All ‘workers’ must be paid the National Minimum Wage (NMW) – workers may work on different contracts such as full or part-time, zero-hours, but they must all be paid the NMW.
Self-employed people are an exception to this as they work under their own contract which will define them as self-employed, setting their own rates, providing their own equipment, completing their own training and invoicing you as their customer.
The NMW rates are reviewed and typically increase each April, the rates are allocated by categories of age, length of service and apprentices. The minimum age of a person eligible for NMW is someone who exceeds the compulsory school age, there is no upper age limit.
Minimum Wage Changes For 2021
Following the Budget, it was confirmed that the minimum wage increase will go ahead as planned.
The highest rate of the NMW is the National Living Wage – currently, everyone aged 25+ must earn at least this from April 2021 – this is going to be lowered to include those aged 23+.
The New Rates From April 2021
Workers aged 23 + £8.91 per hour.
Workers aged 21-22 £8.36 per hour.
Workers aged 18-20 £6.56 per hour.
Workers aged 16-17 £4.62 per hour.
Apprentice rate £4.30 per hour.
Family Leave Rates Overview
The Government set a statutory minimum rate for those on family leave.
Employers are allowed discretion to pay more than this rate, but they must not pay less.
Family leave includes –
• Shared Parental
• Parental Bereavement Leave aka Jack’s Law.
Dependant’s leave is not legally required to be paid, it is optional, but your policy should be uniform across the board with no variation from employee to employee.
Family leave rates are increasing from 4th April 2021 from £151.20 to £151.97 per week.
The lower earnings limit, which employees must earn to be eligible for family leave and sick pay, is to remain at £120.00 for the 21/22 tax year.
Statutory Sick Pay
The Government set a minimum rate of pay for sick pay. Companies can provide a higher rate, but they must not provide less. To be eligible –
• Employees need to earn the lower earnings limit and be working under a contract that lasts for at least 3 months.
• Employees need to have been off work for at least three days, with payment commencing from day four.
From 6th April the current rate rises to £96.36
New IR35 Rules
New IR35 legislation was due to come into place in April 2020, this will now commence on 6th April 2021.
Under IR35 we‘re looking at the self-employed.
Currently, those working in the private sector are solely responsible for determining the employment status of contractors they use. This has previously provided companies the opportunity and incentive to pay the wrong amount of tax.
From April 2021, eligible large and medium-sized organisations engaging contractors through intermediary companies will also be responsible for assessing the employment status of those contractors.
Organisations will need to meet at least two of the below for these rules to apply –
• Have over 50 employees including the Directors / Owners.
• Have a net turnover in excess of £10.2m.
• Have over £5.1m on their balance sheet.
Remember that even if the above does not apply to you, it is good practice to have contracts in place which confirm the self-employed status of contractors that you are using.
If you have questions or require any advice on the changes discussed here, please contact a member of the MJB Avanti team (08000) 388 799