When making non-contractual termination payments in lieu of notice (excluding holiday pay or bonuses) employers must calculate the post-termination period ‘earnings’ subject to income tax and NICs. The formula to calculate the taxable earnings is:
basic pay x number of months’ notice period – termination payment
Even where there is no contractual pay in lieu of notice clause, these payments will be taxable.
Some ‘injury for feelings’ payments that would otherwise have been tax free will no longer be so unless they relate to psychiatric injury or a recognised medical condition.
Key compensation limit changes from 6 April 2018
Employment right (maximum sums)
Previous limit
Current limit (as of 6 April 2018)
Weekly pay
£489
£508
Unfair dismissal basic award/redundancy pay
£14,670
£15,240
Unfair dismissal compensatory award
£80,541 (or a year's salary if lower)
£83,682 (or a year's salary if lower)
National minimum wage
For those over 25 who are entitled to the National Living Wage, this will rise from £7.50 to £7.83 per hour. For apprentices it will rise from £3.50 to £3.70 per hour.
Changes to family payments
From 1 April 2018, statutory maternity, paternity, adoption and share parental pay increases to £145.18 per week. Maternity allowance will rise to the same figure on 9 April 2018.
Gender pay publication deadline
The deadline for private and voluntary sector gender pay gap reports for employers with over 250 employees is 4 April 2018.