The most critical time of the year, where new legislation changes are introduced, is the month of April.
Are you prepared and well aware of the upcoming changes in employment law?
1. Introduction of the national living wage
The living wage is a minimum hourly wage needed to cover food, clothing and housing. Starting April 1st, workers who are 25 or older will be earning a £7.20 hourly wage, an amount that the government is committed to increase every year. Those under 25 years old will receive a minimum wage of £6.50 per hour and will be reviewed in October 2016. To check eligibility workers can use the simple calculator.
2. Harsher fines for employers who don’t comply with minimum wages (April 1st)
Penalties double for employers who underpay national minimum or living wages.
Being uncooperative with a compliance officer, in answering questions, and creating false records may lead to criminal prosecution.
3. Introduction of a new state pension scheme; contracting out is invalid (April 6th)
The pension system, as we know it, is comprised of two parts:
- the Basic State Pension
- the additional State Pension (S2P), which includes:
- earnings pension (State Earning Related Pension Scheme/SERPS)
- pension credit (low income benefits )
A single state pension will replace the current basic & additional state pension.
Until now, employers had the option to provide an occupational pension scheme, “contracting out” of the additional State Pension and qualifying for a rebate on National Insurance Contributions rates for employers and employees. The UK government will introduce a simple, unbiased system where all employees will pay a flat rate of NICs, regardless of membership in an occupational pension scheme. This way, everyone will have a clear picture of what they will receive as a state pension.
4. Elimination of employer NICs for interns younger than 25 (April 6th)
High quality apprenticeships will be more accessible than ever. In enforcing this measure, the Government supports employers by removing the NICs on employee earnings and encourages youth employment.
5. Requirement to repay public-sector exit payments
Exit payments are given as part of a termination arrangement for:
- Redundancies (compulsory or voluntary)
- In lieu of notice
- Pension reductions for early retirement
- Severance (part of a settlement agreement)
Employees earning £100,000 or more annually must pay back their exit payments if they return to public sector employment within the year. Under the new law, a statutory cap of £95,000 is applied to exit payments.
6. Penalties for not paying tribunal awards (April 1st)
Failure to pay employment tribunal fees, costs, awards and settlements will end up in a penalty reaching 50% of the amount owed. Penalties range anywhere from £100 to £5,000 but employers may qualify to pay half the amount within 14 days after the notice date.
7. Introduction of new salary requirement for Tier 2 workers (April 6th)
When there is a proven shortage of skilled workers in the UK, international companies transfer them over. The minimum salary for skilled foreign workers (coming to the UK for employment & sponsored by their employers) is £35,000.
8. Frozen statutory family-related and sick pay rates
Statutory parental (£139.58 /week) and sick pay rates (£88.45/week) will remain unchanged due to a decline in the Consumer Prices Index.
9. Mandatory reporting of gender pay gap
The Government aims to tackle the complex drivers of the pay gap to promote gender equality and ensure men & women are fairly rewarded in every organisation. Employers of large businesses (over 250 employees) must publish mean & median salaries between male and female employees. Other factors to be taken into consideration are:
- Education
- Job / industry
- Position
- Work experience levels
- Length of work week
- Breaks in employment
An employer’s reputation may be affected by the published information.
10. Abolition of dispensations (April 6th)
Dispensations are agreements settled with HMRC on benefits and expenses provided to employees without:
- reporting to HMRC
- deducting tax and National Insurance
With the new process:
- dispensations will no longer be granted
- allowable expenses will be exempt from income tax
This is a great burden to employers, though, since they will be accountable for:
- applying the correct tax to all expenses paid
- keeping records of all payments
So, under the new legislation, it’s vital for employers to:
- retain evidence of compliant dispensations already granted by HMRC. Otherwise, HMRC can annul dispensations for up to 4 years after the end of the tax year.
- re-apply to HMRC for approval on allowed expense rates (ex. subsistence & overnight stays). Otherwise, the rates will no longer be valid and the amount will be subject to Tax and NIC.
- have compliant processes in place, applying the correct tax treatment and ensuring accurate payments/reimbursements (when necessary). Otherwise, employers may eventually face consequences.
