EMPLOYMENT

New Financial Year Brings New Rules

The commencement of the new financial year on 6th April has seen the introduction of a number of important financial and taxation changes which HR professionals and those responsible for employment matters within your business must be aware of.

In this month’s update we run through the most significant changes introduced and the implications for those dealing with employee terminations;

National Insurance Contributions Payable on Termination Payments Exceeding £30,000

From 6th April employers will be liable to pay National Insurance Contributions on any part of termination payments which exceed the £30,000 income tax exemption. Government guidance has indicated that such payments are likely to be collected in ‘real-time’ as part of an employers normal payroll return to HMRC.

Payments in Lieu of Notice

Prior to 6th April 2018 it was not uncommon for employers to prematurely terminate an employee’s employment in breach of contract, thereby meaning notice payments could fall within the £30,000 income tax exemption on termination payments provided within Sections 401 to 403 of the Income Tax (Earnings and Pensions) Act 2003.

To curb this practice the distinction between contractual and non-contractual payments in lieu of notice (PILONs) has now been removed. From 6th April Employers will be required to identify the amount of pay that an employee would have received if they had worked their notice period regardless of whether they in fact worked for the entirety of same. The amount will be treated as ‘earnings’ and will not be subject to the £30,000 income tax exemption.

The Employment Rights (Increase of Limits)(No2) Order (Northern Ireland) 2018

On 30th March the Department of Economy filled the void created by the absence of an Assembly by passing The Employment Rights (Increase of Limits) Order (Northern Ireland) 2018 which came into force on 6th April 2018.

This Order increases limits which an Industrial Tribunal can award for a range of employment rights including statutory redundancy payments, the basic and compensatory awards for unfair dismissal claims and the minimum basic award for unfair dismissal in certain cases.
The main changes are as follows;

-The maximum amount of “a week’s pay” for the purpose of calculating a redundancy payment or for various awards including the basic or additional award of compensation for unfair dismissal has been increased from £500 to £530.
-The limit on the amount of compensatory award for unfair dismissal has been increased from £79,100 to £83,847.
- The minimum amount of a basic award of compensation has been increased to £6,442.

The increases apply where the event giving rise to the entitlement to compensation or other payment occurs on or after 6th April 2018.

If you require employment law advice or guidance please contact Millar McCall Wylie on 02890200050 and ask to speak with a member of our Employment Team. 

 

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