Posted by ianpascall - January 11, 2018 10:37 am Payroll changes and budgeting for 2018

This might be the time of year when you are thinking about pay rises for your staff and/or budgeting for the coming year.

In this regard you need to be aware of two changes, being an increase in the National Living Wage (NLW) and National Minimum Wage (NMW), and an increase in pension contributions.

From 1 April 2018 the following increases apply:

Employees over 25 (NLW)                           From £7.50 per hour to £7.83 (that’s 4.4%!)

Employees aged 21-24 (NMW)                   From £7.05 per hour to £7.38

Employees aged 18-20 (NMW)                   From £5.60 per hour to £5.90

Employees aged 16 and 17 (NMW)             From £4.05 per hour to £4.20

Apprentice NMW                                            From £3.50 per hour to £3.70

As you can see, the increase is quite a bit above the rate of inflation.

Under pensions auto-enrolment you, as an employer, are required to contribute 1% of gross pay all the while that the employee also pays 1%.  From 6 April 2018 those percentages increase to 2% (employer) and 3% (employee).

To make matters even more challenging, the Low Pay Commission has indicated that the NLW is likely to rise to “around £8.20 per hour (ph) “ in 2019/20 and “around £8.60 ph” in 2020/21. This is coupled with further increases to pension contributions from 6 April 2019 to 3% (employer) and 5% (employee).

Therefore, given the above NLW increases, the employer is effectively funding the employees’ extra pension contributions. To the cynics amongst us, that comes as no surprise.

For labour intensive businesses this will be a real cost that has somehow to be absorbed or passed on to customers.

Please get back to us if you wish to discuss the implications of the above or require any assistance with either budgeting/costing or payroll processing.  For more details about our payroll services click here.