A number of important Employment Law changes will be taking place this April. We set out below the top ten changes that employers should be aware of.
Top 10 changes coming into force on 6 April 2017:
- Gender Pay Gap Reporting Regulations: All private and charity sector employers with over 250 employees will be required to take a snapshot of their workforce’s pay and bonuses on 5 April 2017 (and each anniversary date going forward). The employer then has 12 months to calculate their Gender Pay Gap (“GPG”) figures, publish them on their own website and also submit their report to the Government by 4 April 2018. The GPG report must show: – Mean and median gender pay gap between men and for women – Mean and median bonus pay gap between men and women (calculated over a 12 month period) – Proportion of male and female employees who received a bonus- Quartile pay distribution for men and women
Further information on GPG reporting can be found here. For help and advice about how these new rules will affect your organisation, who are your relevant employees, what is “ordinary pay” and how to put together the calculations and report then please speak to one of our Employment Team on 0118 952 7284.
- Apprenticeship Levy: All employers with an annual payroll of more than £3 million will have to pay 0.5% of their annual wage bill into a new Apprenticeship Fund. The money will be used to help fund the training of apprentices under the new Apprenticeship Scheme. Employers will be given a “digital account” and training vouchers which can then be claimed against the Apprenticeship Levy fund.Employers will have an allowance of £15,000/year to set against the amount of Levy they are required to pay. The money will be deducted monthly by HMRC along with the usual NIC’s and income tax payments. The first Levy payments are due to be taken in May 2017 and it will be up to employers to calculate their payroll and inform HMRC each month whether they are eligible to pay. Further information on the Apprenticeship Levy can be found here.
- Immigration Skills Charge: All employers who sponsor migrant workers under the Points Based System will be required to pay a fee of £1,000 per year, per migrant. This fee is reduced to £364 for small employers and charities and some exemptions to the Charge apply, such as for those migrants in PHD level roles. Further information on the upcoming Immigration changes can be found here. Please speak to our Business Immigration Team for more information.
- Increases in National Minimum Wage & National Living Wage: From 1 April 2017, the new rates will be as follows: – Workers aged 25 and over – increased to £7.50/hour- Workers aged 21-24 – increased to £7.05/hour- Workers aged 16-17 (who are not apprentices) – increased to £4.05/hour- Apprentices in first year of apprenticeship or aged under 19 – increased to £3.50/hour
- Increase in the rates of statutory payments: From 1 April 2017, the new statutory rates will be as follows:- Statutory sick pay – an increase from £88.45/week to £89.35/week- Statutory maternity, paternity, adoption, shared parental pay and maternity allowance – an increase from £139.58/week to £140.98/week – Statutory redundancy payment – an increase from £14,370 to £14,670
- Increase in the maximum awards at Employment Tribunal: From 6 April 2017, the new maximum awards will be as follows: – Maximum basic award for unfair dismissal – an increase from £14,370 to £14,670 – Maximum compensatory award for unfair dismissal – an increase from £78,962 to £80,541 – Statutory limit on a week’s gross pay – an increase from £479 to £489
- Changes to benefits under salary sacrifice schemes: From 6 April there will be restrictions on what new types of salary sacrifice arrangements can be created. Only the following kinds of salary sacrifice arrangements will be able to benefit from tax and NIC’s advantages: – Employer supported childcare – Cycle to work schemes – Ultra low emission cars- Employer contributions to registered pension schemes- Pension advice
There will be a transition period for pre-existing salary sacrifice schemes, which will continue to benefit from the tax and NIC’s advantages (provided the existing arrangement does not end, is not varied or renewed after 6 April 2017) as follows:
– Salary sacrifice arrangements entered into before 6 April 2017 will continue to benefit from tax advantages until 6 April 2018.
– Existing salary sacrifice arrangements regarding cars, school fees or accommodation will continue until 6 April 2021.
After these dates, only those salary sacrifice schemes of the type listed above will attract tax and NIC’s advantages.
- Tax free childcare scheme introduced: A new tax free child care scheme is due to be introduced on 28 April 2017. Replacing the existing childcare vouchers scheme, the government will make a 20% contribution (up to a max of £2,000 per year) towards the cost of childcare. The scheme will initially be rolled to the youngest children first and is intended to be applied to all parents by the end of 2017.
- Changes to the intermediaries rules (IR35): The changes are to crack down on perceived tax avoidance in which workers avoid paying income tax and NI contributions by supplying their services through a third party and paying themselves a dividend. These changes will only apply to public sector employers at this point. The new rules will make the public authority (or other third party or agency who pays the intermediary) responsible for assessing whether rule IR35 applies to the engagement and, if it does, then they (e.g. the public authority or service company) will be liable for the deduction and payment to HMRC of any income tax or NI contributions. They will also be responsible for paying employer secondary Class 1 NIC’s.
- Brexit: The Prime Minister is due to trigger Article 50. This will begin the two year exit process from the EU. However we are not expecting any drastic upheavals in employment law the medium term. It is expected that Parliament will enact some form of Great Repeal Bill, incorporating all EU legislation into UK law at the point of the UK’s exit from the EU. Employment law is not a priority area for reform but we may see changes over time as the primacy of EU law ends and new UK legislation and case law is developed.
These changes in the new tax year are expected to bring a number of challenges for employers. In particular, there is an increased financial burden on larger companies and those recruiting employees from outside the EU in the form of the Apprenticeship Levy and Immigration Skills Charge. These are both designed to increase investment in up-skilling the UK workforce, but these along with the increases in NMW/NLW it will put added pressure on employer’s budgets.