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To infinity and beyond? – rates and limits increase

Published: 13th March 2018

Author: Sadia Begum

Tribunal awards

Every April, the limits on unfair dismissal compensatory awards and other employed-related payments are increased in light of inflation. We have set out below the new rates for 2018/19, which will apply for dismissal on or after 6 April 2018:

  • Maximum week’s pay (for redundancy payments and the unfair dismissal basic award) will increase to £508 from £489. This means the maximum basic award or statutory redundancy payment will be £15,240.
  • Maximum compensatory award will increase from £80,541 to £83,682.

National Minimum Wage

The draft National Minimum Wage (Amendment) Regulations 2018 were published on 6 February 2018 and they provide for the annual increase of hourly rates of minimum wage. The proposed changes will take effect from 1 April 2018 and are as follows:

  • The national living wage (workers aged 25 and over) will be increased to £7.83.
  • The standard adult rate (workers aged between 21 and 24) will be increased to £7.38.
  • The development rate (workers aged between 18 and 20) will be increased to £5.90.
  • The young workers rate (workers aged under 18 but above the compulsory school age who are not apprentices) will be increased to £4.20.
  • The rate for apprentices will be increased to £3.70.

Taxation of termination payments

As part of HMRC’s reforms for the simplification of tax and NIC treatment of termination payments, the following changes will take place from 6 April 2018:

  • The tax treatment of payments in lieu of notice (“PILON”) will no longer depend on whether there is a contractual PILON clause. Instead, all payments in lieu of notice will be treated as earnings and therefore be subject to tax and class 1 NICs.
  • Payments for injury to feelings will fall outside the exemption for injury payments, except where the injury amounts to a psychiatric injury or other recognised medical condition.

The new rules in relation to PILON will apply to terminations made on or after 6 April 2018. Any payments made for terminations in 2017/19 will be subject to the old rules, even if the payment is made in 2018/19.

With effect from 6 April 2019, it is proposed that all termination payments above the £30,000 threshold will be subject to class 1A NICs (employer liability only). This will be dealt with by the ‘National Insurance Contributions Bill’ which is expected to be published later on this year.

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