A number of employment law changes are coming into force on 6 April 2021 that UK employers should make note of.
National minimum wage – The annual increases in national minimum wage rates will apply, taking the minimum salary of those aged 23 or over to GBP 8.91 per hour. For further information, please see our update here.
Increase of limits of tribunal awards – The following increases in tribunal awards will take place. In cases involving dismissal, the new rates will apply where the effective date of termination falls on or after 6 April 2021.
- The limit on a week’s pay will increase to GBP 544 (from GBP 538)
- The maximum compensatory award for unfair dismissal will increase to GBP 89,493 (from GBP 88,519)
- The minimum basic award for certain unfair dismissals will increase to GBP 6,634 (from GBP 6,562)
New IR35 rules – The new IR35 rules in the private sector come into force. These rules impact how contractors who are engaged through personal service companies are taxed and impose a greater administrative burden on the companies that engage them. For further information, please see our update here.
Increase in Vento bands for discrimination injury to feelings awards – The Presidents of the Employment Tribunals (England & Wales, and Scotland) have issued Presidential Guidance updating the Vento bands for damages for injury to feelings in discrimination claims. The new figures will apply for claims issued on or after 6 April 2021.
The lower band (for less serious cases): GBP 900 to GBP 9,100.
Middle band (for those cases, which do not merit a higher award): GBP 9,100 to GBP 27,400.
The upper band (the most serious cases): GBP 27,400 to GBP 45,600.
An award of over GBP 45,600 may still be awarded in the most exceptional cases.
Post-Employment Notice Pay (PENP) – An additional criterion will be required for using the simplified PENP calculation (this is where “P” and “D” in the formula are expressed in months). To date, the criteria have been:
- the last pay period was a month
- minimum contractual notice period is expressed in whole months
- the post-employment notice period is equal to the minimum notice or is otherwise a whole number of months.
In addition to the above, it will now be a requirement that basic pay is paid in equal monthly installments. Some common variable elements of pay (overtime, commission, and bonuses) are excluded from the definition of basic pay, and so employees whose pay otherwise doesn’t vary won’t be affected. However, an hourly paid employee will be affected, even if they are paid on a monthly basis. The change means that employers will need to use the standard PENP formula for these employees, which requires you to use the number of days in the last pay period as “P” in the formula. This means that the PENP figure can vary depending on whether the last pay period was one of the longer or shorter months of the year.
At the same time as making the above change, an existing HMRC alternative calculation will be put into law. This alternative calculation irons out the calendar issue we have just described for some employees, by allowing employers to use 30.42 as “P” (i.e. the average number of days per month in a non-leap year). However, the alternative calculation only applies to employees whose last pay period was a month and whose basic pay is paid in equal monthly installments (and who do not qualify for the simplified calculation because either their minimum contractual notice entitlement or their post-employment notice period is not a whole number of months).
The concept behind PENP is simple: non-contractual payments in lieu of notice should be taxed. However, the actual rules are often complex. Our team is happy to advise on any PENP queries you might have.