Key employment law changes this April | What do employers need to be aware of?

A number of employment law changes have come to force this April.  We highlight the key dates and changes below:

First gender pay reporting date passes

Surrounded by much publicity, 4 April was the final date for employers with 250 or more employees to upload their gender pay gap statistics for 2017 to the government portal and publish them on their website.  Whilst at the end of March just over 6,000 employers had uploaded their data, this has now risen to over 10,000. Notably, this includes at least 255 employers who have declared less than 250 employees, emphasizing that smaller businesses are taking this issue as seriously as larger employers.

However, 4 April is not the end of the story.  Those employers who have reported must now ensure that they follow through on any initiatives they have identified to close the gender pay gap, as well as investigating what other measures may be appropriate. Indeed, 5 April marked the 'snapshot' date for the gender pay data that employers must report on by 4 April 2019 – leaving no room for employers to sit back.  The Equality and Human Rights Commission has also indicated that it is taking compliance seriously – those employers who have yet to report, should now look to do so as soon as possible, whilst those who have should ensure that they are comfortable that they have reported correctly.  

Significant changes to taxation of termination payments

Significant changes to the tax treatment of termination payments apply from 6 April 2018.  In essence, the new rules treat all employment contracts as though they contain a payment in lieu of notice (PILON) clause, so that the basic pay the employee would have received during the notice period will be taxed as earnings (subject to income tax and employee’s and employer’s national insurance contributions (NICs)).  A statutory formula is used to calculate what part of a termination payment must be treated this way (with the £30,000 exemption remaining potentially available for any balance which is genuine compensation for loss of office). The new rules will apply where both employment is terminated and the termination payment is made on or after 6 April 2018.

Employers will need to ensure they are on top of the new rules, not only to manage the expectation of employees looking to maximise the £30,000 exemption but also to ensure that the formula is applied correctly.  This will involve understanding some new terminology, such as the “post-employment notice period”.  In the light of these tax changes, the inclusion of PILONs in employment contracts may become more common, and standard settlement agreement terms dealing with taxation should also be reviewed. 

With effect from the same date, payments for injury to feelings will be placed outside the exemption for injury payments (except where the injury amounts to a psychiatric injury or other recognised medical condition). Foreign service relief for UK resident employees has also been abolished (except in relation to seafarers). 

Increases to minimum wage rates

From 1 April there are increases to the national living wage and minimum wage rates as follows:

Age                 Rate

25 and over:    £7.83

21 to 24:          £7.38

18 to 20:          £5.90

Under 18:         £4.20

Apprentice:      £3.70

Given the government's continued focus on national minimum wage enforcement, it will be important to ensure that these new rates have been factored into pay rates accordingly.

Increases to statutory pay rates

The level of statutory maternity, adoption, paternity and shared parental leave increased to £145.18 per week on 1 April and on 6 April, the statutory sick pay increased to £92.05 per week.

Compensatory and basic/statutory redundancy awards

6 April 2018 saw a rise in the maximum compensatory award for unfair dismissal, from £80,541 to £83,682, and the maximum amount of a week’s pay, used to calculate statutory redundancy payments and various awards, including the basic and additional awards for unfair dismissal, from £489 to £508.

Changes to child-care allowance delayed

The government has agreed to a six month extension of the workplace childcare voucher system being kept open to new entrants after Labour used a parliamentary procedure to a force a vote on a series of changes. The employer-backed voucher schemes are being replaced by a new system of tax-free childcare (leaving voucher schemes only available to existing members).  The Guardian has reported that the delay on the abolition of childcare vouchers could lead to the policy being abandoned altogether, although the government has not made any indications in this respect.