Pay and pensions contributions are increasing

George Hay Chartered Accountants

National Minimum Wage & National Living Wage

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 on 1 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.

The NMW, which applies at varying rates dependent on age, will also increase from 1 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 NLW and NMW are compulsory and despite the two rates increasing at the same time every year, many employers still neglect to pay their staff correctly.

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 fail to pay their staff correctly, whether knowingly or unintentionally, 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.

Pensions contributions

The minimum pensions contributions will also increase again from 6 April 2019, for both employees and employers.

If you are an employer and you pay your staff monthly, this means that you have one final payday before you must comply with the changes.

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 Auto-Enrolment. 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.

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, to find out more about how we can help your business run more efficiently and cost-effectively.

To find out what else is changing in the world of payroll and pensions, in 2019, click here.