National Minimum Wage / National Living WageOn 1st April 2018, the hourly National Minimum Wage (NMW) will increase to £7.83 for those aged 25 and over. Additional increases will apply to the other age brackets bringing their hourly wage up as follows: 21 to 24 – £7.38, 18 to 20 – £5.90, Under 18 – £4.20, Apprentice – £3.70. Ross says:
“This increase to the NMW will apply to all workers falling into these age brackets and will also apply to holiday and auto-enrolment pension calculations too. All employers must ensure they pay these new rates, otherwise they risk a maximum fine of £20,000 per worker.”
Automatic enrolment pensionsFrom 6th April 2018, employers may be required to increase the amount of their contributions into their automatic enrolment pension. Prior to April 2018, the auto enrolment total minimum contribution was 2%, with at least 1% being paid by the employer. In April 2018, this minimum increases to 5%, of which at least 2% must be paid by the employer. Ross comments:
“This is the second of three increases to the minimum total contribution levels. As of 6th April 2019, this will rise to 8%.
“Employers will need be keep on top of these changes and will need to plan their budgets accordingly. It is also important that employers ensure that they inform their employees of any changes in advance of them being implemented.”
Other Statutory Rate increasesEmployers should also be aware that there will be increases to the statutory rates for Maternity, Paternity, Adoption and Shared Parental Pay. The current weekly rate is £140.98, or 90% of the employee’s average weekly income, whichever figure is lower. From April 2018, the statutory rate is increasing to £145.18 (or 90% of the employee’s average weekly income if this figure is less than the statutory rate). Statutory Sick Pay will also be increased; the weekly rate will rise from £89.35 to £92.05.
Taxation of termination paymentsThe treatment of termination payments will change from 6th April 2018. From then any payment in lieu of notice, whether contractual or not, will become fully subject to tax and National Insurance Contributions. Also, from April 2018 all redundancy and notice payments above £30,000 will be subject to both tax and National Insurance Contributions. Previously, these payments were only subject to tax. Ross comments:
“This will have a significant impact on employers and the cost of providing termination packages for employees. Employers will need to consider whether they need to compensate for the increased cost to employees, who will suffer additional tax and National Insurance Contributions after April 2018.”Ross finishes:
“2018 is proving to be a very busy year on the employment law front. As we’ve seen, these are just some of the significant changes occurring this year which employers must comply with.
“At Tallents Solicitors, we understand that this can be a confusing and complicated area of law for employers to stay aware of. That’s why, if any employers have concerns regarding the areas raised in this article, then our employment law specialists at Tallents can advise and support you.”