Latest employment law changes 2016
Don’t be caught out by the recent changes to employment law
April 2016 saw a swathe of new employment law come into force. To make sure you’re not caught out, here’s a quick round up of some of the important changes so you can see what might affect your business and help ensure you avoid costly mistakes.
New National Living Wage
This is, in effect, a new statutory minimum wage rate for workers aged 25 and over. Starting at £7.20 per hour and rising to £9.00 per hour by 2020.
Lower minimum wage rates already apply to workers on lower age bands, and for apprentices, and these are updated in October. You can find the current rates on the Government’s website.
Please be aware that the NLW is not related to the living wage rate used by the Living Wage Foundation, which campaigns for minimum pay levels to reflect the basic cost of living.
Our blog Is your business ready for the new National Living Wage helps you plan for the future impact of higher wage bills and potential employee relations issues.
Penalty for non payment of national minimum wage
The Government are cracking down on rogue employers found not to have paid the national minimum wage (and the new National Living Wage – mentioned above). The penalty has increased to a maximum of £20,000.
This is a steep penalty and applies to each worker who has been underpaid.
Annual Increase on Employment Tribunal awards
The calculation of a weeks’ pay and compensation limits has now increased and applies to dismissals or detriments occurring on or after 6 April 2016.
The main changes to note are:
- A week’s pay increased to £479 (previously £475)
- The maximum compensatory award for unfair dismissal increased to £78,962 (previously £78,335)
Employer NICs are abolished for apprentices under age 25
This is good news for those of you who employ young apprentices. From 6 April you are not required to pay employer national insurance contributions for apprentices aged under 25.
Minimum salary requirement is introduced for tier 2 workers
This will affect you if you sponsor skilled foreign workers under tier 2 of the immigration points system. A new requirement for a minimum salary of £35,000 is now in force. Employees from outside the European Economic Area looking to stay in the UK permanently must be earning more than £35,000 after the first five years of residence. And remember, if you employ a tier 2 worker without a right to work in the UK you face a fine of £20,000.
A new state pension scheme has now come into effect, ending contracting-out
A single-tier state pension has been introduced, replacing the previous basic state pension and additional state pension. This means employer-provided pension schemes will no longer be able to contract out of the state pension and receive a national insurance rebate.
So, if you provide a previously contracted-out scheme, its employer and employee national insurance contribution liability will increase.
You should ensure that employees are aware that there may be an impact on their pay packet and that they understand the reasons for this. Your pension provider should be able to provide you with information about your scheme and how to communicate the changes to your staff.
Upper level of qualifying earnings increase for auto enrolment purposes
From 6 April the upper level of qualifying earnings increased for auto enrolment purposes. Qualifying earnings are the gross earnings received by a worker in a pay reference period. They determine whether a worker qualifies as a ‘jobholder’ and, therefore, whether they are someone who must be auto enrolled into a workplace pension or someone who has the right to opt in.
Minimum pension contributions are assessed by reference to the jobholder’s qualifying earnings. This means that contributions only have to be paid on the earnings within a worker’s qualifying earnings band.
Gross earnings that count as qualifying earnings include:
- Salary or wages
- Statutory sick pay
- Statutory maternity, paternity, shared parental and adoption pay
The upper level of qualifying earnings will depend on how often staff are paid. If they are paid weekly from 6 April the upper level is £827 but if they are paid monthly the upper level is £3,583.
Please contact us for further information and advice on these employment law updates.