Alongside the finance requirements, there are some key developments in employment law will take effect from the start of the month. Here, Alan Price, law director at Peninsula Employment, explains five of the most important changes small businesses need to look out for.
1. Deadline for gender pay gap reports
Whilst this issue has been in the spotlight for many months, the first deadline for publishing gender pay gap reports for private companies is 4th April 2018.
Once the deadline has passed, large companies cannot forget about this issue as it is an annual requirement; the next ‘snapshot date’ for private companies to collect pay data is 5th April 2018.
Additionally, publicity on gender pay gaps is unlikely to wane and employers may find their employees are raising more questions or complaints about their pay, and the pay of others around them.
2. Changes to taxation of termination payments
In a move to simplify the tax treatment of termination payments, the tax distinction drawn between contractual and non-contractual pay in lieu of notice (PILON) payments will be removed.
From 6th April, all PILON payments will be subject to normal deductions, e.g. income tax and employee Class 1 National Insurance Contributions, regardless of whether there is a contractual PILON clause.
Employers who pay termination payments will have to carry out a complicated calculation to split the payment in to “post-employment notice pay” or “PENP” and the remaining balance. PENP will be taxable whilst the remaining balance is tax-free up to the £30,000 threshold.
3. Minimum wage increases
Hot on the heels of nearly 180 employers being ‘named and shamed’ for underpaying staff, the increases to minimum pay rates will take effect from 1st April.
National Living Wage, the minimum rate applied to workers aged 25 and over, will increase by 4.4 per cent up to £7.83 per hour. All other National Minimum Wages will rise from the same date, with those on the apprenticeship rate receiving a record 5.7 per cent increase from £3.50 to £3.70 per hour.
Employers need to be aware of these rate increases as a failure to apply them correctly could lead to enforcement action.
4. Auto-enrolment contributions on the rise
Alongside wages, employers will be responsible for increasing the minimum auto-enrolment contributions they pay towards workers’ pensions. From 6th April, employers will have to contribute 2 per cent (up from 1 per cent) and employees have to contribute a minimum of 3 per cent (also up from 1 per cent). The minimum contributions will increase again from April 2019.
These increases are a legal requirement; a failure to increase contributions appropriately could lead to a daily fine and being publicly named for non-compliance.
5. Tribunal awards to become more expensive
Employers who lose claims at tribunal will have to pay more in compensation from April as the maximum limits on tribunal awards receive their annual update. These increases come at a time when employment tribunal claims are on the up, with claims increasing by 90% in October-December 2017 compared to the previous year.
From 6th April, the maximum award for an unfair dismissal, totalling the maximum basic and compensatory award, will total £98,922; a significant amount of money for any business.