A number of legal changes are expected this year and employers need to be aware of imminent employment-related statutory rates of pay increases, as well as where changes may need to be made to payroll policies and processes.
Statutory family leave pay entitlements
One change which has been confirmed is the annual increase to the weekly rates for statutory pay in respect of statutory family leave. From 2 April 2023, these will change as follows:
- Statutory maternity pay (SMP), and statutory adoption pay (SAP) is paid for the first six weeks at 90% of the employee’s average weekly earnings and the remaining 33 weeks of SMP/SAP are to be paid at the increased amount of £172.48 per week. If an employee does not meet the earnings threshold to qualify for SMP, they may qualify for maternity allowance;
- Statutory paternity pay is payable for two weeks at £172.48 per week;
- Statutory parental bereavement leave pay increases to £172.48 per week; and
- Statutory shared parental leave pay is to be paid again at £172.48 per week.
Statutory pay and leave entitlement are complicated so be sure to check eligibility requirements in each case. Also, remember that just because an employee does not qualify for statutory pay does not mean that they do not qualify for the corresponding statutory leave. Always take advice if you are unsure.
Statutory sick pay (SSP)
From 6 April 2023, statutory sick pay is set to increase to £109.40 per week, from its previous amount of £99.35. Remember that if you do enhance sick pay, for example, if you pay company sick pay, please ensure that any enhanced employer payments include SSP. SSP is paid when an employee is sick for at least four days in a row (including non-working days). You cannot count a day as a sick day if an employee goes home sick during a working day. It is always advisable to keep sickness absence under review, make sure sickness is properly recorded and manage sickness issues early to support your staff who are unwell.
Weekly rate of pay
The weekly earnings threshold a worker must meet to become eligible for statutory family leave payments or statutory sick pay will remain the same, at £123 per week from April 2023.
Living and minimum wage rates
Similar to statutory pay entitlements, new statutory minimum National Living Wage (NLW) and National Minimum Wage (NMW) rates have also been announced. From 1 April 2023, the new rates are as follows:
- The NLW rate for workers aged 23 and over, will increase by 9.7% to £10.42 per hour;
- The NMW rate for workers aged 21 to 22 will increase by 10.9% to £10.18 per hour;
- The rate for workers aged 18 to 20 will increase by 9.7% to £7.49 per hour;
- The rate for young workers aged 16 to 17 will increase by 9.7% to £5.28 per hour; and
- The apprentice rate will increase by 9.7% to £5.28 per hour.
Maximum compensation for unfair dismissal and a statutory week’s pay
Where the effective date of termination falls on or after 6 April 2023, the limit on a week’s pay when calculating statutory redundancy pay or, in the employment tribunal, where calculating basic or additional awards of compensation for unfair dismissal will increase to £643. The maximum compensatory award in most unfair dismissal claims will also increase to £105,707 (or 12 months’ pay whichever is the lower) again where the dismissal took effective on/after 6 April 2023.
What to do next?
Remember to check with your payroll provider or payroll teams as rates of pay will need to change for those whose leave continues into the new pay period.
The increase in a week’s pay is particularly relevant for employers considering redundancies and the increase will need to be factored into overall costs.
With regards to the NMW/NLW, payment and eligibility applies to the wider category of “worker” and not just employees. Employers should retain accurate pay records and deal with any concerns raised informally by staff in the first instance. NMW legislation has teeth – a failure to pay the correct rate of NMW/NLW could result in an employment tribunal claim and/or a complaint to HMRC. If HMRC finds the employer to be in breach it could make the employer pay up to 6 years’ worth of back pay, issue a fine of up to £20,000, take legal action as well as ask the Department for Business, Energy and Industrial Strategy (BEIS) to add the employer’s name to a public “name and shame” list.
Emma O’Connor is legal director in the employment team at Boyes Turner LLP