Employers see sharp increase in expenditure on staff

George Hay Chartered Accountants

This month will see employers across the UK have to accommodate a sudden increase in employment costs, following a rise in workplace pension contributions and minimum wage rates.

For many businesses, who are already feeling the effects of growing uncertainty over the UK and wider global economy, the sharp increase in expenditure on staff could not have come at a worse time.

Minimum contributions for workplace pensions have risen to eight per cent this month, with employers required to pay in three per cent for each of member of staff who is enrolled in a qualifying pension scheme. The remaining five per cent must be made up by contributions from the employee.

However, employers can opt to increase their contribution to reduce the impact on employees, should they wish to do so.

The minimum contribution only applies to employees earning £10,000 a year or more and percentage contributions are calculated using only the employee’s earnings between £6,136 and £50,000.

The boundaries have also increased, since 2018’s income thresholds were £6,032 to £46,350, respectively.

Meanwhile, many employers will also see wage costs increase with the introduction of new statutory rates of pay.

As of 6 April 2019, employers must pay the following hourly rates for staff on the minimum or national living wage:

  • 25 and over (national living wage) – £8.21
  • 21 to 24 – £7.70
  • 18 to 20 – £6.15
  • Under 18 – £4.35
  • Apprentice – £3.90

In some cases, the increase in the statutory minimum wage could push up the additional amount that employers are required to pay towards workplace pensions.

The increase in pensions contributions for employees could also generate minimum wage problems, where they are contributing via salary sacrifice. Employers will need to ensure that employees are earning the correct rate of pay after the salary sacrifice element has been deducted.

Experts are warning employers that it isn’t as simple as just ensuring that the basic hourly rate exceeds the new minimum.

The rules for calculating national minimum wage pay are complex, and employers may find themselves inadvertently in breach of the rules once issues such as unpaid working time and any necessary deductions are accounted for.

Consequently, employers who have a large number of minimum wage workers and who are underprepared may see their cashflow take a significant hit.

The UK’s minimum wage is currently growing faster than other countries with a similar or higher minimum wage, such as Belgium, France and Germany.

The UK government is committed to eradicating low pay and later this year will announce the independent Low Pay Commission’s remit after 2020. At Spring Statement, ministers also announced that the world-leading academic Professor Arindrajit Dube will lead a review of the impact of minimum wages internationally.

Wage increases follow the biggest increase to workers’ rights in a generation, launched in 2018, and are a vital aspect of the modern Industrial Strategy.

As part of this, from 6 April all workers, including casual and zero-hour workers, will have the right to receive a payslip and the maximum employment tribunal fines for employers will quadruple from £5,000 to £20,000.

With GH Payscheme, you can rest assured that your payroll is in safe hands. Our support doesn’t start and end with simply producing your payroll each month but goes far beyond that; with specialist knowledge and years of experience, we are only a phone call away should you require advice and guidance on any payroll-related query.

We work with you to tailor our payroll services to the needs of your business and, using the latest technology, we ensure your business is compliant with payroll legislation at all times.

Contact one of our team today on 01767 315010 or by emailing biggleswade@georgehay.co.uk, to find out more about how we can help your business run more efficiently and cost-effectively.

If you want to read more about the recent legislative changes affecting worker’s payslips, click here.

Link: National Minimum Wage and National Living Wage rates & Workplace pensions