PIXIE PAYROLL Blog

I can’t believe it’s December already; it feels like I write these annual reviews far more frequently than just once a year! And as has become the norm over the last few years, it’s certainly been another difficult one for us all. Covid may not still be with us on quite the scale as in previous years, but increasing costs, recruitment issues and business uncertainty have once more presented challenges.

Cost of living

As we did at the end of 2022, we can’t look back on the year without mentioning the cost of living crisis. With inflation still running well above the Bank of England’s target, consumers have seen the cost of everyday items increasing. Other things, like insurance, have seemed to have suddenly jumped in price this year.

High inflation rates have this year filtered into rises such as pensions and benefits, pay rises and even increases in train fares, adding even more costs to businesses’ bottom lines.

There are some signs that the inflation rate is coming down and this month, the interest rate was kept the same for the third month in a row so we could be hopeful for a better 2024.

Taxation

We’ve also seen some taxation changes this year and as in 2022, it’s mostly been in connection with National Insurance. After the rollercoaster of last year which saw a number of rate change announcements, the Chancellor announced another in his Autumn Statement last month (which you can read all about here) and said that the headline rate of NI would fall to 10% from January from 12%. There will be changes to the NI that self-employed people pay too.

Apart from that, and despite many rumours, there were no other tax changes, so we are waiting to see what happens in the Budget next Spring.

Pixie Payroll’s year

We have been kept very busy this year and we’re so grateful to all the new clients which have joined us and entrusted the vital job of payroll management to us. We have also been working with more businesses from outside of Cornwall which is great for us.

We have been helping employers manage pay rises, sickness absence and recruitment throughout the year, as well as an extra bank holiday that we had for the coronation of King Charles III in May. We like to think that hopefully we’ve taken away some of the day to day headaches for our clients.

It’s also been a real pleasure for us to once again be sponsors of Mullion Cricket Club – this year we added sponsoring a player as well as a match ball to our support. We had an amazing summer of cricket no matter the results and it was so rewarding to get behind our village team.

So now 2024 is on the horizon and it’s likely to be another challenging one although with some hope of better times. We’d like to wish everyone a very Merry Christmas and a peaceful New Year.

The Chancellor of the Exchequer Jeremy Hunt has delivered his Autumn Statement and it’s an interesting one. There has been a lot in the media over the last couple of days about taxes, wages and benefits but now we have the full picture about what’s planned.

National Living Wage

There will be some quite significant changes to the National Living Wage next spring. At the moment, only those aged 23 and over are paid the NLW with younger workers and apprentices being paid various levels of National Minimum Wage but from April next year, the age at which employees start receiving the NLW will decrease to 21 years, so those aged 21 and 22 will be included for the first time.

In addition, the NLW rate will increase by just over £1 an hour – from £10.42 an hour currently to £11.44 an hour. That means anyone working 37 hours a week will receive nearly £2,000 a year more before tax.

National Insurance

This isn’t the first time our Budget or Autumn Statement blog posts have focused on National Insurance. But the Chancellor also announced some quite big changes here and it is the mechanism by which he has delivered the much-anticipated tax cuts, especially as he kept the freeze on the threshold when people start paying tax, meaning more people will become taxpayers as wages rise.

The headline rate of National Insurance will reduce from 12% to 10%. And he’s not waiting until next April to implement this either; it will be from 6^th January which means we’ll see a little more in our pay packets during January. 

For the self-employed, who pay their National Insurance in a slightly different way, an entire class of contributions – Class 2 – is being abolished entirely from next April. And the rate at which they pay Class 4 on profits over £12,571 is being reduced to 8% from the current 9%.

Benefits & pensions

It was confirmed that working age benefits will increase by 6.7% in April, a figure taken from September’s high inflation rate. In addition, Local Housing Allowance rates will also increase to reflect the increase in rents recently. The Chancellor also announced investment in schemes to help those with health conditions or who have been unemployed for more than a year get back into work.

The pensions triple lock has once again been maintained and so state pensions will rise by 8.5% from April, in line with average earnings.

Business initiatives

There was also some news for businesses in the Autumn Statement. The tax break that allowed companies to deduct spending and investment on new machinery from profits so lowering the tax bill has been made permanent.

Retail, hospitality and leisure companies – all of whom have been hit really hard by the cost of living crisis – will continue to get a 75% discount on business rates for another year.

Duties

There is often a change in various duties during these statements and this year is no different. There will be no change to alcohol duty for now, but tobacco duty rises by 2% and hand rolling tobacco duty by 12%. The Chancellor didn’t mention fuel duty so that will remain unchanged.

Cornwall Devolution Deal

Finally, and as it’s something close to home, we should mention that the Chancellor announced that a new devolution deal has been proposed for Cornwall. It includes measures that focuses on skills, green energy and Cornish culture and there’s more information here.

