What’s coming into force this April for employers, and what is ahead in the next 12 months?

Written on 31 Mar 2016

This April sees a number of legal developments for employers:

1. A new National Living Wage

The new National Living Wage (NLW) is introduced from 1 April 2016 entitling workers aged 25 and over to at least £7.20 per hour. The penalty for underpayment of the National Minimum Wage (NMW) and now the NLW will also double to 200% of arrears (although halved if paid within 14 days). This remains subject to a maximum penalty of £20,000 per worker. The Government has published new guidance on calculating the minimum wage available here.

2. Unfair dismissal: an increase to a week’s pay and the maximum compensatory award

From 6 April 2016, the maximum compensatory award for an unfair dismissal claim increases to £78,962 (from £78,335), or 12 months’ pay, whichever is lower and the maximum amount of a week’s pay used in calculating the unfair dismissal basic award and statutory redundancy payments increases to £479 (from £475).

3. Restricting employment tribunal postponements and new penalties

For employment tribunal claims issued on or after 6 April 2016, new rules come into force limiting the ability of a party to apply to postpone a hearing. New financial penalties are also introduced for employers who fail to pay tribunal awards or settlement sums under a COT3 from 6 April. The penalty will be 50% of the unpaid amount, subject to a minimum of £100 and a maximum of £5,000. The penalty is paid to the Secretary of State.

But statutory pay rates for family leave and sick pay remain the same

There are no changes to the statutory rates of maternity, paternity, adoption and shared parental pay which are currently set at £139.58. Statutory sick pay also remains static at £88.45.

And what’s in the pipeline?

With a number of significant employment developments ahead, employers will need to plan ahead. In addition to immigration and trade union reforms which are currently proceeding through Parliament, other developments to watch for within the next 12 months include:

  • Gender pay reporting

Gender pay reporting for companies with 250 plus employees. We are currently awaiting the outcome of a consultation on draft regulations introducing gender pay reporting for companies with 250 plus employees (see here). It is anticipated that the final regulations may well come into force on 1 October 2016.

  • Simplifying taxation of termination payments

Changes to taxation of termination payments. The recent Budget confirmed that the government is proceeding with proposals to simplify the tax treatment of termination payments. Termination payments that are subject to income tax on amounts in excess of £30,000 will also be subject to employers national insurance contributions. Legislation will be introduced to ensure that all payments in lieu and certain damages payments are taxed as earnings. A technical consultation will take place this summer with a view to changes being implemented in April 2017.

  • Apprenticeship leave

The apprenticeship levy is due to come into force in April 2017. The levy will be at a rate of 0.5% of an employer’s wage bill, but an allowance of £15,000 means only employers with a wage bill of at least £3m will be caught (see here).

  • Shared parental leave for grandparents

Extension of shared parental leave and pay to grandparents. The government announced in the recent Budget that it will launch a consultation in May 2016 on how to implement its commitment to extend shared parental leave and pay to working grandparents. The consultation will also look at how the system may be streamlined, including simplifying the eligibility requirements and notification system and the potential to make better use of digital technology (see here).

  • National Minimum Wage rates

New NMW increases will take effect on 1 October as follows:

– The rate for workers aged 21 to 24 will be £6.96;
– The development rate for workers aged 18 to 20 will be £5.55;
– The young workers rate will be £4; and
– The apprenticeship rate will be £3.40.

The NLW rate of £7.20 will continue to apply to workers aged 25 and over although it has been confirmed that all NMW rates, including the NLW, will be uprated in parallel from April 2017.

  • Volunteering leave

Volunteering leave – the right for employees of public employers and large private employers to take three days volunteering leave each year – is also still in the pipeline although no specific timescale has been indicated for its introduction.