Changes to employment law – April 2016

There are a number of key changes to employment law coming into effect in April 2016. Considerable attention has been given to the introduction of the national living wage; however, as I set out below, there are several other changes of which you should be aware:

1. From 1 April 2016, a new compulsory national "living wage" of £7.20 per hour will be introduced for workers aged 25 and over. The current rate of national minimum wage for workers aged 21 and over will remain unchanged at £6.70 per hour.

2. From 1 April 2016, the penalty for non-payment of the national minimum wage and the national living wage will be increased from 100% of arrears to 200% of arrears. This penalty would be halved if the employer paid within 14 days. This move follows an increase in the maximum financial penalty for employers who fail to pay their workers the national minimum wage to £20,000 per worker. Previously, there was a maximum penalty of £20,000 for a breach irrespective of the number of workers affected.

3. From 6 April 2016, employers will no longer have to pay employer National Insurance Contributions for apprentices under the age of 25 on earnings up to the Upper Earnings Limit (which will be £827 from 6 April 2016).

4. On 6 April 2016, legislation will come into force limiting the number of postponements to two for each party in an employment tribunal case and imposing a deadline for requesting postponements of seven days before a hearing. A third application by a party for a postponement (or a postponement submitted after the deadline) will only be granted in exceptional circumstances. In addition, tribunals will be required to consider a costs or preparation order where a successful application for a postponement is made after the deadline.

5. On 6 April, new legislation will come into force introducing a scheme for penalising employers who fail to pay tribunal awards or settlement sums under a COT3. The penalty will be 50% of the unpaid award, subject to a minimum of £100 and a maximum amount of £5,000. The penalty will be reduced by 50% if both the penalty and the unpaid sum are paid within 14 days of a penalty notice.

6. New tribunal compensation limits come into force on 6 April 2016. The maximum amount of a week's pay, used for example to calculate statutory redundancy payments and basic awards for unfair dismissal, will increase from £475 to £479. The maximum compensatory award for unfair dismissal will increase from £78,335 to £78, 962.

7. On 6 April 2016, a single-tier state pension will be introduced, which replaces the previous basic state pension and state second pension (SP2). Employers will therefore no longer be able to contract out of SP2 and receive a National Insurance rebate. The result is that there will be an increase in National Insurance Contributions for those employers who previously provided a contracted-out pension scheme.

8. We are expecting new regulations to come into force in April 2016 or soon after, requiring high earning public sector employees to repay some or all of their exit payments if they re-join the public sector within a year of their departure. This requirement will apply to payments for loss of employment, including severance payments and payments made to reduce an actuarial reduction to a pension on early retirement.

9. Finally, certain changes many employers would normally expect to see in April are not happening this year. Unusually, there will be no rise in the statutory rates of pay for adoption, maternity, paternity or shared parental leave. Similarly, there will be no change in the rate of statutory sick pay.