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The beginning of April brings important changes in employment law. This week, we highlight some of the most notable developments to have on your radar.

Increases to National Minimum Wage and Statutory Payments

With effect from 1 April 2018, the National Minimum and National Living Wage have increased. For workers over 25, the NLW has increased to £7.83 per hour, up from £7.50. For workers aged between 21 and 25, the NMW has increased to £7.38 from £7.05. For those aged 18 to 21, the hourly rate is up to £5.90 from £5.60. Young workers aged between 16 and 17 have had an increase from £4.05 to £4.20. The apprentice rate has risen to £3.70 from £3.50. Given that a number of employers in the hospitality sector have been in the news recently for underpaying employees by requiring them to buy certain items of clothing such as black jeans and trainers to wear to work, it is important that employers are aware of the currents rates and rules for the NMW to ensure compliance.

Other increases in statutory minimum payments include statutory sick pay, which from 6 April 2018, increases from £89.35 to £92.05 per week, and statutory maternity, paternity, adoption and shared parental pay, which increased to £145.18 from £140.97 per week on 1 April 2018. The cap on weekly pay used to calculate the statutory redundancy payment will increase to £508 from 6 April.

Gender Pay Gap Reporting

As highlighted by our previous Insight on the subject, employers with more than 250 employees must publish certain information about their gender pay gap by 4 April 2018. The BBC reported that 78% of companies who published data paid men more than women, and only 8% had no gender pay gap when using the median measure.  Beyond the headlines about sizable differentials the focus may turn to the accompanying narratives and to whether there will be any government action in response to the reports. The Equality and Human Rights Commission has also indicated that approximately 1,500 companies who should have reported data did not do so, and it will be of interest to see to what extent enforcement action against non-compliant organisations is instigated.

Tribunal Compensation Limits

The increase in the  upper limit to Employment Tribunal compensatory awards, with the maximum award rising from  £80.541 to £83,682, will be of interest to employers given the significant increase in employment tribunal claims since tribunal fees were held to be unlawful by the Supreme Court in July 2017.  The Ministry of Justice Quarterly Statistics for October to December 2017 show that the number of single claims received has increased by 90% since the abolition of fees and the number of multiple cases received has increased by 467%. It is evident that fees were a substantial barrier to claimants, and with this barrier removed, employers may wish to be more alive to the risks of claims and to take advice when dealing with situations which may turn into a litigation.

Taxation of Termination Payments

From 6 April 2018, all payments in lieu of notice made by employers will be subject to income tax and class 1 national insurance contributions, regardless of whether there is an express clause allowing the employer to pay in lieu of notice in the contract of employment. If the whole or part of the notice period is not worked, then the sum equal to the basic pay the employee would have received if they had worked this period is subject to tax and national insurance. The new rules apply to all termination payments where the termination date and the date of the payment occur after 6 April. Where there were no PILON clauses in the contracts of employment, many employers previously used tax free PILON payments to incentivise employees to enter into settlement agreements. Such negotiations will now become more costly for employers.

If you have any queries about any of the issues raised above, please contact a member of the Stronachs Employment Team.

Annika Neukirch, Solicitor

Chambers UK 2018

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