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By Annika Neukirch, Trainee Solicitor

With the coming of spring there are a number of changes to employment law. Stronachs’ David Chalmers previously explained the introduction of the National Living Wage from 1 April. Other changes coming into force this spring are increases to the maximum compensation amounts and redundancy payments, and the introduction of penalties for employers in relation to unpaid tribunal awards and settlements. Looking further into the future, the Budget 2016 outlines the plans to introduce employer national insurance contributions in relation to termination payments.

Compensation Limits

With effect from 6 April, the maximum compensatory award for unfair dismissal will increase from £78,335 to £78,962. The cap on a weeks’ pay, which is used to calculate not only the basic award in relation to unfair dismissal claims but is also key to calculating statutory redundancy payments is also increasing, from £475 to £479. Any employer currently carrying out a redundancy exercise should ensure that their calculations have taken the increases into account in so far as the relevant date of dismissal is on or after 6 April.

Penalties for Unpaid Tribunal Awards and Settlements

Once the time for appealing a decision or award by an employment tribunal has expired, employees will be able to use a new procedure from 6 April to enforce such an award. Employers will first be issued with a warning notice giving them 28 days to pay the outstanding sum. If the sum is not paid within the required time frame, a penalty notice may be issued. The penalty is paid to the Secretary of State and will be 50% of the unpaid relevant sum. This is subject to a cap of a maximum of £5,000 and a minimum of £100. In addition the employer has the opportunity to reduce this penalty by half if they pay both the unpaid sum owed to the claimant and the penalty within 14 days of issue. Employers also have a right to appeal the new penalty notices if they believe that the notice was issued incorrectly, the amount payable is wrong, or that it was unreasonable for the notice to be issued. It is important to ensure that, if no appeal is going to be pursued, awards are paid on time to avoid these costly penalties.

Budget 2016

Previously in this blog, Stronachs’ Anya Duncan discussed settlement agreements and in particular, the consultation by the Government on proposals in relation to reforming the tax exemption for termination payments of under £30,000. The Government has now announced in the Budget 2016 that, with effect from April 2018, employers will have to pay NICs on any element of a termination payment that exceeds £30,000. It will continue to be the case that no employee NICs are due, and the tax and NIC treatment for sums less than £30,000 will not change. It also announced that it will introduce legislation to clarify that all payment in lieu of notice payments are taxable. These changes will clearly impact the costs of settlement for employers and these will have to be taken into account in determining whether and at what level to offer a settlement in the future.

Please get in touch with a member of the Stronachs Employment team if you have any queries about the above.

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