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April’s employment legislation changes will have a big impact on employers and employees in the UK. Businesses who do not comply will face fines as well as being named and shamed, so it is essential they understand exactly what they need to do.

National Living Wage

The National Minimum Wage is the minimum pay per hour almost all workers are entitled to by law. Currently there are four different hourly rates covered under National Minimum Wage legislation:

  • £6.70 for workers 21 and over
  • £5.30 18-20 years
  • £3.87 for 16-17 years, who are above school leaving age but under 18
  • £3.30 for apprentices under 19 or 19 or over who are in the first year of apprenticeship.
From April 2016, the ‘National Living Wage’ comes into force. This is a new rate of pay for those aged 25 and over at £7.20 per hour.

Employers should consider reviewing their employee contracts and consider how they will notify employees of these changes. They should ensure that they are not only implementing these costs for those over aged 25 and over this year, but how they will keep on top of this going forward.

Statutory maternity/paternity /adoption/shared parental/sick pay

From the start of April, the rates of statutory maternity pay, paternity pay, shared parental pay and adoption pay are frozen for 2016/17 at £139.58 per week (or 90% of the person's average weekly earnings if that is less than £139.58).

The weekly rate of statutory sick pay will remain frozen at £88.45 for 2016/17, commencing on 6th April.

While employers don’t need to make any changes, these rates normally increase annually, so it is important to keep staff informed of the rate freezes. It’s also important for employers to be aware that the new government funded ‘Fit for Work’ service, provides free assessments for employees on sickness absence and advice on work-related health matters.

Employer national insurance contributions abolished for apprentices under 25

Employer national insurance contributions for apprentices under the age of 25 will be abolished with effect from 6th April 2016.

Employers should bear in mind that the current apprentice rate of £3.30 an hour is only applicable for those 19 and over for the first year of their apprenticeship. Following that first year, they will need to pay the applicable rate to the employees age.

Lower earnings limit for national insurance contributions frozen

The lower earnings limit for primary Class 1 national insurance contributions will be frozen for 2016/17 at £112 per week, from 6th April 2016.

Increase in the income tax threshold and the basic rate tax threshold

On the 6th April, the income tax personal allowance increases to £11,000 and the threshold at which employees pay basic rate tax to £32,000.

These changes mean that anyone earning up to £32,000 will pay 20% tax on earnings over £11,000, so employers will need to ensure that payroll and finance systems have adjusted to handle these changes.

Public-sector exit payments repayable and clawback regulations

From April 2016, there will be provision for regulations to be made to require the repayment of exit payments made to public sector workers. Draft regulations will make provision so that employees in the public sector with annual earnings of £80,000 or more must repay exit payments where they return to work in the public sector within one year of leaving. Termination payments to public sector executives returning to the same area of work within a short period of time could also be ‘clawed back.’ Whilst this will require extra vigilance and the need to create new systems to monitor potential claw back situations, in the long run this will benefit the public sector by tightening up loopholes with regards exit payments.

Limit on number of employment tribunal postponements and tribunal awards

From 6th April 2016, there will be a limit placed on the number of postponements and adjournments granted in an employment tribunal case. The Government will also introduce limits applying to various tribunal awards. Other amounts payable under employment legislation will be amended.

Non-payment of tribunal awards to incur financial penalty

Tribunal enforcement officers will have the power to levy a financial penalty against employers for failure to pay employment tribunal awards from 6th April.

These changes to employment tribunal will mean after a certain deadline, applications for postponements will be disallowed, and business will face financial penalties for non-payment of tribunal awards for matters which occur on or after 6th April.

By Rhian Hayes, HR consultant in the new division at EST Accountants and Tax Advisers