Important changes to employment rates

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.