Employment law changes from April 2016: what employers need to know
Introduction of the National Living Wage
The National Living Wage comes into force on 1 April 2016. Workers aged 25 and over will be entitled to the National Living Wage rate of £7.20 per hour from the first pay reference period beginning on or after 1 April 2016. So, for example, if an employer’s monthly payroll period begins on 15 April 2016, the National Living Wage rate will apply from that date, because this is the first pay reference period that begins on or after 1 April 2016. The employer does not have to pay workers the National Living Wage for the period from 1 April to 14 April 2016.
Where salary sacrifice arrangements are in operation, employers need to check that employees’ pay does not fall below the increased rate of pay required by the National Living Wage.
Strengthening of National Minimum Wage compliance measures
From 1 April 2016 the penalty for employers for non-compliance with the National Minimum Wage will double to 200% of the total underpayment owed to each worker (up to a maximum of £20,000 per worker), unless the arrears are paid within 14 days. The same enforcement regime will also apply for non-payment of the National Living Wage.
A new penalty of disqualification from being a company director (for up to 15 years) for failure to pay the National Minimum Wage and/or National Living Wage is also being introduced on 1 April 2016.
Introduction of a new state pension scheme – no more “contracting-out”
A single-tier state pension is being introduced from 6 April 2016, and this will replace the previous basic state pension and additional state pension.
As a result, pension schemes provided by employers will no longer be able to contract out of the state pension and receive a National Insurance rebate, which means that for schemes that were previously contracted out the employer and employee National Insurance contributions will increase. Employers who operate contracted out pension schemes need to make employees aware of this and any impact on their pay.
The abolition of employer National Insurance contributions for apprentices under 25
To encourage employers to create more apprenticeships, from 6 April 2016 employers’ National Insurance contributions for apprentices under 25 will be abolished. This means that employers will no longer have to pay Class 1 National Insurance contributions on any earnings up to the upper earnings limit applicable to apprentices under 25.
Introduction of financial penalties for non-payment of Employment Tribunal awards
Research showed that less than half of Tribunal claimants who had been awarded compensation received the full award from the employer.
To try to address this, from 6 April 2016 a financial penalty can be imposed on an employer who fails to pay an Employment Tribunal award of compensation, or a settlement reached through Acas under a COT3 agreement. The penalty will be 50% of the unpaid sum, subject to a minimum of £100 and a maximum of £5,000, although if the employer pays both the unpaid sum to the claimant and the imposed penalty within 14 days of the penalty notice, then the penalty will be reduced by 50%.
Increase in a week’s pay
On 6 April 2016 the cap on a week’s pay for the purposes of calculating a statutory redundancy payment increases from £475 to £479. The maximum statutory redundancy payment will therefore increase to £14,370.
The increase in a week’s pay will also apply to the calculation of the basic award in unfair dismissal claims.
No change to statutory family-related pay and sick pay rates however
Statutory adoption, maternity, paternity and shared parental pay rates and statutory sick pay generally increase each April, but the rates have been frozen at £139.58 per week for family-related pay and £88.45 per week for statutory sick pay for the time being.
If you need advice on any of these employment law changes, please contact Helen Kay on or .
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