The annual update to the statutory cap has just been announced with the release of The Employment Rights (Increase of Limits) Order 2023. The changes will take effect on the 6th April 2023.
Statutory Cap
The statutory cap on a weeks pay for the purposes of calculating the basic award and statutory redundancy pay, will increase from £571.00 to £643.00 with effect from the 6th April 2023. Hence, the unfair dismissal basic award in employment tribunal cases will increase, and the maximum is now £19,290.00 (i.e. 20 x £643.00 x 1.5).
The maximum amount that can be awarded for the unfair dismissal compensatory award will also increase from £93,878.00 to £105,707.00 on the 6th April 2023.
Statutory Redundancy Pay
The statutory cap on a weeks pay also increases from £571.00 to £643.00 on the 6th April 2023 for the purposes of calculating statutory redundancy pay, and the maximum is now £19,290.00 (i.e. 20 x £643.00 x 1.5). Hence, from the 6th April 2023, 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 £643.00.
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 under the age of 22, 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 2023, 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 2023, whereas the increase in the statutory cap takes effect on the 6th April 2023.
The increases in the National Minimum Wage and the National Living Wage were announced in the 2022 Autumn Statement on the 17th November 2022. The new rates are as follows:-
- For workers aged 23 and over (i.e. the National Living Wage), the rate will increase by 9.7% from £9.50 per hour to £10.42 per hour
- For workers aged 21-22 inclusive, the rate will increase by 10.9% from £9.18 per hour to £10.18 per hour
- For workers aged 18-20 inclusive, the rate will increase by 9.7% from £6.83 per hour to £7.49 per hour
- For workers aged 16-17 inclusive, the rate will increase by 9.7% from £4.81 per hour to £5.28 per hour
- The apprentice rate will increase by 9.7% from £4.81 per hour to £5.28 per hour
- The daily rate for the accommodation offset will increase by 4.6% from £8.70 to £9.10
Other April 2023 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 amongst the last. Inbetween time, apart from what the new Vento bands will be, the remainder of the April 2023 have already been announced, including the changes to family friendly payments
The rate changes in relation to family friendly payments will take effect on the 2nd April 2023. 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 their gross weekly pay per week, subject to a maximum of £172.48 per week (up from £156.66 per week) after the first 6 weeks.
- Statutory Paternity Pay – the smaller of £172.48 per week (up from £156.66 per week) or 90 per cent of their average weekly earnings per week
- Statutory Shared Parental Pay – the smaller of £172.48 per week (up from £156.66 per week) or 90 per cent of their 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 their gross weekly pay per week, subject to a maximum of £172.48 per week (up from £156.66 per week) after the first 6 weeks.
- Statutory Parental Bereavement Pay – the smaller of £172.48 per week (up from £156.66 per week) or 90 per cent of their average weekly earnings per week
The average gross weekly earnings required to qualify for all of these benefits will remain at £123.00 or more.
Maternity Allowance will also increase from the 2nd April 2023. 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 will be entitled to Maternity Allowance for 39 weeks of the smaller of £172.48 or 90 per cent of their average gross weekly earnings per week (up from the smaller of £156.66 or 90 per cent of their average gross weekly earnings per week).
Finally, on the 6th April 2023, Statutory Sick Pay (SSP) will increase from £99.35 to £109.40 per week. The average gross weekly earnings required to qualify for SSP will remain at £123.00 or more.
The Statutory Cap And Inflation
The increase in the statutory cap has been larger than usual this year (i.e. £72.00), on account of the increase in inflation. Last year, when inflation was lower, the increase in the statutory cap was £27, increasing from £544.00 to £571.00. And in the year prior to that when inflation was even lower, the increase in the statutory cap was just £6.00.
