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Employment law update: changes from April 2018


New statutory rates of pay for the 2018/2019 financial year come into force on 1 April 2018, including an increase to the national living and minimum wage: 

New rates for statutory employment payments – National Living wage and national minimum wage.

 Category of worker

 Hourly rate

 Aged 25 and above (national living wage rate)


 Aged 21 to 24 inclusive


 Aged 18 to 20 inclusive


 Aged under 18 (but above compulsory school leaving age)


 Apprentices aged under 19


 Apprentices aged 19 and over, but in the first year of their apprenticeship


The new rates apply to the next pay reference period that begins on or after 1 April 2018. For example, an employee paid on the 20th of each month will start to receive the new rate of minimum wage from 21 April onwards.

Other rate increases:

  • Maternity pay, paternity pay, shared parental pay and adoption pay rates are set to increase to £145.18 per week or 90% of the employee’s average weekly earnings, whichever is lower.
  • Statutory Sick Pay is also increasing to £92.05 per week.


Taxation of termination payments:
In addition to the rate increases, employers should also be aware of how payments made in lieu of notice (PILONs) will be treated as of next month:


  • New regulations coming into force as of 5 April 2018 stipulate that all payments which are made in lieu of notice (contractual or otherwise) on termination of employment are now taxable i.e. subject to tax and NICs.
  • The tax treatment of contributions towards employee's legal fees paid under a settlement agreement will remain as it is now (i.e. tax free.)
  • The £30k tax exemption on settlement payments will remain (although arguably should be increased, since it has remained at the same level since 1988).
  • As of 2019 – payments above £30,000 tax free threshold will also be subject to employer NICs.


On the face of it, these changes seem relatively small, especially to those companies who always subject PILONs to tax and NICs in any event. However, the portion of a termination payment which contains a PILON in full or in part is now referred to as "Post-Employment Notice Pay" or "PENP" for short. The way that PENP is calculated is specifically set out in the regulations, and can lead to some unusual quirks and discrepancies where e.g. notice is expressed as months, because the regulations require a calculation of days. It is strongly advised that you seek our advice in respect of this before entering into settlement negotiations going forward to ensure that you are correctly applying these calculations to your settlement offers.


What's April's update about?
Next month marks the deadline for companies with over 250 employees to publish their gender pay statistics. We will be reporting on this topic in next month's employment law update and keeping you up to date on the hot topics surrounding the gender pay gap.

For more information, please contact Claire Knowles or Rebecca Mahon


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