Business Law & Compliance

The five most significant pieces of 2016 employment law

6 min read

28 January 2016

In 2016, employers will begin to feel the impact of the employment law reforms made by the first Conservative government. As such, here are the five most important pieces of legislation that leaders need to keep in mind.

If you’re wondering what the key employment law changes in 2016 will be in order to ensure you have a head start to the year ahead, then look no further. 

(1) Statutory maternity pay and statutory sick pay rates to stay the same

The government has proposed that annual increases in the weekly rate of statutory maternity and paternity pay will remain the same in 2016. Although there is no requirement to uplift these rates each year, they normally increase every April in line with the consumer price index. However due to a fall in the consumer prices index by 0.1 per cent, there will be no increase to the rates in 2016/17.

The rate of statutory sick pay has also been frozen at its current weekly rate of £88.45.

To be entitled to these statutory payments, the employee’s average earnings must be equal to or more than the lower earnings limit. 

(2) Reporting on gender pay gap

According to recent figures from the Office for National Statistics, the gender pay gap narrowed in 2014 to 9.4 per cent, compared with ten per cent in 2013. However, a number of equal pay cases, such as actions brought against Asda, placed employers’ pay practices under scrutiny. A such, employers with 250 or more staff will be obliged to publish information about gender pay gaps starting from 26 March 2016. 

This will need to include details of bonus payments. However, while legislation is already in the Equality Act 2010, it has yet to be enacted and further details of what this means for employers are yet to be disclosed.

This, according to clause 78, will “require employers to publish information relating to the pay of employees for the purpose of showing whether there are differences in the pay of male and female employees”.

(3) Payments made to public-sector staff when leaving are subject to new rules

Exit payments for public-sector employees are capped at £95,000. And from 1 April 2016, there will be a requirement for public-sector staff with annual earnings of £100,000 or more to repay exit payments when they return to work in the same part of the sector within 12 months.

The government was clear that it wanted to cover all forms of exit payment to ensure individuals wouldn’t be able to circumvent the cap. As such, it has been ensured that any payment relating to loss of employment is included. This would include payments in lieu of notice.

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(4) The era of the national living wage

Starting from 1 April 2016 employers will need to pay staff aged 25 and over a national minimum wage of £7.20. Over 1m workers in the UK are set to directly benefit from the increase as many will see their pay packets rise by up to £900 a year. This will be the largest annual increase in a minimum wage rate across any G7 country since 2009.

Chancellor George Osborne said: “The new National Living Wage is an essential part of building the higher wage, lower welfare, lower tax society that Britain needs and it’s great to see that over a million people will see their living standards boosted when this comes into force. Britain deserves a pay rise and this one-nation government is making sure it gets one, helping more people have the security of a higher wage to provide for themselves and their families.”

BIS explained it would enforce National Living Wage compliance. Employers that fail to pay it would face fines of 200 per cent of arrears. They may also face criminal charges and may be disqualified from being a company director for 15 years.

(5) Zero hours exclusivity clauses

Some employers have used exclusivity clauses to prohibit workers from working for another businesses without the employer’s consent. Exclusivity clauses in zero hours contracts have been prohibited since May 2015, but from 11 January 2016, legislation gives workers working under a zero hours contract the right to complain to an employment tribunal.

Government guidance on exclusivity clauses suggested: “An employer must allow the individual to take work elsewhere in order to earn an income if they themselves do not offer sufficient hours. If an employer includes an exclusivity clause in a zero hours contract, the individual cannot be bound by it, the law states the individual can ignore it.

“An employer must not attempt to avoid the exclusivity ban by, for example, stipulating that the individual must seek their permission to look for or accept work elsewhere.”