April 2018 sees a number of significant changes being made to a variety of employment law rules.
Effective from 1st April
Minimum wage rates to be increased
The National Living Wage (NLW) for workers aged 25 and over will increase from £7.50 to £7.83 per hour.
Other National Minimum Wage (NMW) rates will also increase:
- for workers between 21 and 24, the rate will be £7.38
- for workers between 18 and 20, rate will be £5.90
- for those workers under 18 but are above compulsory school age and not Apprentices, the rate will be £4.20; and the rate for Apprentices will be £3.70.
“Family Friendly” Payments to be increased
The weekly amount rate for maternity, adoption, paternity and shared parental leave pay will increase from £140.98 to £145.18.
Effective from 6th April
Increase to Statutory Sick Pay
SSP will to increase to £92.05 per week.
Increase to a week’s Statutory Pay
This will increase to £508 per week (from £489 per week).
This figure is relevant for employers who intend to make redundancies on or after 6 April 2018.
Statutory redundancy pay is calculated on a week’s statutory pay multiplied by an employee’s length of service and is dependent on their age.
- Employees under 22 receive half a week’s statutory pay for each year of service up to the age of 21
- Employees aged between 22 and 40 receive one full week’s statutory pay for each year of service
- Employees aged 41 and over will receive 1.5 week’s statutory pay for each complete year of service
The statutory pay figure is also relevant for employers who are defending a claim for unfair dismissal for dismissal on or after 6 April 2018 as this is the figure a Tribunal will use as a starting point in calculating an award where it agrees that a dismissal is unfair.
Taxation of termination payments
In order to protect themselves against any future claims for unfair dismissal or discrimination by employers when an employee is leaving their employment, employers will sometimes ask their employees to sign a settlement agreement. The effect of a settlement agreement is that in return for a payment being made to an employee, the employee will sign away their rights to pursue a claim against their employer in the employment tribunal.
These payments are called termination payments.
The termination payments usually comprise two elements. A payment in lieu of notice and a severance payment.
The current position is that tax is only payable on the payment in lieu of notice if an employer is contractually entitled to make that payment.
From 6 April, however, all payments which are made in lieu of notice, regardless of whether an employer has a contractual right to make the payment, will be classed as general earnings and will be subject to income tax and Class 1 NICs .
In relation to a severance payment, the current position remains unchanged and tax is only payable on the balance of a severance payment which is over £30,000.