CHANGES IN RATES AND TAX TREATMENT AFFECTING TRIBUNAL AWARDS AND COMPROMISE AGREEMENTS

A Week’s Pay

Increase in Tribunal Limits in Northern Ireland from 6 April 2018 – Differences with GB

The Department of the Economy has through three Orders brought in changes in the limits. The basis of calculation of the increase sets out a different procedure for indexation from that used in GB, with the result that there are now significant variations.  The results include the following:-

The maximum amount of a week’s pay for purposes of calculating statutory redundancy entitlement, basic award and other matters in Northern Ireland is as follows:-

  • 5th April 2018 – £500
  • 6th April 2018 onwards – £530. This contrasts with the G.B. figure of £508

The limit on the amount of the compensatory award for unfair dismissal rises as follows:-

  • 2016 – £79,100
  • 2018 – £83,847

In Northern Ireland the maximum award for unfair dismissal is not limited to 52 weeks’ pay.

There are corresponding changes to other maximum limits for Tribunal awards. For those who want the details, try the following links set out.

http://www.legislation.gov.uk/nisr/2018/79/contents/made

http://www.legislation.gov.uk/nisr/2018/69/contents/made

http://www.legislation.gov.uk/nisr/2018/80/contents/made

For technical reasons the Department has made the second Order, which appears to make increases for 2017 to 2018, but we understand that this is not in fact brought in until 6th April 2018,so the old rate of £500 continues to apply up until 5th April 2018.

Statutory Maternity Pay, Paternity Pay and Shared Parental Pay

Because these are legislated for on a national basis through the tax system the new rate from 1 April 2018 for the U.K.applies – £145.18.

National Living Wage and National Minimum Wage

Again, because these are set nationality the new rate applies – the national living wage for those aged 25+ is £7.83 from 1st April 2018.

Discrimination Claims – Awards for Injury to Feelings

In Northern Ireland there is no equivalent to the Guidance issued by the Presidents of Employment Tribunals for England, Wales and Scotland, however, although not bound by the Guidance, Tribunals here are likely to follow it in many cases.

The three Vento bands:-

  • A lower band of £900 – £8,600 for less serious cases.
  • A middle band of £8,600 – £25,700 for cases not meriting an award in the upper band.
  • An upper band of £25,700 – £42,900 for the more severe cases.

As with Scotland there may be scope to argue that the full bands should not be applied, but the increases are likely to affect negotiations and Tribunal awards.

Taxation of Injury to Feelings Awards

From 1st April 2018 awards for injury to feelings resulting from termination of employment will be subject to tax and employer’s national insurance unless there is medical evidence to demonstrate psychiatric industry or other recognised medical condition in relation to the award. Where there is no termination of employment, or the injury to feelings award is clearly not in connection with termination then the amount will not usually be taxable.

HMRC may start as part of PAYE investigations examining whether settlements reached in Compromise Agreements or through the Labour Relations Agency may include an element in respect of injury to feelings which should have been taxed rather than paid as a termination payment. HMRC can seek evidence going behind the written agreement, so it may be important to exercise caution in setting out the figures in negotiation for discussion. In some cases it may be appropriate for the Agreement to make clear that a settlement is in respect of the termination of employment, but that the employer does not accept that there was unlawful discrimination and is not making any payment in respect of that.

Post Employment Notice Pay

From 1st April 2018, where an employee leaves without having served their full statutory/contractual notice period, whichever is the longer, there is a requirement for the employer to account for tax and national insurance on the unserved portion of the notice period.  The tax legislation sets out the method of calculation. The practical effect is that where notice is not worked part of the maximum £30,000 tax free termination payment may be subject to tax and national insurance.  This does not apply to statutory or contractually binding redundancy payments – but HMRC may query whether the situation is a genuine redundancy, rather than resignation, retirement etc.

It may take a little while before the implications of these various changes work through, but the likely effect is that it will be become more expensive for employers to settle disputes/Tribunal claims.

Gender Pay Gap Reporting

There is no website, and no compulsory Gender Pay Gap Reports in Northern Ireland, because the necessary Regulations have not been passed.

This briefing sets out general propositions but the precise legal and factual position can be complex. This note does not provide specific advice on particular situations and  you should always check the position.