Employment Law Changes in April 2018 - What should my organisation be doing?

It’s that time of year again when business owners and HR professionals are busy getting to grips with impending changes in employment law.  This year is no exception and there are a number of changes to be aware of.  In this article, we consider some of the main changes that are due to come in and what steps you should be taking to prepare your business.  

1. Statutory Payment Increases

A number of forthcoming changes relate to adjustments in statutory payment rates.  HR professionals should ensure changes are made promptly and in line with the specified deadlines.  There are strict penalties for organisations’ which fail to pay employees appropriate rates of pay or other statutory payments due to employees.

Minimum Wage - As of 01 April 2018, the national living wage increased to £7.83 per hour for workers aged 25 and above.  HR professionals should ensure that this is implemented and appropriate documentary evidence is kept to evidence this. Other wage rates should also be increased as appropriate; to £7.38 per hour for workers aged 21, to 24, £5.90 per hour for those aged 18 to 20 and to £4.20 for workers under 18 who are no longer of compulsory school age.

Family-related Pay and Sick Pay - Payments of statutory maternity, paternity, adoption and shared parental pay increased to £145.18 per week for applicable weeks commencing on or after 01 April 2018.  From 06 April 2018, the rate of statutory sick pay also increases to £92.05 per week. In addition to ensuring appropriate payments are made, HR professionals should review and update their organisation’s policies and other associated documents that refer to the new rates, such as their family policies and sickness absence procedures.

Redundancy Pay - Another change coming into force on 06 April 2018 is the new limit for statutory redundancy pay.  Any employer making redundancies must pay any employees with more than two years’ service a redundancy payment, which is calculated by reference to the employee’s weekly pay, length of service and their age. The weekly pay is subject to a maximum amount, and as of 06 April this increases to £508.

1. Termination Payments

Representing a significant change in employment law are the new rules on taxation of termination payments, which also come into force on 06 April 2018.

Previously, when an employee was paid a termination payment, the tax treatment of that payment varied depending on the terms of the contract of employment.  If there was an express provision in the contract allowing the employee to be paid in lieu of notice, the payment was considered to represent wages and as such was subject to tax and national insurance contributions.  If there was no express provision in the contract, the situation would depend on what the employer’s ‘normal’ practice was.  If the employer’s practice was to usually pay in lieu, a payment in lieu of notice term was considered to be ‘implied’ into the contract, which meant the termination payment may be taxable in the same way as if there was an express provision in the contract.  If there was no express clause within the contract and no ‘implied’ term, the payment was then regarded as compensation for a breach of contract, rather than payment of wages.  This would make the first £30,000 of the payment tax free.

This change simplifies the rules so that all payments in lieu of notice, whether contractual or not, will now be taxable.  The £30,000 exemption will no longer apply to payments in lieu of notice, which represents a significant shift in how these payments are dealt with.  HR professionals should ensure that any payments made to employees in lieu of notice on or after 06 April 2018 are now taxable and there will no longer be a need to consider the express or implied provisions of the contract of employment to determine the tax treatment of the payment.

1. Gender pay gap

The 04 April 2018 is the deadline for private-sector and voluntary-sector employers to publish their first gender pay gap reports.  Public-sector employers should have already done so, with their slightly earlier deadline of 30 March 2018 having now passed.

The pay gap reporting requirements are only relevant to those employers with 250 or more employees. Any organisation falling into this category should have been preparing for this well of the impending deadline given the amount of work required to produce the reports ready for publishing.

Employers are required to upload their pay gap results to the Government’s reporting website as well as publishing the report on their own organisation website, where it should remain accessible for at least three years. 

Once the deadlines pass, employers risk facing significant public criticism for failing to do meet the reporting requirements, but also risk unlimited fines being imposed for their failure to comply.  The Equalities and Human Rights Commission has previously issued a statement confirming it would write to any and all organisations that do not comply by 09 April, from which time organisations will have 28 days to comply before an investigation takes place and an unlawful act notice is issued. Any organisations that have not yet published their reports therefore should take swift action to do so as soon as possible.

1. GDPR

Whilst the deadline is not as imminent as for the above changes, the General Data Protection Regulation (GDPR) comes into effect on 25 May 2018 and organisations should now be well underway with their preparations for this significant and far-reaching new legislation.

Organisations should be proceeding with various tasks in readiness for the implementation of the GDPR including reviewing and updating procedures to ensure privacy, preparing privacy notices for employees and others, for example job applicants, ensuring they have appropriate legal basis for processing personal data and taking steps to ensure this is done fairly and lawfully within their organisation. Whilst the GDPR is more wide-reaching than solely employee/HR considerations, there are a number of employment-specific actions that HR professionals will want to take to ensure they are compliant with this new legislation.  This is a complex and far-reaching piece of legislation, so if in doubt, specialist legal advice should be sought.

For further advice on this or any employment law issue, contact a member of the Chattertons Employment team.