National Living Wage: Pay rise for workers in April

In his most recent Budget (29 October 2018), the Chancellor announced that the National Living Wage (NLW), paid to workers aged 25 or over, will rise from £7.83/hour to £8.21/hour in April.

The 4.9 per cent rise represents an annual increase of approximately £690, for a full-time worker, meaning many low-paid workers will see their pay rise above current levels of inflation.

First introduced back in July 2015, the Government anticipate that, by 2020, the NLW will be 60 per cent of median earnings.

Though higher than the National Minimum Wage (NMW), which is paid to workers 25 and under, the NLW still does not satisfy the Living Wage Foundation’s recommendation of £8.75/hour (£10.20/hour in London).

The NMW, which applies at varying rates dependent on age, will also increase from April as follows:

National Minimum Wage (per hour)
Age 21-24 Age 18-20 Age under 18 Apprentice
Currently £7.38 £5.90 £4.20 £3.70
From April 2019 £7.70 £6.15 £4.35 £3.90

The Living Wage Foundation, concerned that workers needs were not being met, devised the ‘Real Living Wage’ (RLW); a more generous, independently calculated rate, intended to reflect what people need to spend to feed, clothe and house themselves. Unlike NLW the RLW is a voluntary scheme that companies can sign up to.

The current RLW rates are £9 for workers outside of London and £10.55 for those in London.

Over 4,500 employers across the UK are signed up to the agreement, including large organisations such as IKEA and Google.

The report also revealed that women were more likely than men to be underpaid, while the worst-offending sectors were retail, hospitality and cleaning and maintenance.

Typically, there are one of two reasons why workers might not be paid correctly; either the employer knowingly underpays their staff, or a genuine error is made when it comes to implementing changes to rates.

Those who neglect to pay their staff correctly should be aware that it is a criminal offence not to adhere to the legal minimum rates.

Firms found to have breached these regulations must repay what is owed to staff and could face a maximum fine worth 200 per cent of the total underpayment.

Elaine Shaw, Payroll Manager at George Hay, said: “We say it every year, but every year it is as important as the last; employers must adhere to the legal minimum rates for both the NMW and the NLW.”

“Those who choose to flout the rules knowingly must realise that they cannot get away with it. Not only is it unfair on those employees who find themselves struggling because they have been underpaid, but also on those employers who make every effort to stay up-to-date and compliant with the latest legislative changes.”

“The Government must remain committed to tracking down those non-compliant employers and to ensuring the appropriate action is taken against them.”

At George Hay, we offer a dedicated outsourced payroll, and pay advice service to all industry sectors, tailored specifically to the requirements of each individual business.

Our professionals have the specialist knowledge and experience to help you with any payroll query you may have, so why not contact one of our team today on 01767 315010 or by emailing biggleswade@georgehay.co.uk

Government unveil pensions dashboard proposals

On 3 December, the Department for Work and Pensions (DWP) unveiled proposals that, if implemented effectively, would give millions of people improved access to their pension facts and figures.

Put simply, the proposal is to create free, user-friendly ‘pensions dashboards’ that would allow individuals to access information relating to their pension schemes in one place, online, for the first time.

Welcomed by consumer groups and pension providers, it is intended that the dashboards would:

  • give individuals accurate, easy to understand and secure information;
  • show individuals what they currently have accrued and give them an idea of what they can expect to live on during retirement;
  • give people control of who has access to their data as well as when and how they check it; and
  • help people to locate ‘lost’ pension pots.

The Government, who have pledged a £5m injection to fund the project, suggests that the first pension dashboard would be available in 2019, with others to be introduced in the years that follow.

It is hoped that, by offering several dashboards, individuals will benefit from the opportunity to select the one that works best for them.

Guy Opperman, Minister for Pensions and Financial Inclusion said: “Pensions dashboards are another major milestone in our radical pension reforms, harnessing innovative technology to benefit savers.”

“Bringing pensions information into the digital age has the potential to revolutionise the way we all think about and plan for later life.”

The Government has made clear its intention to let industry lead and facilitate it in doing so.

There has been speculation that pressure is mounting for the Government to compel all pensions providers to feed client data into the dashboard project; however, the Government have not yet made any announcement to this effect and data submission will initially be voluntary.

The unveiling of the proposals marks the start of the consultation, which addresses a range of matters including delivery models, governance and safeguarding of sensitive information.

Samantha Bassett, Payroll Administrator at George Hay, said: “We are pleased to see that the pensions dashboard project is progressing, as improved access to their own pensions data will undoubtedly help people to better plan for retirement.”

The DWP’s consultation ended on 28th January and it is expected that the Government will respond within the next 12 weeks. The details of the consultation can be found here: Pensions dashboards: Working together for the consumer.

Here at George Hay we have a dedicated payroll bureau service, developed specifically to help businesses operate more efficiently and cost-effectively. We offer a comprehensive, confidential and competitively priced outsourced payroll solution for businesses of any size, operating in any industry sector, in any location.

To find out more about how we can help you, whether with payroll or pensions, contact one of the team today on 01767 315010 or by filling out one of our online enquiry forms.

Automatic enrolment and Automatic Re-Enrolment Update

Under Automatic enrolment (AE), employers must enrol all employees who ordinarily work in Great Britain and who satisfy age and earnings criteria into a qualifying workplace pension and pay at least the minimum level of contributions into the pot.

First introduced back in October 2012, the roll-out was finally completed in March 2018 when the last groups of small and micro employers took on their AE duties.

Since October 2017, all new employers have had immediate pensions duties requiring them to automatically enrol eligible employees into a qualifying pension scheme.

The AE earnings trigger determines who exactly is eligible to be automatically enrolled into a workplace pension, by their employer, in terms of how much they earn. This threshold has been left at £10,000 in the latest review of the AE Earnings thresholds for 2019/20.

