In April 2011 a number of new employment laws came into force. Affecting paternity leave and pay, taxation of termination payments, statutory sick pay rates and retirement ages, all are “must know” for employers and need early action to avoid getting caught out. Jenny Wotherspoon and Chris Stack report.
Topic: Employment
Who: UK Government
Where: UK
When: April 2011
Law stated as at: 1 May 2011
What happened:
Background
In April 2011 numerous changes were introduced to UK employment legislation.
Jenny Wotherspoon and Chris Stack summarise the key changes for employers in the marketing and advertising sectors.
Additional Paternity Leave and Pay
With effect from 3 April 2011, fathers or same sex partners may be entitled to take up to 6 months' additional paternity leave ("APL") in addition to the 2 weeks' ordinary maternity leave to which they were previously entitled. In order to be eligible for APL an employee must fulfil certain criteria, including the following:
- have 26 weeks' continuous employment as at 15 weeks before the expected week of childbirth;
- be the child's biological father or the spouse / partner (of either sex) of the child's mother;
- expect to have responsibility for the child's upbringing;
APL cannot begin until 20 weeks after the child's birth and must be taken in the first 12 months of the child's life. Employee's need to give at least eight weeks' notice of the date on which they want their APL to commence and the child's mother must have returned to work before it can do so. The employee will also need to ensure that he complies with the requisite notification and information requirements.
Additional Paternity Pay ("APP") will also be paid at the same rate as statutory maternity pay ("SMP") (see below) to the extent that the mother has not exhausted her SMP entitlement.
What should employers do now?
make sure HR/managers are aware of the rights of an individual taking APL (which are essentially the same as those of a woman on maternity leave) e.g. bonus awards, priority over vacancies on redundancy, keeping in touch days etc.
consider amendments to the following policies:
- Maternity leave;
- Paternity leave;
- Adoption leave;
- Annual leave; and
- Redundancy.
Taxation of termination payments
From 6 April 2011 payments made to a departing employee following the issue of a P45 will be taxed in full at the employee's applicable income tax rate (and not simply at basic rate as was previously the case). Any allowances due will not be taken into account and instead they must be claimed by the individual when completing his or her income tax self assessment return.
What should employers do now?
- compromise agreements which provide for a payment to be made after the issue of a P45 should not refer to deduction of tax at the basic rate. Instead the payment should be made subject to "such income tax as the employer is by law obliged to deduct" or similar wording;
- seek legal advice on any agreements which have already been entered into providing for deduction at basic rate only.
Statutory payment rates
The standard weekly payments rates for the following benefits have been increased:
- Statutory maternity pay, statutory paternity pay and statutory adoption pay have all been increased from £124.88 to £128.73 with effect from 3 April 2011.
- Statutory sick pay has also increased from £79.15 to £81.60 with effect from 6 April 2011.
Abolition of the Default Retirement Age ("DRA")
On 6 April 2011, the DRA of 65 was abolished. Save where limited transitional provisions apply, retirement dismissals from this date will be age discriminatory (unless objectively justified) and retirement dismissals will only be fair if they fall within "some other substantial reason" and a fair procedure is followed.
The removal of the DRA will have an impact on the whole employment process changing not only how employers dismiss employees but also how they deal with other issues raised by managing an older workforce including: recruitment; performance management; sickness absence; and promotion.
What should employers do now?
- consider whether a retirement age should be retained and if so how this is objectively justified – employers who are want to retain a retirement age should seek specific legal advice on whether this is likely to meet the high legal threshold of objective justification;
- review the provision of age-related benefits such as enhanced redundancy schemes (although there is an limited exemption for some group insured benefits once the employee has attained the state pension age);
- consider the impact on pension schemes; and
- review performance management, performance review, sickness absence, equal opportunities and recruitment procedures.
