Employment termination payments

The calling of a snap General Election on the 8 June 2017 has raised the question as to whether any pending employment related legislation will complete its parliamentary progress in time.

The Government has in fact announced that it will push through, before Parliament is dissolved on the 3 May that part of the Finance Bill 2017 which will remove the distinction between contractual and non-contractual payments in the treatment of termination payments as from the 6 April 2018.  In short, this will mean that all payments in lieu of notice in a termination payment will be taxed as earnings.

The new provisions, when they take effect, will require employers to split a termination payment between the amounts treated as earnings and the amounts benefiting from the £30,000.00 tax exemption, which will continue to apply.  Statutory and contractual redundancy pay (to the extent that the contractual redundancy pay does not exceed the statutory amount) will continue to benefit from the £30,000.00 exemption.

We will provide more information as and when the legislation is enacted but no longer will it be possible for the fairly common practice to be adopted by employers of rolling notice pay into a termination payment and thereby avoiding having to pay employer’s Nation Insurance.

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