Key changes for employers to note in the new tax year 2021/2022

Following the announcement of the Budget in March and in the lead up to the end of the 2020-21 financial year we appreciate that businesses have been kept busy with all that has been going on in preparation for opening and covid restrictions, so you may not have had time to consider some of the other important changes that came into force this month.   

I set out below the key changes for employers to note.

National Living Wage and the National Minimum Wage

Prior to 1 April 2021 workers aged 25 and over were entitled to receive a National Living Wage of £8.72. As of 1 April 2021, this has now been increased to £8.91 per hour and applies to all workers aged 23 and over.

Workers aged between:

• 21 and 22 years old are entitled to receive a National Minimum Wage of £8.36 an hour;
• 18 and 20 years old are entitled to receive a National Minimum Wage of £6.56 an hour; and
• 16-17 years old are entitled to receive a National Minimum Wage of £4.62 per hour.

Apprentices are now entitled to be paid at a rate of £4.30 per hour.

Statutory Sick Pay

Statutory Sick Pay has increased from £95.85 per week to £96.35 per week from 6 April 2021 and so anyone who is off sick on or after this date will be entitled to the increased rate.

Statutory redundancy pay and the basic award for unfair dismissal.

The maximum cap for the gross weekly pay used to calculate an employee’s statutory redundancy or their basic award for a claim for unfair dismissal has been increased from £538.00 per week to £544.00.

The maximum amount for statutory redundancy pay or for the basic award has therefore now increased to £16,320.00. This rate will apply for anyone whose employment ends on or after 6 April 2021.

Compensatory award for unfair dismissal

The maximum compensatory award for unfair dismissal cases has increased from £88,519.00 to £89,493.00 from 6 April 2021 for anyone whose employment ends after this date.

Failing to comply with a reinstatement order or a re-engagement order made by the tribunal in an unfair dismissal claim.

As the weekly pay has been capped at the statutory amount of £544.00, any compensation awarded for failing to comply with a re-engagement order or reinstatement order will increase accordingly.

Limits on compensation for injury to feelings in discrimination claims

From 6 April 2021, what is known as the “Vento” bands used to assess an employee’s injury to feelings in discrimination claims have been increased slightly as set out below:

• £900.00 – £9,100.00 representing the lower band for less serious cases;
• £9,100.00 – £27,400.00 representing the middle band for cases that do not merit the upper band;
• £27,400.00 – £45,600.00 representing the upper band for cases of a serious nature; and
• Exceptionally serious cases exceeding £45,600.00.

Failure to provide an employee with a written statement of particulars.

If you fail to give an employee a written statement of particulars setting out the terms and conditions of their employment with you, from 6 April 2021 the 2 or 4 weeks’ compensation has increased to reflect the increase in the statutory weekly cap of £544.00.

Statutory Maternity, Paternity, Adoption Pay and Statutory Shared Parental Leave Pay

The weekly rate following the first 6 weeks at 90% has increased from £151.20 to £151.97 from 4 April 2021 for those entitled to Statutory Maternity, Paternity and Adoption Pay.

Statutory Shared Parental Leave Pay has also increased to the same weekly rate of £151.97 from 4 April 2021. Those entitled to the pay should receive £151.97 a week or 90% of their average weekly earnings, whichever is lower.

IR35

What was delayed last year as a result of the pandemic, as of 6 April 2021, the IR35 rules are now in force. The purpose of the rules is to prevent contractors from paying less tax by providing their work through personal service companies. The IR35 rules would mean that (subject to certain criteria) a business engaging with a contractor via a personal service company would have to pay tax and national insurance contributions as it would be deemed that the contractor is an employee of the business.

Next Steps

In relation to changes to rates of pay we recommend updating any internal forms, spreadsheets used including those used by accounts/payroll staff to ensure that no administrative errors are made when completing payroll for the end of the month.

It is a good time to review your contracts to ensure that any terms are up to date and rates of pay are updated accordingly.

If you are currently undergoing a redundancy consultation process, you should revisit any calculations of redundancy pay sent to affected employees to ensure that they are up to date.

If you have any questions in relation to the changes that have recently been implemented, please feel free to get in touch with myself or any member of the team on 01983 897003.