April 2011 Employment Law Changes

The most important changes to employment law you need to be aware of are:

The proposed extension of the right to request flexible working to include parents of children up to aged 18 has been revoked before it was due to come into force on 6 April 2011.

From 3 April 2011:

• Additional paternity leave: for babies born on or after 3 April 2011 the right to additional paternity leave will be available for fathers
• Statutory weekly payment rates increase: 
  • statutory maternity, paternity and adoption pay will increase from £124.88 to £128.73, and the weekly earnings threshold will increase from £97 to £102;
  • statutory sick pay will increase from £79.15 to £81.60 and the weekly earnings threshold will increase from £97 to £102; and
  • maternity allowance will increase from £124.88 to £128.73 but the earnings threshold will remain at £30.

 From 5 April 2011:

• Equality Act 2010: a number of provisions of the Act will come into force including positive action in recruitment and promotion,but the decision has been made not to proceed with the dual discrimination provisions in the Act. See below regarding the public sector equality duty.

 From 6 April 2011:

• The Equality and Human Rights Commission’s statutory Codes of Practice on the Equality Act 2010 will finally be in force .  The new Codes are available on the EHRC website.
• Default retirement age: the default retirement age of 65 will be abolished
• Taxation of termination payments: employers must use an OT PAYE code for post-P45 (see below)
• Immigration: the permanent migration cap will come into effect restricting the number of certain non-EU immigrants entering the UK to work.

Public Sector Equality Duty  

The government has published a policy review paper  on the new specific duties under the Equality Act 2010.  The government intends to bring the duties into force in July 2011. The revised draft regulations would impose more limited publication obligations, but the key change is that all listed public authorities must now publish information about their compliance with the general equality duty by 31 December 2011, instead of 31 July 2011.

 Termination payments

Where the employment will terminate or the termination payment will be paid on or after 6 April 2011 employers will have to operate code OT and not BR (basic rate) when they make a payment to an ex-employee after the P45 has been issued and the payment is subject to PAYE.

Compromise agreements should be reviewed to remove any references to tax being deducted at basic rate.

The operation of the OT Code means that tax will be payable in slices at 20%, 40% or 50% (depending upon the amount involved).  It does not affect the £30,000 tax free slice.   The way that PAYE works on a monthly basis means that any taxable amount in excess of £12,500 will be subject to tax at the 50% rate (and below this, taxable amounts over £2,917 will be subject to tax at 40%).  This means that the vast majority of any substantial termination payment will, from 6 April, be subject to tax at 50%.

The OT code assumes no personal allowances, so the calculation of the “slice” starts at zero.

The government has amended the Employer Further Guide to PAYE and NICs to reflect the change.