An employee facing the death of someone close to them is sadly something that many employers have to experience from time to time. It’s a situation that can affect people in many different ways and in some cases can severely affect a person’s ability to work. So it’s important that employers are prepared for the situation so they can adequately and compassionately support their staff member.

What is the law around compassionate leave?

Anyone who is classed as an employee has the right to time off from work if a dependent dies or they suffer the loss of a child to stillbirth or when they are under 18.

A dependent is defined as a husband, wife, civil partner or partner, child, parent, someone who lives in their household (but not employees, lodgers or tenants) or someone who relies on the employee such as an elderly neighbour.

But whilst employees have the right to take leave, there is no law around that leave being paid or how long the leave should be (unless it is in the case of the death or stillbirth of a child) so that’s why it is important employers consider the matter in their policies and contracts.

Should compassionate leave be paid?

In an ideal world, all compassionate leave should be paid, in the same way parental and sick leave is. But that’s not always possible and as there is no legal direction, it is important to give consideration as to where an employer stands before a situation arises.

One option would be to agree that employees can take paid time off after a bereavement and specify how long that can be for. That could be just a few days, a couple of weeks or longer. At a minimum, the employee should be able to have time to deal with the arrangements that follow a death and to attend the funeral, which might involve some long-distance travelling.

Then the employer can consider whether a longer period of leave might be allowed if it’s combined with annual leave or unpaid leave. In some circumstances, the leave might be considered as sick leave in which case, the standard sick leave policy should be enacted including the need for fit notes and consultation with the GP.

Having a discussion with the employee about leave and pay at the point of bereavement is not ideal and so employers are encouraged to develop a policy for all their employees as a matter of course, so it is in place for when it is required.

Death of non-dependents

If the person who has passed away is not a dependent of the employee, they can still request leave but there is no legal obligation to grant it. As mentioned above, a ready policy will help with these situations with consideration at least given to allowing paid time off for the funeral. As always, sensitivity and compassion are needed when discussing the circumstances so that the employee feels supported.

If you need help developing a compassionate leave policy, a specialist HR consultant will be able to help you. If any of your employees need compassionate leave and there needs to be adjustments to your payroll, just get in touch.

September is the month of back to school. For many young (and even some not-so-young) people, their higher education journey will begin which means becoming acquainted with student loans. Student loans are connected to payroll so here’s a look at what they are and how they can impact take home pay.

What is a student loan?

Put simply, a student loan is money a student borrows to pay for tuition fees and living expenses whilst they are studying. No repayments on the loan are made while the student is still studying and then after graduation, there is a salary threshold below which no repayments need to be made. Student loans are available for undergraduate and postgraduate study and may be supplemented by grants or bursaries which do not have to be repaid.

How much can be borrowed?

The amount that can be borrowed depends on a number of factors including household income but also where the student lives and studies. Tuition fees loans are capped at £9,250 and maintenance loans to cover living expenses go up to £13,022 for those students living away from home and studying in London or £9,978 for those studying outside of London.

The maintenance loan is intended to cover accommodation costs, transport and general living expenses so the maximum loan for those students who stay living at home is reduced to a maximum of £8,400.

The rates are different for part time or continuing full time students.

Any part-time work a student does during their studies has no impact on the amount of student loan that can be borrowed.

Paying back a student loan

No repayments on a student loan are due until after graduation. But then it all becomes quite complicated depending on what plan the loan is under and the income threshold that applies to that plan. For example, students who have borrowed under Plan 4 can earn £27,660 before they need to begin making repayments but those under Plan 5 will need to make repayments when they reach £25,000.

The repayment rate is 9% of income above the threshold. So for example, if a graduate is earning £30,000 and they are on Plan 4, they will need to pay 9% of £2,340 or £210.60.

Interest is charged on the student loan and again, this rate depends on the plan.

Full information on replaying a student loan and all the different plans can be found here.

Repayments are calculated as part of the payroll and are deducted from salary in the same way as tax and national insurance is. When we run payroll, we are notified of the details so we can make the calculation but employees should always check that the amounts are correct. Self-employed people make their repayments via their tax return.

Additional payments can be made at any time to bring down the balanced owed without any penalties.

Under certain circumstances, the loan will be written off. Again, this depends on what plan the loan is under and the details on that can be found here.

The new Plan 5

A new plan has been introduced for this year called Plan 5 so any new students starting this September will be on that plan. The thresholds for Plan 5 are earnings of over £480 a week, £2,083 a month or £25,000 a year before repayments need to be made and the repayment rate is 9%. The interest rate is 7.3%. A Plan 5 loan will be written off 40 years after the April when the first repayment was due.

If you need more information on student loans then head to the Student Finance website https://www.gov.uk/student-finance. If you’d like information on your own payroll scheme that might include employees repaying student loans then just get in touch.