July Budget – Key Employment Law Announcements

The first Conservative Budget of the new Parliament was announced on 08 July 2015. During the course of this Budget, there were several announcements which had significant implications for both employers and employees alike.

The first of these is the introduction of what is to be called the new National Living Wage. This is effectively a premium or top up of the existing National Minimum Wage for those workers who are aged 25 and over. It is the Government’s aim to ensure that more experienced workers receive a higher wage. Although the National Minimum Wage will remain in place, there will be a premium over and above the National Minimum Wage. The first premium comes into effect in April 2016 at a 50p rate which will mean the National Living Wage at that point will be £7.20.

This move follows the Government’s consultation with the Low Pay Commission. The Low Pay Commission monitors and evaluates the National Minimum Wage and provides the Government with its findings. The Government has given the Low Pay Commission the remit of reviewing each of the different National Minimum Wage rates over the next twelve months and to thereafter make recommendations on the increase that the Low Pay Commission believes should apply from October 2016, as well as initial thoughts on the National Minimum Wage rates for 2017. This is in order to give as much assistance to businesses as possible.

As part of the Budget, the Government also announced that it will open a consultation on the tax treatment of termination payments. Current proposals include replacing the £30,000.00 exemption with a new Income Tax relief in cases of statutory redundancy and developments in this area are likely to develop further as 2015 progresses.

A further development has also come to light following the budget which is the desire of the current Prime Minister to request an opt out from European Union employment social protection laws (such as the Working Time Directive and the Agency Workers Directive). However, this is speculation at this time and it remains to be seen whether the Conservative Government will include such an ‘opt out’ on their wish list with any re-negotiation of the United Kingdom’s position within the European Union.