What are the key developments for Employment Law in 2016?

  • New National Living Wage to be introduced

From 1 April 2016, the government will introduce a new mandatory National Living Wage (NLW) for workers aged 25 and above, initially set at a rate of £7.20 – a rise of 50p relative to the current National Minimum Wage (NMW) rate. That’s a £910 per annum increase in earnings for a full-time worker on the current NMW.

The current NMW rate of £6.70 will continue to apply for those aged 21 to 24.

Employers should also be aware that Regulations are to be introduced under the Small Business, Enterprise and Employment Act 2015 to increase the penalty for underpayment of the NMW. Employers paying below the minimum wage currently face a fine equal to 100% of the underpayment owed to each worker; however, this will double to 200% of the arrears owed if the debt is not cleared within 14 days. The maximum penalty will remain at the rate of £20,000 per worker (the entire fine was previously capped at £20,000).Employers paying below the minimum wage currently face a fine equal to 100 per cent of the underpayment owed to each worker, but this will double to 200 per cent of the arrears owed if the debt is not cleared within 14 days. The maximum penalty will remain at the rate of £20,000 per worker (previously the entire fine was capped at £20,000).

  • Termination Payments may be made taxable

The Office for Tax Simplification has carried out a consultation on reforming the tax and National Insurance treatment of termination payments. The outcome of the consultation was a suggestion that all termination payments (save for some limited exceptions) should be taxable. The government intends to publish a summary of its responses to this consultation in 2016.

As many employers will already be aware, non-contractual termination payments can generally be paid tax free up to the value of £30,000. If the above changes are introduced, this could lead to a number of disputes and uncertainty regarding which payments will qualify as tax free. It also means that employers will come under pressure to ‘gross up’ termination payments which makes it less straight forward for employers who are seeking to ‘exit’ staff.

It is important to bear in mind that, currently, employees are not responsible for paying tax on an employer’s contribution to legal costs when signing a settlement agreement. However, the new proposals could result in the removal of this concession which, again, could mean that employers are faced with having to gross this up.

  • Shared Parental Leave to be extended

Following the introduction of shared parental leave, employers should prepare themselves for further developments in this area with the aim of increasing flexibility and choice for working parents. The government has proposed extending shared parental leave (and pay) to working grandparents to enable them to care for their grandchildren. This is designed to reflect the often crucial role that working grandparents play in providing childcare and supporting working families. The new system will also provide flexibility in working arrangements for grandparents without fear of them losing their job.

  • New measures to eradicate Gender Pay Inequality

Equal pay is an area which remains very much at the forefront of employment law. Although paying women less than men is unlawful, the gender pay gap still exists in many industries. In an effort to combat this, the government will make the publication of equal pay audits compulsory for private sector and voluntary organisations (public sector bodies are likely to be exempt) who employ more than 250 staff. It would therefore seem sensible for employers to start preparing for these changes as soon as possible by ensuring that equal pay audits are already carried out.

For more information or for any employment law enquiries the employment team can be contacted at [email protected] or 020 7408 8888.