National living wage

On 1 April the National Living Wage will become law.

Employees aged 25 or over, who are not in the first year of an apprenticeship, will be legally entitled to be paid at least £7.20 per hour - an extra fifty pence per hour more than the National Minimum Wage. The Government is committed to increasing this every year, so by 2020 the rate will be more than £9 per hour.

Anyone under the age of 25 will continue to be paid the National Minimum Wage.

Exclusivity in zero hours contracts 

New regulations came into force on 11 January 2016 which are designed to ensure that individuals who are engaged on zero hour contracts are not prevented from working for other employers.

The new regulations ensure that employees should not be treated detrimentally or dismissed if they work for someone else in breach of a contractual “exclusivity clause”, which are now considered unenforceable. There is currently no guidance in relation to whether this protection extends to an implied term of exclusivity, i.e. where although there is no express contractual provision, an employer requires exclusivity in practice.   The general view is that it is likely that the new provisions will be interpreted by the courts to protect employees in this situation.

If an employee is dismissed because they work elsewhere, the dismissal will be automatically unfair. There is no qualifying period required to bring such an unfair dismissal claim. It applies from day one of employment.

Trade Union Bill

The controversial Trade Union Bill is currently at the Committee stage in the House of Lords and has also been the subject of three consultations which have now closed. The most recent consultation outcome, on ballot thresholds in important services, was published on 21 January 2016.

The key proposed reforms include.

  1. Increasing ballot thresholds so that industrial action must be supported by 50% of the employees who vote in a ballot and at least 50% of employees who are eligible to vote have taken part in the ballot.
  2. Introducing a more stringent ballot threshold in important public services such as transport, education and health so that industrial action must be supported by 40% of all employees who are eligible to vote. Ballots must be run under the 40% threshold where a majority of workers involved are carrying out an important public service.
  3. Extending the notice of industrial action required to be given to employers to 14 days
  4. Allowing employers to use agency staff to cover for striking employees. This will potentially mean that employers can mitigate the disruption caused by strike action by the use of agency staff.
  5. The ballot paper will have to have a clear description of the trade dispute and the planned industrial action.
  6. A requirement for pickets to be supervised by a named official, potentially enforceable through injunction.

The new legislation is expected to be implemented by the summer of 2016.

Consultation on Public Sector Exit Payments Recovery Regulations

The Small Business, Enterprise and Employment Act 2015 introduced a requirement for high-earning employees in the public sector who receive an exit payment on termination of their employment to repay the money where they return to the same part of the public sector within 12 months.

The consultation now seeks views on amendments to the proposal, including extending the requirement to repay the money where the employee returns to any part of the public sector; and reducing the earnings threshold from £100,000 to £80,000 per annum.

The Regulations are due to come into force in April 2016.

Consultation on taxation of termination payments

The government is in the process of considering the responses to a consultation on its proposal that all future payments related to the termination of employment will be subject to income tax and national Insurance contributions. It is proposed that there should be two notable exceptions to this new approach:

  • Redundancy payments – but the tax-free element will be reduced considerably, see below.
  • Payments awarded by an employment tribunal in respect of unfair and wrongful dismissal, and discrimination.

The proposals are likely to have a major impact on the way both employers and employees approach an agreed termination of employment.:

  • Employees are likely to demand increased termination packages to reflect any reduction in net settlement pay
  • Employers may incorrectly label a dismissal as “redundancy” in an attempt to maintain the tax advantages for both parties
  • An increase in the number of claims progressing to an employment tribunal hearing as employees have a tax-related advantage in receiving an award from a tribunal, which will incentivise them to pursue a claim and reduce the prospect of an “out of court” settlement

If the proposals are successful this will mean that all payments made in connection with termination would, as a starting point, be treated as earnings subject to tax and NIC.

The consultation has now closed and a summary of responses is expected later this year. 


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