On Wednesday this week the Chancellor delivered his first Autumn Statement which contained a number of aspects relevant to employment law, including employee shareholders, National Minimum Wage increase, salary sacrifice and termination payments.
We have summarised the key points below.
The Autumn Statement likely signifies the beginning of the end for employee shareholder status.
Employee shareholder is a form of employment status which has existed since 1 September 2013. The concept was widely criticised from the start.
The basic principle of employee shareholder status is that individuals who receive at least £2000 worth of shares in their employer give up certain employment rights including the right to claim unfair dismissal or receive a statutory redundancy payment.
When launched, employees who received shares were entitled to an exemption on capital gains tax on any increase on the value of the first £50,000 worth of shares issued to them. This benefit was eroded from March 2016, limiting the CGT exemption to £100,000 of gains.
The Autumn Statement set out that income tax and capital gains relief will no longer apply in respect of any shares issued on or after 1 December 2016. The Government also indicated that they will be closing the employee shareholder status for new users altogether “at the earliest opportunity”.
National Minimum Wage increases
National Minimum Wage rates will increase from 1 April 2017 as follows:
- National Living Wage (25 years+) increases from £7.20 to £7.50
- Standard adult rate (21-24) increases from £6.95 to £7.05
- Development rate (18-20) increases from £5.55 to £5.60
- Young worker rate (16-17) increases from £4.00 to £4.05
- Apprentice rate (apprentices under 19 or in the first year of apprenticeship) increases from £3.40 to £3.50
The Government has also indicated that it will be increasing its investment in National Minimum Wage enforcement. Fines for failing to pay the National Minimum Wage have increased significantly over the last couple of years, now costing 200% of any underpayment, capped at £20,000 per underpaid worker.
The Government has announced that from April 2017 it will be reducing the types of benefit that can qualify for tax and national insurance contribution relief via a salary sacrifice arrangement.
From April, the only types of benefit that will qualify are as follows:
- Enhanced employer pension contributions to registered pension scheme, together with pension advice.
- Childcare benefits.
- Cycles and safety equipment under the cycle to work scheme.
- Ultra – low emission cars.
There are transitional arrangements due to be put in place for existing arrangements, so that reliefs are preserved until April 2018 (April 2021 for cars, accommodation and school fees).
The Government has announced that from April 2018 employer national insurance contributions will become payable on any termination payments in excess of £30,000.
If you require any further advice in relation to employment law or HR matters, please contact Joanne Holborn, Tom Scaife or Caroline Rayner on 01228 552600 or 01524 548494.
This alert does not provide a full statement of the law and readers are advised to take legal advice before taking any action based on the information set out above.