A round-up of recent employment law news and forthcoming changes

Employment Tribunal statistics

  • Most businesses are now aware that Employment Tribunal fees were scrapped in July 2017, meaning it is now free to bring a claim.
  • According to recent data from the Employment Tribunals Service, there has been an approximately 100% increase in the number of claims following the abolition of fees. This means the volume of claims is now about two-thirds of the volume preceding the introduction of fees in 2013.
  • As we previously reported, under the fee regime, employers might have made bolder decisions when handling workplace disputes. In light of the recent statistics, many employers may decide to act more cautiously moving forward. Many claimants will now take the view that they have “nothing to lose” by putting in a claim. Whilst there are steps employers can take to try to dispose of vexatious or unreasonable claims, they will still be put to management time and cost in dealing with them.

Tax on termination payments

  • From 6th April 2018, changes are being made to the way payments in lieu of notice are taxed.
  • The current position is that where an employee’s contract of employment contains a clause which allows the employer to make a payment in lieu of notice (a “PILON” clause), or where there is no PILON clause in the contract but the employer nevertheless has an automatic practice of making payments in lieu of notice to departing employees (known as an “auto-PILON”), the whole payment is subject to income tax and national insurance. That will still be the case after 6th April 2018.
  • What is changing is the rule regarding non-contractual PILONS. Currently, where there is no PILON clause in the employee’s contact, and where the employer does not have an auto-PILON practice, any payment in lieu of notice can be paid tax free up to £30,000 and is free of employer and employee national insurance contributions. Employers are often able to use this as an incentive when negotiating settlement packages with departing employees.
  • For termination payments made on or after 6th April 2018, even where the contract of employment does not contain a PILON clause and there is no auto-PILON practice, the value of the notice period which is not worked will be taxable in full and subject to employer and employee national insurance contributions. From 6th April 2018, employers will need to work out what part of a termination payment is notice pay, and be prepared to evidence this to HMRC, to avoid falling foul of the new tax rules. The £30,000 tax free exemption will only apply to that part of a termination payment which is genuinely ‘ex gratia’ and not connected to the employee’s notice period.

Rates and allowances

  • The National Minimum Wage rates will go up on 1st April 2018 as follows:
Worker's age Current rate Rate from April 2018
25+ £7.50 £7.83
21-24 £7.05 £7.38
18-20 £5.60 £5.90

Apprentices (aged under 19 or in the first year of their apprenticeship)

£3.50 £3.70
  • From 6th April 2018:
    • statutory sick pay will increase from £89.35 to £92.05 per week; and
    • the pensions auto-enrolment minimum contribution rate will change. The total minimum contribution will increase to 5%, to be made up of a minimum 2% employer contribution and a minimum 3% employee contribution. 
  • From 1st April 2018, statutory maternity pay will increase from £140.98 to £145.18 per week.