In April statutory rates of pay and maximum awards in the Employment Tribunal increase. Given current inflation, the increases this year are higher compared to previous years. Employers must ensure they adequately budget for the rise in staffing costs.
The key changes to rates and limits that employers need to be aware of are set out below.
Employment Tribunal Awards
New Vento bands
To take account of the Retail Prices Index (RPI) measure of inflation, from 6 April 2023, Employment Tribunal awards for injury to feelings will be as follows:
- A lower band of £1,100 to £11,200 for less serious cases
- A middle band of £11,200 to £33,700 for cases which do not merit an award in the upper band
- An upper band of £33,700 to £56,200 for the most serious cases
- Amounts over £56,200 can be awarded in the most exceptional cases
There are separate rules in respect of claims presented in Scotland so that the bands remain subject to paragraph 12 of the Presidential Guidance as originally issued on 5 September 2017.
Changes to compensation for unfair dismissal and redundancy pay
The new rates implemented by the Employment Rights (Increase of Limits) Order 2023 apply where an employee’s effective date of termination is on or after 6 April 2023. The changes are as follows:
- The compensatory award will increase from £93,878 to £105,707 (an inflation-based increase of over 12%), albeit there is still the cap of 52 weeks’ gross pay in circumstances where this amount is lower than the maximum compensatory award
- A ‘week’s pay’ (for basic award and redundancy payment calculations) in England and Wales will increase from £571 to £643 so the maximum statutory redundancy payment and basic award will be £19,290
As a result, employers must ensure any redundancy payments made in respect of dismissals on or after 6 April 2023 are calculated using the new rate of a ‘week’s pay’ as stated above. If redundancy exercises have already commenced and are ongoing, employers will need to revisit redundancy payment calculations and revise payments accordingly for dismissals which take effect on or after 6 April.
National Minimum Wage and National Living Wage
With effect from 1 April 2023, the National Minimum Wage (NMW) and National Living Wage (NLW) hourly rates increase as follows:
- For workers aged 23 and over: an increase from £9.50 to £10.42 per hour (a 9.7% increase)
- For 21- to 22-year-olds: an increase from £9.18 to £10.18 per hour
- For 18- to 20-year-olds: an increase from £6.83 to £7.49 per hour
- For 16- to 17-year-olds: an increase from £4.81 to £5.28 per hour
- For Apprentices: an increase from £4.81 to £5.28 per hour
The accommodation offset rate rises to £9.10 per day.
Employers need to ensure that these increases are factored into employees’ pay and that payroll information is updated accordingly. It may be that employees who were previously paid above NMW and NWL are now much closer to the statutory minimum and care needs to be taken that inadvertent breaches of the Regulations do not occur. Employers should review contracts and arrangements for lower paid workers against the Regulations to make sure they are still compliant.
Increase to other statutory rates
Following the Social Security Benefits Up-rating Order 2023, the following increases to statutory payments for 2023 in England, Wales and Scotland have been made:
- From 02 April 2023, statutory maternity, paternity, adoption, shared parental and parental bereavement pay will increase from £156.66 to £172.48
- From 06 April 2023, statutory sick pay will increase from £99.35 to £109.40
Employers need to be mindful of these changes and apply the increases when calculating the statutory pay for any eligible employees. It is also worth checking policies and updating these where rates are specifically referred to.
