Taxation of termination payments
Changes in the way in which termination payments are taxed will come into force from 6 April 2018.
The key changes are:
• Currently, if an employer makes a “payment in lieu of notice” or “PILON” to an employee who is leaving, and there is no right in the employee’s contract for the employer to make this payment then, broadly, the payment is allowed to be made without deductions for tax and national insurance contributions, up to £30,000. However, from 6 April 2018 this will no longer be the case. Notice pay, whether or not there is a PILON in the contract, will be taxable and subject to National Insurance contributions.
• Currently, the first £30,000 of a non-contractual termination payment is free from deductions for tax, and no national insurance contributions are due. From 6th April 2018, non-contractual termination payments up to £30,000 will still be free from deductions for tax where there is no notice element. Whilst payments above £30,000 will be subject to employer’s national insurance these will still be exempt from employee’s national insurance.
Increase in compensation limits
These increases are particularly relevant to redundancies made on or after 6 April 2018 as the maximum amount for a weeks’ pay will increase to £508 per week (from £489). Additionally, the maximum compensatory award for unfair dismissal will rise to £83,682 (from £80,541) where the effective date of termination is on or after 6 April 2018.
The European Commission has launched an online tool to help businesses understand the General Data Protection Directive (GDPR), which will come into play on 25 May 2018. The main points to note are: • The definition of “personal data” will be broader; • Individuals will have a right to request that their data is erased, if there is no need for the organisation processing it to continue to do so. This is known as the “right to be forgotten”; • There will be stricter rules for obtaining consent from individuals before processing their data; • The maximum fines which can be imposed on organisations for breaching data protection will significantly increase. Further information on this can be found on the ICO website: https://ico.org.uk/for-organisations/guide-to-the-general-data-protection-regulation-gdpr/
The Government has accepted that there is a lack of certainty over employment status and has begun discussion on the test for employment status and how it could be defined in legislation.
Disability Knowledge of disability: the Court of Appeal has clarified in Donelien v Liberata UK Limited that the duty to make reasonable adjustments does not apply when an employer does not know,and cannot reasonably be expected to know, that an employee is disabled at the relevant time. Disability discrimination – sickness absence: dismissing a disabled employee for exceeding the company’s sickness absence policy could potentially be indirectly discriminatory. Employers will need to ensure that any warnings or dismissals are justified and that they have complied with the duty to make reasonable adjustments (Ruiz Conejero v Ferroser Servicios Auxiliares). Perceived disability: the EAT has held, in Chief Constable of Norfolk v Coffey, that a police officer suffered direct discrimination because of a perceived disability when she was turned down for a transfer because of concerns that her hearing may deteriorate further, and she may end up on restricted duties.
Shared Parental Leave and Pay
The Shared Parental Leave and Pay (Extension) Bill was introduced on 21 February 2018. Self -employed contractors will be entitled to shared parental leave and pay, enabling them to take paid and unpaid leave more flexibly following the birth or adoption of a child. The introduction of the Bill follows the recent launch of the government “share the joy” campaign which aims to improve the uptake of shared parental leave by new parents. The Bill is a Private Members’ Bill and its second reading is scheduled to take place on Friday 11 May 2018. Date to be confirmed: Shared parental leave to be extended to grandparents: Shared parental leave is to be extended to allow grandparents to take time off work to care for their grandchildren. The new system will allow a mother to share her maternity leave with a nominated working grandparent. Gender pay gap reporting for private companies: 4th April 2018 Regulations require employers in the private sector with at least 250 employees to publish, by 4th April 2018, gender pay information.
Working time – rest breaks
The EAT has held in Crawford v Network Rail Infrastructure Ltd that the length of the 20-minute rest break required for workers under The Working Time Regulations is crucial and cannot be met by a number of shorter breaks totalling 20 minutes. The length of the break is crucial and if this is not met, an employer will be deemed to be in breach of The Working Time Regulations.
While we take every care to confirm the accuracy of the content in this edition, it is not legal advice. Specific legal advice should be taken before acting on any of the topics covered. If you would like to discuss any of the above or any other aspect of employment law, please do not hesitate to call us on 0161 667 6100.
Taxation of termination payments