Employment Law Changes for April 2016

There are wide-ranging changes to employment law which are due to be introduced in April 2016.

1. Living wage

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.

The national living wage is a new top rate of the national minimum wage. Future changes will be recommended by the Low Pay Commission, in the same way that it makes recommendations for changes to the national minimum wage rates. The new living wage rate is not connected to the rate used by the Living Wage Foundation.

Employers should ensure that employees’ pay is not brought below the new rate by salary-sacrifice arrangements.

2. Penalties for non-payment of the national minimum wage have increased

The penalty for employers found not to have paid the national minimum wage doubles from 1 April 2016. The financial penalty imposed on employers that fail to pay employees the national minimum wage will increase to 200% of the amount by which a worker has been paid below the national minimum wage. The enforcement rule is the same for non-payment of the national living wage.

3. The rates of statutory maternity pay, statutory paternity pay, statutory shared parental pay and statutory adoption pay are frozen

Unlike in previous years, there will be no increase to statutory adoption, maternity, paternity or shared parental pay rates in April 2016. Rates are frozen as of 2015/16 at £139.58 per week (or 90% of the person's average weekly earnings if that is less than £139.58).

4. The rates of statutory sick pay remain frozen

The weekly rate of statutory sick pay remains at £88.45 for 2016/17.

5. Employer National Insurance contributions are abolished for apprentices under age 25

As part of the Government’s drive to encourage employers to create more apprenticeships for young people, from 6 April 2016, employers will not have to pay Class 1 national insurance contributions on earnings up to the upper earnings limit for apprentices aged under 25.

6. Single-tier state pension introduced

The Pensions Act 2014 introduces a new state pension for people reaching state pension age on or after 6 April 2016, replacing the previous basic state pension and additional state pension.

The rules of the new scheme:

• specify the minimum number of years of national insurance contributions or credits a person will need to qualify for any new state pension;

• specify the rate at which a person who defers claiming their new state pension will accrue an increase to their new state pension when they finally claim it; and

• end contracting out for defined-benefit schemes. The end of contracting out will mean an end to national insurance rebates for individuals and an increase in national insurance contributions for employers and employees who are members of previously contracted-out schemes. The Act gives private sector employers the power to increase employees' pension contributions and reduce pension accrual to take account of the abolition of contracting out.

All Simply-Docs employment contracts have been amended accordingly with the removal of the contracting out option and the amended contracts are available from 5 April 2016.

7. Limit on number of employment tribunal postponements comes into force

As of 6 April 2016, a limit is placed on the number of postponements and adjournments granted in an employment tribunal case.

8. Employment tribunal award limits amended

The annual increases in the limits on certain employment tribunal awards and other amounts payable under employment legislation are due to come into force on 6 April 2016.

The limit on a week’s pay which, amongst other things, is used to calculate statutory redundancy payments will increase from £475 to £479.

The maximum compensatory award for unfair dismissal will increase from £78,335 to £78,962 (provided this is lower than the additional cap on the compensatory award of 52 weeks’ pay).

The increased amounts will apply where the event that gives rise to entitlement to compensation or other payment (for example the effective date of dismissal or redundancy) occurs on or after 6 April 2016.