As is standard for this time of year, there are a number of legislative changes which will take effect in April 2016 which employers should be aware of. The most publicised of these is the introduction of the National Living Wage.
Living wage
From the 1st April 2016, employers will be required to pay employees over the age of 25 the National Living Wage, which will initially be £7.20. Effectively, this becomes the new minimum wage for such employees. The rate is expected to remain the same when the minimum wage rates are subject to their annual review in October 2016, for younger employees and apprentices.
The government has also announced a range of measures to tackle non-compliance. Penalties for non-payment of the living wage (or, as the case may be, the minimum wage) will be doubled to 200% of the arrears, subject to a maximum of £20,000 per employee. However, penalties will be halved if the employer pays within 14 days. A dedicated HMRC team will have powers to refer cases for criminal prosecution and to name and shame non-compliant employers. There is also a further new penalty whereby a director of a non-compliant company can be disqualified from acting in such a capacity for up to 15 years.
Some large employers have already announced intentions to limit overtime payments or cut allowances in order to cover the additional wage costs. While all employers will have to budget to ensure that employees can be paid the new living wage, care should be taken as to what measures are implemented to achieve this. For example, some employers may aim to hire workers aged 18-24 instead of older workers as their minimum rate remains lower, which could be found to be age discrimination. Further, attention should be paid to contractual terms to ensure entitlements are not removed or significant changes made to terms of employment without consultation and in breach of contract.
Changes to statutory limits
1. Compensation limits
The maximum amount of a week’s pay for the purpose of calculating statutory redundancy payments and basic awards for unfair dismissal will be subject to a small rise from £475 to £479 from 6 April 2016.
Similarly, the statutory cap on compensatory awards for unfair dismissal will also rise from £78,335 to £78,962. Again, this will not make a great deal of difference in practice, as the cap for compensatory awards is the lower of this limit or 12 months’ salary. Therefore for most employees the cap will be 12 months’ salary.
2. Statutory payment rates
In April the rates for various statutory payments are reviewed, including those for Statutory Sick Pay and Statutory Maternity Pay, Paternity Pay, Adoption Pay and Shared Parental Pay. It appears that this year there will be no change to the current rates.
Financial penalties for unpaid awards
A further change coming into force on 6th April 2016 is the introduction of financial penalties for employers who fail to pay tribunal awards or sums due in terms of ACAS COT3 settlement agreements. On receipt of a warning letter, such employers will have 28 days to pay the sums due –including interest - or face a penalty of 50% of the outstanding sum, subject to a minimum of £100 and a maximum of £5,000.
It is not currently clear how this procedure is initiated and whether the unpaid claimant will have to make an application to begin enforcement proceedings. It is also debatable how successful the measures will be given one of the most common reasons for non-payment is that the employer is experiencing financial difficulties. As there are uncertainties as to how the procedure will work, it remains to be seen how often such penalties will be imposed in practice. Nevertheless, it is worth remembering that potential for such penalties now exists.
Budget 2016
There were also a few employment related points announced in this week’s budget. These are not changes which will occur immediately but are also worth noting:
- Taxation of Termination payments - from April 2018 payments made on termination of employment over £30,000, which are subject to income tax, will also be subject to employers NICs. It was confirmed that payments below £30,000 will remain tax free and all termination payments will be free from employee NICs.
- Consultation on Shared Parental Leave – the government is launching a consultation on potentially extending shared parental leave and pay to working grandparents, as well as to look at simplifying aspects of the current system.
- Salary Sacrifice – the government is considering restricting the number of benefits which can be made available through salary sacrifice. From April 2018, the childcare voucher scheme will be closed to new entrants. Existing members will be able to continue receiving childcare vouchers through salary sacrifice as long as their employer operates the scheme. The government intends to introduce a new tax-free childcare scheme which will not be operated by employers.
Contact our Employment Lawyers Glasgow, Scotland
For more information on wages and employment issues, contact our expert employment lawyers at Miller Samuel Hill Brown.
