2012 Employment Law Update: Part 3

Friday 13th January 2012

Welcome to the 3rd and final part of our 3-part overview of some very recent important cases and the key employment legislation coming into force throughout 2012, what it all means and how employers can deal with it effectively.

Part 3 focuses on the issues of employment tribunal awards; pensions; salary sacrifice arrangements, and; local authorities.

Employment Tribunal Awards Increase

From 1 February 2012 the limits for employment tribunal awards will increase. The maximum compensatory award for unfair dismissal will rise to £72,300. The maximum basic award for unfair dismissal will increase to £12,900 and the maximum week’s pay for basic award and redundancy pay purposes will rise to £430.


The Pensions Act 2011 (Commencement No.1) Order 2011 brings into force many of the provisions of the Pensions Act 2011 as of 1 January 2012, 3 January 2012 and 6 April 2012. In addition to this the Pensions Act 2008 (Commencement No. 11) Order 2011 brings into force various provisions of the Pensions Act 2008 as of 3 January 2012.

What should employers do?

Employers should be aware that a lot of changes to the laws relating to pensions will be coming into force over the course of the next few months and years. The most significant of these is the requirement for employers to automatically enrol their staff into a workplace pension scheme.

Timing depends on further legislation, but the duty of employers to automatically enrol their staff into a workplace pension scheme is expected to come into force in stages. Those stages are expected to begin on 1 October 2012 for the very largest employers.

Employers with 3000 or more workers in their PAYE scheme are likely to have staging dates between 1 October 2012 and 1 July 2013.

The Government has announced that employers with fewer than 50 workers in their largest PAYE scheme will not be staged into the employer duties on automatic enrolment until the after the end of this Parliament.

Employers can check the provisional start date for their business at www.tpr.gov.uk. Employers who are in any doubt as to their obligations should check the website of the Pensions Regulator and, if necessary, obtain legal advice.

Occupational Pension Schemes

The Occupational Pension Schemes (Employer Debt and Miscellaneous Amendments) Regulations 2011 come into force on 27 January 2012.

What does this mean?

The Regulations introduce provisions relating to employer debt, in particular the ‘flexible apportionment arrangement’, whereby an employer in a multi-employer occupational pension scheme is able to apportion its liabilities in relation to the scheme to another employer in the scheme. An employer who does this will not have to pay a debt to the scheme, but the employer to whom the liabilities are apportioned will become responsible for those liabilities.

Salary-Sacrifice Arrangements

Changes to VAT on salary-sacrifice arrangements come into force on 1 January 2012.

What does this mean?

For salary-sacrifice agreements made on or after 28 July 2011, output tax is due on the amount of the employee’s salary waived in return for taxable benefits. In relation to agreements made before 28 July 2011, output tax is due only on the occurrence of an event specified in the Revenue and Customs guidance – see http://www.hmrc.gov.uk/briefs/vat/brief3611.htm

Local Authorities

The Localism Act 2011 comes into force on 15 January 2012.

What does this mean?

Local authorities will be required to prepare a pay policy statement for the financial year 2012/13 and subsequent financial years setting out the authority’s policies relating to the remuneration of its employees and officers.

For further information or advice on any of the issues outlined in this e-Brief, please contact a member of the employment team.