The annual update to the statutory cap has just been announced. The changes will take effect on the 6th April 2022.
Statutory Cap
The statutory cap on a weeks pay for the purposes of calculating the basic award and statutory redundancy pay, rises from £544.00 to £571.00 with effect from the 6th April 2022. Hence, the unfair dismissal basic award in employment tribunal cases will increase, and the maximum is now £17,130.00 (i.e. 20 x £571.00 x 1.5).
The maximum amount that can be awarded for the unfair dismissal compensatory award will also increase from £89,493.00 to £93,878.00 on the 6th April 2022.
Statutory Redundancy Pay
The statutory cap on a weeks pay also increases from £544.00 to £571.00 on the 6th April 2022 for the purposes of calculating statutory redundancy pay, and the maximum is now £17,130.00 (i.e. 20 x £571.00 x 1.5). Hence, from the 6th April 2022, the amount of statutory redundancy pay an employee is entitled to is the number of weeks which can be taken into account multiplied by the lower of either their average weekly wage or £571.00.
The number of weeks which can be taken into consideration depends on how long the employee has been continuously employed by their employer and how their years of continuous service relate to certain age bands. For each complete year of continuous service between the ages of 18 and 21, they will receive half a week’s pay. For each complete year of continuous service between the ages of 22 and 40, they will receive one week’s pay. For each complete year of continuous service between the ages of 41 and above, they will receive 1½ weeks’ pay. The maximum number of years which can be taken into account is 20.
National Minimum Wage & National Living Wage
The changes to the statutory cap are not the only changes that are taking place in April 2022, in terms of rate changes. The National Minimum Wage and the National Living Wage are also increasing, although those rates will increase on the 1st April 2022, whereas the increase in the statutory cap takes effect on the 6th April 2022.
The increases in the National Minimum Wage and the National Living Wage were announced in the Autumn Budget and Spending Review 2021 on the 27th October 2021. The new rates are as follows:-
- For workers aged 23 and over (i.e. the National Living Wage), the rate will increase by 6.6% from £8.91 per hour to £9.50 per hour
- For workers aged 21-22 inclusive, the rate will increase by 9.8% from £8.36 per hour to £9.18 per hour
- For workers aged 18-20 inclusive, the rate will increase by 4.1% from £6.56 per hour to £6.83 per hour
- For workers aged 16-17 inclusive, the rate will increase by 4.1% from £4.62 per hour to £4.81 per hour
- The apprentice rate will increase by 11.9% from £4.30 per hour to £4.81 per hour
- The daily rate for the accommodation offset will increase by 4.1% from £8.36 to £8.70
Other April 2022 Rate Changes
Whereas the changes to the National Minimum Wage and the National Living Wage are usually the first of the annual April rate changes to be announced, the changes to the statutory cap are usually the last. Inbetween time, the remainder of the April 2022 have already been announced, including the changes in family friendly payments
The rate changes in relation to family friendly payments will take effect on the 3rd April 2022. The increases will be as follows:
- Statutory Maternity Pay – those who qualify are entitled to receive it for 39 weeks at a rate of 90% of gross weekly pay per week, subject to a maximum of £156.66 per week (up from £151.97 per week) after the first 6 weeks.
- Statutory Paternity Pay – the smaller of £156.66 per week (up from £151.97 per week) or 90 per cent of average weekly earnings per week
- Statutory Shared Parental Pay – the smaller of £156.66 per week (up from £151.97 per week) or 90 per cent of average weekly earnings per week
- Statutory Adoption Pay – those who qualify are entitled to receive it for 39 weeks at a rate of 90% of gross weekly pay per week, subject to a maximum of £156.66 per week (up from £151.97 per week) after the first 6 weeks.
- Statutory Parental Bereavement Pay – will rise from £151.97 per week to £156.66 per week.
The average gross weekly earnings required to qualify for all of these benefits has risen from £120.00 or more to £123.00 or more.
Also, from the 3rd April 2022, where an employee earns less than £123.00 per week on average, but was employed for 26 of the 66 previous weeks earning at least £30 per week (averaged over any 13 week period during the said 66 weeks), then they are entitled to Maternity Allowance for 39 weeks of the smaller of £156.66 or 90 per cent of their average gross weekly earnings per week.
Finally, on the 6th April 2022, Statutory Sick Pay (SSP) will increase from £96.35 per week to £99.35 per week. The average gross weekly earnings required to qualify for SSP has risen from £120.00 or more to £123.00 or more.
The Statutory Cap And Inflation
The increase in the statutory cap has been larger than usual this year (i.e. £27.00), on account of the increase in inflation. Last year, when inflation was lower, the increase in the statutory cap was just £6, increasing from £538.00 to £544.00
