As National Payroll Week 2021 draws to a close (a week to celebrate and raise the profile of payroll professionals in the UK) we’re reflecting on what’s been a pretty tumultuous week in terms of HR and payroll. With the announcement of the National Insurance Contribution (NIC) increase and subsequent Health and Social Care Levy this week, raising tax levels in the UK to higher than they’ve been since World War II, many businesses have been asking themselves how this will impact them.
Legislation and regulation that impacts payroll is fast-paced and ever-changing – more so than ever because of the events of recent times. With that in mind, we wanted to give a quick rundown of the trends, changes and important considerations in payroll in 2021, and how they might impact your business.
NICs increase and the Health and Social Care Levy
In terms of changes, this is the most recent and pressing – the government’s decision to increase NICs by 1.25% from April 2022 to fund health and social care. This increase will be reverted in 2023 and then replaced by the Health and Social Care Levy, which will be charged at the same rate and applicable to all businesses.
What does the NIC increase mean for my business?
The initial 1.25% increase in NICs will raise employer contributions from 13.8% to 15.05%. In practice, this is what the increase would look like:
With the current rate of 13.8%
For an employee earning £1000, you would currently pay:
(1000-737) x 0.138 = £36.30
With the new rate of 15.05%
For an employee earning £1000, you will pay:
(1000-737) x 0.1505 = £39.58
The increase also applies to employees, who will now pay 13.25% (previously 12%,for those earning less than £50,270 per annum). So in reality, this is a 2.5% increase in NICs rather than a 1.25% increase.
What does the Health and Social Care Levy mean for my business?
The Health and Social Care Levy will be a 1.25% tax applicable to employers, employees and self-employed people liable to pay National Insurance contributions. A point to note is that the Employment Allowance, which discounts small business NICs by up to £4,000, will apply to the levy, meaning that in practice, around 40% of businesses will not be impacted.
Talk Staff’s payroll experts stay up-to-date and informed of all upcoming payroll regulation and legislation changes, and can help you understand in more detail your obligations and how the Health and Social Care Levy will impact you. Get in touch to chat to one of our team.
Despite being introduced back in 2013 and being one of the most significant changes ever made to PAYE, many businesses fall foul of missing deadlines for Real-Time Information (RTI) submissions to HMRC. RTI requires you to submit PAYE information every time you pay your employees, on or before the date of payment. RTI submissions should be made every time you make payment, regardless of whether you as a business pay HMRC quarterly or monthly. The submission includes a Full Payment Submission (FPS), informing HMRC of employee payments and deductions, and an Employer Payment Submission (EPS), which applies if you reclaim things like statutory maternity pay, Employment Allowance, Construction Industry Scheme (CIS) reductions, or NIC holidays.
How do RTI submissions impact my business?
Failing to submit RTIs on time will land you with a fine, unless you have a “good reason”. The reason for late submission and whether this warrants the fine being waived is at the discretion of HMRC. You will also be fined for inaccurate returns.
The penalties for late filing are as follows:
- 1-9 employees – £100
- 10-49 employees – £200
- 50-249 employees – £300
- 250+ employees – £400
Whether you are outsourcing payroll or looking after it in-house, ensuring RTI compliance is vital to avoid costly penalties – both through timely submissions and accuracy of data.
Gender pay gap reporting
Reporting on gender pay gaps is required for business with 250 employees or more – whether this applies to you or not, keeping an eye on pay gaps in your organisation is good practice. For this year’s reporting, it’s worth noting that the deadline has been extended to 5th October 2021 due to the impact of COVID. Usually, you are required to take a snapshot of payroll on the 5th April, and report by the 4th April the following year.
In this post, we’ve highlighted just three things you need to be aware of when it comes to payroll in your business. As regulations change so rapidly, and more transparency around payroll is required, the admin burden increases. Talk Staff support businesses of all shapes and sizes with expert payroll outsourcing services. We can support you with HMRC compliant reports, secure payslips, auto-enrolment, P11Ds and more. If you’d like to find out how we could support you, get in touch to get a quote.