The latest review ‘Automatic enrolment: review of the earnings trigger and qualifying earnings band for 2019/20’ contains the proposals for the 2019-20 tax year, as follows:

Current and proposed automatic enrolment thresholds
Trigger Lower limit qualifying earnings band Upper limit qualifying earnings band
Current (2018/19) £10,000 £6,032 £46,350
Proposed (2019/20) £10,000 £6,136 £50,000

As a result of the review, the Secretary of State has concluded that the existing threshold of £10,000 remains the appropriate level at this point in the establishment of AE.

This is said to reflect ‘the key balance that needs to be struck between affordability for employers and individuals and the policy objective of giving those who are most able to save the opportunity to accrue a meaningful level of savings with which to enter their retirement.’

As aforementioned, though all the staging dates may now have passed (meaning all employers now have immediate pensions duties) this doesn’t mean that those who did stage can forget all about Auto-Enrolment. The Pensions Regulator and many employers are now considering their ongoing ‘re-enrolment’ duties.

On the three-year anniversary of their original staging date, employers will need to complete the re-enrolment process.

Unlike their original, predetermined staging date, the employer can select a date to re-enrol from a given re-enrolment ‘window’. Designed to make the process more flexible for employers, the re-enrolment date the employer chooses can be up to 3 months before or after their original staging date.

On this date all of the workers on the payroll will need to be re-assessed and any workers who are eligible, that have previously opted out of the scheme, will be automatically enrolled back into the pension scheme. Employers should also bear in mind that new statutory communications will need to be generated and issued to employees.

Workers will have all of the same opt out rights as before but, as before, they will have to contact the pension provider directly and comply with the necessary steps in order to be removed from the pension scheme and for the opt out refund to be processed.

A Re-Declaration of Compliance will need to be submitted to The Pensions Regulator. For the most part, this follows the same format as the original Declaration and is completed online. It must be submitted within five months of the third anniversary of the staging date.

As with the first Declaration of Compliance, if the submissions are not made on time The Pensions Regulator can issue escalating fines.

Elaine Shaw, Payroll Manager at George Hay, said: “It remains as important as ever to ensure you are compliant with your legal obligations, as an employer, in respect of workplace pensions.”

“Failing to fulfil your responsibilities can be extremely costly for both you and your employees, so it pays to seek professional advice if you’re unsure about what you should be doing.”

At GH Payscheme, George Hay’s specialist Payroll Bureau in Biggleswade, Letchworth and Huntingdon, our team can assist you with administering your chosen workplace pension scheme and help you to ensure that you comply with all of the requirements of Automatic Enrolment.

To discuss your requirements in more detail with one of our experts, call us on 01767 315010 or fill in one of our online enquiry forms.

Payroll & pensions: what’s changing in 2019?

The new financial year often brings about a raft of changes that will impact upon how you process payroll and pensions. Here, we cover a few key things you should be aware of ahead of April 2019:

Pensions contributions increasing

The minimum pensions contributions will increase again in April 2019, for both employees and employers. The increases are as follows:

Employer minimum contribution* Employee minimum contribution* Total minimum contribution*
6 April 2018 – 5 April 2019 2% 3% 5%
6 April 2019 onwards 3% 5% 8%

*minimums are based on a banded qualifying earnings scheme. Different rates apply for schemes where a different earnings basis is used.

As an employer, you can choose to pay the full amount of the total minimum contribution, leaving staff with nothing to pay at all, unless the scheme’s rules say that they have to make contributions. Employees can also choose to contribute more than the minimum amount if they want to.

If you choose to pay in more than their legal minimum contribution, but less than the total minimum contribution, then staff must pay in at least enough to make up the shortfall.

When it comes to ensuring you are appropriately prepared, there a few things you should consider:

  • Can your workplace pension scheme and payroll software support the contribution increases by 6 April 2019?
  • If the answer to the above is no, then your chosen scheme may no longer qualify under AE. Have you thought about alternative schemes/software?
  • How will you communicate the pension contributions increases to your staff?

If you’re unsure about how to meet your obligations or you’re concerned about the upcoming changes, we would urge you to seek professional advice at the earliest opportunity.

A change to the Tax-free Personal Allowance

From 6 April, the tax-free Personal Allowance (the threshold used to calculate how much income tax needs to be paid) will increase from £11,850 to £12,500. The threshold for paying higher rate tax has increased from £46,350 to £50,000.

State pension on the rise

The state pension is due to increase by 2.6 per cent in April 2019, meaning that the basic state pension will be £129.20, and the flat-rate state pension will rise to £168.20.

Expected to affect up to 13 million pensioners, those who are entitled to the full new single-tier state pension could see their income rise by approximately £221 a year. Those who receive the basic state pension could find themselves roughly £169 better off at the end of the 2019/20 tax year.

The state pension is protected by the ‘triple lock’ guarantee, meaning that it rises each year in line with the greater of annual price inflation, average earnings growth or a guaranteed 2.5 per cent minimum.

Since September’s 2018 inflation figure was 2.4 per cent and average earnings were 2.6 per cent, the government is expected to use average earnings to increase the state pension from 6 April 2019.

A (slightly) more generous Pensions Lifetime Allowance

The Pensions Lifetime Allowance (LTA) will rise from £1,030,000 to £1,055,000 in line with the Consumer Price Index (CPI).

While this may not apply to you at present, it’s worth bearing in mind that pensions are a long-term commitment and you may find yourself edging towards or even exceeding the LTA by the time you wish to take your benefits. At this point, it may be necessary to act to avoid exceeding the limit.

Here at George Hay, we work with you to tailor our payroll services to the needs of your business. So, if now seems like the perfect time to make your payroll needs a priority, don’t hesitate to get in touch with our team today.