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Spring budget and April 2016 employment law changes

Several key changes to employment law come into effect in April 2016 and a number of other important future developments were announced in this…

There are several key changes to employment law coming into effect in April 2016 and a number of other important future developments were announced in this month’s budget.

We summarise the crucial employment law ‘points to note’ for HR practitioners.

April 2016 changes 

  • National Living Wage: The much anticipated and debated statutory minimum pay rate will come into force on 1 April 2016. The new higher rate of £7.20 will apply to all workers aged 25 and over.
  • Financial Penalties for unpaid ET Awards: Section 150 Small Business Enterprise and Employment Act 2015 will come into force on 6 April 2016 introducing a new scheme for penalising employers who fail to pay tribunal awards or settlement sums under a COT3.
  • New Rules on Tribunal Postponements will apply to all claims issued on or after 6 April 2016.  The limit for postponements will be two for each party in each case. A deadline for postponements of 7 days before the hearing will be introduced and the Tribunal must consider ordering a party to pay costs if an application to postpone is made after this cut-off.
  • Tribunal Compensation Limits: The maximum compensatory award for unfair dismissal and other key payment rates and limits will rise on 6 April 2016.

Spring Budget: Employment law implications 

  • Apprenticeship Levy ‘Top-Ups’: Under the proposed apprenticeship levy, employers will receive a government ‘top-up’ equivalent to 10% of their monthly apprenticeship levy contributions that will be added to their funds available to spend on apprenticeship training
  • Extension of SPL to Grandparents: The Government will consult in May 2016 on how to implement it’s commitment to extend the Shared Parental Leave regime to working grandparents. The consultation will also look at ways of simplifying the eligibility and notification requirements of the existing regime.
  • Termination Payments:  From April 2018 termination payments that are subject to income tax on amounts in excess of £30,000 will also be subject to employer NICs. Termination payments (which are not contractually due) below £30,000 will remain exempt from tax and NICs. Legislation will also be introduced to ensure that all payments in lieu of notice and some damages payments are taxed as earnings. These changes will be introduced in the Finance Bill 2017 and a future National Insurance Contributions Bill.
  • Salary Sacrifice: The Government is considering restricting the range of benefits that can be offered through salary sacrifice schemes. It has confirmed however that enhanced employer pension contributions, childcare benefits and health-related benefits (e.g. cycle to work schemes) will be unaffected. However it is important to note that childcare voucher schemes will be closed to new entrants from April 2018 and replaced with a new centrally administered regime of ‘tax-free childcare’
  • Employee Shareholders: Capital Gains Tax Limit: A lifetime limit of £100,000 on capital gains tax relief has been introduced for employer shareholder shares (issued as ‘consideration’ for entering into an employee shareholder agreement). Gains above the lifetime limit will be subject to capital gains tax in the usual way when the shares are disposed of.
  • Employing Illegal Workers: Loss of NIC Contributions: From April 2017 employers will be subject to the NICs employment allowance for a period of one year if they are subject to a civil penalty for employing illegal workers.