A run-down of changes in employment law this April

This April will see a number of developments in the world of employment law. Not only will we see the usual increases to various statutory rates in line with inflation, we will also see the first gender pay gap reports being published from public sector employers, and changes will be made to the way in which termination payments are treated for tax. Here are the key points and diary dates for employers and HR professionals this April.

Annual increases to statutory rates

• Statutory maternity pay increases to £145.18 per week. The same rate also applies to statutory paternity pay, statutory adoption pay, maternity allowance and shared parental pay.
• National Living Wage (age 25+) increases to £7.83. The standard adult rate of National Minimum Wage (age 21-24) increases to £7.38. The development rate (ages 18-20) increases to £5.90.  The youth rate (ages 16-17) increases to £4.20 and the apprentice rate increases to £3.70.
• Statutory sick pay increases to £92.05 per week.
• The cap on a week’s pay for calculating statutory redundancy payments and various other matters increases to £508. This makes the maximum statutory redundancy payment (and basic award for unfair dismissal) £15,240.
• The cap on most unfair dismissal compensatory awards increases to £83,682 or 52 weeks’ actual pay, whichever is the lower.

Tax changes to termination payments

Currently, payments in lieu of notice (PILONs) are subject to income tax and national insurance deductions if they are paid according to a contractual right (e.g. a clause in the employee’s employment contract saying “the company reserves the right to pay you in lieu of all or part of your notice period”, or words to that effect). However in the absence of any such contractual provision, payments of this nature are generally viewed as damages for breach of contract and can be paid free of tax and national insurance up to a threshold of £30,000.

This distinction is being removed with effect from 6 April 2018. Any part of a termination payment paid on or after that date which represents ‘post-employment notice pay’ cannot be included within the £30,000 allowance and will be subject to income tax and national insurance contributions.

Matthew Clayton, employment law partner at Gloucestershire law firm Willans LLP, commented: “These new rules are likely only to increase the cost of severances for employers, because severance packages are usually negotiated by reference to the net benefit to the employee. After all, the employee’s net loss will still be the same, and therefore it is the employer which is likely to bear the financial burden of swelling the Exchequer’s purse!”

Gender pay gap reports due

Under the gender pay gap reporting rules, UK employers with 250 or more employees are now required to publish figures annually to show the gender pay gap in their workforce. While large public sector employers must publish their reports by 30 March, the first reports from private and voluntary sector employers with at least 250 employees are due by 4 April. But what do employers need to do in order to prepare for potential repercussions, as the transparency around pay increases?

Matthew explains: “The increased transparency will most likely lead to a greater demand for explanation. This, in turn, may be followed by an increase in the likelihood of grievances or potential equal pay claims.

“If a gap exists, it is sensible for employers to be transparent and honest about the reasons for its existence, and even if measures to address the gap need to be implemented over a long period of time, it is important that they are communicated to staff at the outset.”

Further deterrents for potential employers of illegal workers

As of this April, employers will be prevented from claiming Employment Allowance for one year if their organisation has been penalised by the Home Office for employing an illegal worker, and has exhausted all appeal rights relating to that penalty.

Please contact any of the lawyers in our Legal 500-rated employment law team for clear, straightforward advice on any of the issues outlined above.

Matthew heads our employment law team. He handles the full range of contentious and non-contentious employment law issues for clients. His particular specialisms include complex staff restructurings and employment issues concerning business transfers. Matthew is recommended by independent legal directory Chambers and Partners which describes him as ‘solutions-focused’ and ‘a solid and respected practitioner noted for his technical abilities’. He trained and worked at a City of London law firm.