Looking ahead, April is typically the month where most updates to legislation are implemented.
Whether you are an employer or employee it’s important to keep abreast of changes to statutory payments, parental entitlements or contract changes.
Briony McDermott, solicitor at Wake Smith, looks at some of the most important changes to be aware of.
Changes to the Taxation of Termination Payments
Following on from the changes made to the taxation of payments in lieu of notice (PILON payments) which were made in April 2018, with effect from 6 April 2020, class 1A employer National Insurance Contributions (NICs) will be payable on any part of a termination payment that is subject to income tax.
It is widely known that termination payments up to £30,000 are exempt from income tax. Prior to 6 April 2020, no NICs were payable on termination payments over the £30,000 threshold, but this is set to change, and from this date, employer NICs at 13.8% will be payable on any termination payment exceeding the threshold.
All settlement payments will continue to remain exempt from employee NICs.
Ultimately this will increase the cost of termination payments to employers, as for any termination payments over £30,000 the additional liability to NICs will need to be factored in.
Off-payroll Working
It is intended that from 6 April 2020 all payments made by large and medium sized businesses to Personal Service Companies (PSCs) will be treated as payments of employment income on which the instructing company must account for tax. This change will have the effect of shifting responsibility for IR35 tax compliance from the PSC to the instructing company.
Whilst this proposal is currently under review, with the closing date for consultation being mid-February, there has been no confirmation that the implementation date is to be pushed back, so employers should continue to prepare for the changes to be brought into effect.
Parental Bereavement Leave and Pay
From 6 April 2020, all employees who lose a child under the age of 18, or suffer a stillbirth after 24 weeks of pregnancy, will be entitled to 2 weeks' statutory leave to be taken either in one block or as two separate blocks of a week.
Employees who have accrued 26 weeks' service and meet the minimum earnings criteria, will also qualify for Statutory Parental Bereavement Pay, which will be paid at the same rate as Statutory Paternity Pay.
Contracts of Employment
From 6 April 2020, employees will be entitled to a more comprehensive terms and conditions of employment document, which should be provided to them prior to the commencement of employment rather than within the first two months of employment. The right to a statement of terms and conditions will also be extended to workers for the first time.
Statutory Payments
The new rates of statutory payments have also been confirmed. The following rates of statutory pay are to apply from 5 April 2020:
- Statutory Sick Pay (SSP) will be payable at £95.85 per week, an increase from £94.25.
- Statutory Maternity Pay (SMP) and maternity allowance (MA) will be payable at £151.20 per week, an increase from £148.68.
- Statutory Paternity Pay (SPP) will be payable at £151.20 per week, an increase from £148.68.
- Statutory Shared parental Pay (ShPP) will be payable at £151.20 per week, an increase from £148.68.
- Statutory Adoption Pay (SAP) will be payable at £151.20 per week, an increase from £148.68.
The annual National Minimum Wage increases have also been announced, which will also apply from 1 April 2020:
- The current National Living Wage for those aged 25 and over will increase from £8.21 to £8.72 per hour.
- The National Minimum Wage for those aged 21 to 24 will increase from £7.70 to £8.20 per hour.
- The National Minimum Wage for those aged 18 to 20 will increase from £6.15 to £6.45 per hour.
- The National Minimum Wage for those aged 16 to 17 will increase from £4.35 to £4.55 per hour.
- The apprentice rate will increase from £3.90 to £4.15 per hour.
Contracts of employment will be covered at Wake Smith’s next HR Forum with Brewster Partners at the AMP Technology Centre in Rotherham on Wednesday March 11 from 12-2pm, click here for more information.
For information on employment law please contact Briony at [email protected]
