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If your property business employs staff, then you need to start preparing for some potentially big changes to your payroll costs from April. We’ve broken it down for you here.
National Minimum Wage
These are the new National Minimum Wage rates which apply from 01 April 2022:
- For employees aged 23 and over this increases from £8.91 to £9.50 per hour
- For employees aged 21-22 this increases from £8.36 to £9.18 per hour
- For employees aged 18-20 this increases from £6.56 to £6.83 per hour
- For employees aged under 18 this increases from £4.62 to £4.81 per hour
- For apprentices this increases from £4.30 to £4.81 per hour
Apprentices
The apprenticeship rate applies if the apprentice is either:
- Under 19 years of age
- In the first year of their apprenticeship
Apprentices will be entitled to the National Minimum Wage for their age if they are both:
- Aged 19 or over
- Have completed the first year of their apprenticeship
Pension threshold
Please be mindful that the above increases in the National Minimum wage may push your employees’ earnings above the threshold for automatic enrolment of £10,000 per annum. If this occurs, then you will be legally required to enrol these employees into a pension scheme.
We will advise you if this affects any of your employees and will ensure that they are enrolled if we are managing your existing pension scheme.
National Insurance Contributions
On 07 September 2021 the government announced a new 1.25% Health and Social Care Levy to fund the NHS and social care. The Levy will be effective from 01 April 2022 when National Insurance Contributions (NICs) for working age employees, self-employed workers and employers will increase by 1.25%.
This levy will be in effect for 2022/23 and will then revert to previous rates in 2023/2024
Example
In March 2022, your employee earned a basic pay of £2,000.00, of which £1,202.67 is above the Primary Threshold of £9,568 per annum for NICs
- They paid £144.32 (12% of £1,202.67) in NICs
- You paid £165.97 (13.8% of £1,202.67) in employer NICs
In April 2022, you employee earns a basic pay of £2,000.00, of which £1,202.67 is above the Primary Threshold of £9,568 per annum for National Insurance contributions
- They now pay £159.35 (13.25% of £1,202.67) in NICs
- You now pay £181.00 (15.05% of £1,202.67) in employer NICs
In both cases – employee and employer – the percentage contributed towards NI increases by 1.25%
This change will not affect workers over the State Pension age.
What you need to do
Firstly, don’t panic. Take some time to run through this with your payroll manager or payroll service provider to forecast payroll costs from April so that you can plan ahead.
Be prepared to deal with disgruntled employees whose net pay could decrease because of the increase to their NICs due to the new Levy. Make sure that your employees are fully aware of the upcoming changes if you haven't already.
To mitigate some of the impact of the new Levy, you could consider offering a salary sacrifice scheme to your employees. For example, employees could sacrifice some of their salary into their pension scheme. This would reduce NICs for both employee and employer. The employee would sacrifice salary, reducing their net pay, however, they would be reducing their NICs and be saving into their pension instead. Using such a scheme could save the employer and the employee several hundred pounds per year in NICs.
