Increase in UK Employment Protection Awards and New Mandatory National Living Wage

Overview


In Depth


The compensation limits on Employment Tribunal awards and certain other amounts payable under UK employment legislation will be increased as of 6 April 2016.

Key Changes Coming Into Effect on 6 April 2016

Award

Old Maximum

New Maximum

Statutory Redundancy Pay – increased cap on a week’s pay.

The maximum Statutory Redundancy Pay will rise from £14,250 to £14,370.

£475

£479

A Basic Award – increased cap on a week’s pay.

The maximum Basic Award will rise from £14,250 to £14,370.

£475

£479

Increased Maximum Compensatory Award

As such, the maximum total award for unfair dismissal, i.e., maximum unfair dismissal compensation plus maximum basic award, has risen from £92,585 to £93,332.

£78,335

£78,962

 

What Does This Mean for Employers?

The changes will take effect on 6 April 2016 and will apply to dismissals that occur on or after that date.

It is important for employers to note that

  • If an employee was given notice prior to 6 April 2016, but the notice period expires on or after 6 April, the new limits will apply.
  • If an employee’s employment is terminated by means of a payment in lieu of notice, the effective date of termination (EDT) is the actual date the dismissal takes effect, plus the amount of statutory notice applicable to the employee, i.e., one week per year of employment, up to a maximum of 12 weeks. If the statutory notice would take the EDT to or beyond 6 April 2016, the new limits will apply.

An employer’s exposure in the event of an unfair dismissal claim will also rise and should therefore be factored into decisions regarding litigation or settlement strategies.

National Living Wage

Separately, a new mandatory National Living Wage, initially set at £7.20 per hour, was introduced in the United Kingdom with effect from 1 April 2016 for workers aged 25 and over.

The National Minimum Wage, which is currently £6.70 per hour, will continue to apply to workers aged 21 to 24, with a lesser amount applying to younger workers.

Lauren Goda (trainee) contributed to this article.