutual term of trust and confidence their actions, or inaction, may result in claims for constructive unfair dismissal and/or discrimination.

If you would like to discuss any of the issues raised please get in touch with our employment team through your usual contact or at CMSEmployment.Team@cms-cmno.com