A Spring Clean – Important Rate Changes In April 2016

WB
Wedlake Bell

Contributor

We are a contemporary London law firm, rooted in tradition with a lasting legacy of client service. Founded in 1780, we recognise the long-standing relationships we have with our clients and how they have helped shape our past and provide a platform for our future. With 76 partners supported by over 300 lawyers and support staff, we operate on a four practice group model: private client, business services, real estate and dispute resolution. Our driving force is to empower our clients by providing quality legal advice, insight and intelligence that enables them to achieve their goals whether personal or business. We are large enough to advise on the most complex matters, but small enough to ensure that our people and our work remain exceptional and dynamic. Building relationships is at the heart of everything we do.
April 2016 sees a number of important changes to employment rates with the introduction of the National Living Wage ('NLW') and increases to compensation and redundancy limits.
United Kingdom Employment and HR

April 2016 sees a number of important changes to employment rates with the introduction of the National Living Wage ('NLW') and increases to compensation and redundancy limits.

1. National Living Wage

The NLW will take effect from 1 April 2016 and will apply to all workers aged 25 and over. The initial rate is set at £7.20 (50p above the current National Minimum Wage ('NMW') rate of £6.70 for those aged 21 and over). The current NMW rates applicable to those under the age of 25 will continue to apply and will be reviewed in October 2016.

In addition to this change, financial penalties payable by employers who underpay the NMW will increase from 100% to 200% of the underpayment due to each worker from 1 April 2016. The current maximum penalty of £20,000 per worker, remains the same.

If employers have not already done so, they must review worker pay rates and adjust accordingly to meet these new legal minimums. Commercially, a decision will also need to be made as to whether to just increase pay for those aged 25 or over or for younger workers as well. 

2. Compensation & Redundancy Caps

In respect of dismissals made on or after 6 April 2016, there will be increased compensation rates for employment tribunal claims. The maximum compensatory award for unfair dismissal will increase from £78,335 to £78,962. Dismissals for whistleblowing, unlawful discrimination and certain health and safety reasons remain uncapped. There will also be an increase to the minimum basic award for some unfair dismissals from £14,250 to £14,370.

Redundancy pay will also increase with the statutory cap on a worker's weekly pay changing from £475 to £479. As with the basic award for unfair dismissal which is calculated on the same basis, the maximum overall payment will increase from £14,250 to £14,370.

3. Not all change

Whilst this year will see an increase to a number of rates, the weekly rate of statutory maternity pay, statutory paternity pay, statutory adoption pay and statutory shared parental pay will stay the same for the 2016-2017 tax year. Although the general position is that these rates increase each year, the fall of 0.1% in the Consumer Price Index means that the current rates of £139.58 per week will be frozen.  Statutory sick pay is also frozen at £88.45 per week.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More