PIXIE PAYROLL Blog

The Chancellor of the Exchequer Jeremy Hunt confirmed the details of his budget this week after a number of the policies were published in advance of his speech, which meant there were not that many surprises.

Jobs and work

The chancellor’s budget included a number of initiatives to get more people back into work as he believes we currently have too many people who are economically inactive. That might be because access to childcare prevents younger people from working or because older people have chosen to retire or feel they do not have the skills to work in today’s workplace.

As was extensively discussed before the budget speech was delivered, the government will be offering 30 hours per week of free childcare for all children over 9 months old; currently that is only available for 3 and 4 year olds. This will be phased in starting in April 2024 when 2 year olds will get 15 hours of free childcare with the younger children becoming eligible in September 2024. By September 2025, all eligible children aged between 9 months and 3 years will receive 30 hours.

In addition to this, the amount those on Universal Credit can claim for childcare will increase to £951 a month for one child and £1,630 a month for two.

For those older workers, the chancellor announced that £63m will be available to encourage those over 50s who have retired back into the workforce. Returnships – think internship but for those who already have skills and experience – and skills boot camps will boost skills and confidence to help them return to work.

He also announced that there will be a £20,000 increase in the amount that can be put tax-free into a pension each year, again designed to get people staying in the workforce and not retiring too early.

Taxation

There were no big changes to the amounts people as individuals will pay in tax but the chancellor did confirm that corporation tax will increase from 19% to 25% in April, although there will be tax breaks for investments in machinery and technology.

Taxpayers will now have a bit more time to make voluntary National Insurance payment to top up any gaps in their contributions as the deadline has been extended to 31^st July 2023.

Energy costs

Under the Energy Price Guarantee, the government has limited energy bills for a typical household to £2,500 a year, plus a £400 winter discount. That was due to end in April but will now be extended into June. It is hoped that the fall in wholesale prices and reduced consumption in the summer will mean costs naturally falling back by then, so the subsidy won’t be required after that point.

Other announcements

It is traditional at budget time to see changes to alcohol and tobacco taxation and the chancellor made announcements about those too. Alcohol tax will rise in line with inflation from August although there will be reliefs for beers, wines and ciders sold in pubs to allow for better competition with supermarkets. Tobacco tax will rise by 2% above inflation and 6% above inflation for hand-rolling tobacco.

Fuel duty will be frozen so the 5p cut in duty will continue for another year.

This year’s spring budget didn’t have many headline announcements that will affect the average payroll but there are still some important changes coming up for workers so if you have any questions about the budget, don’t hesitate to get in touch.

You might remember that back in October last year, I wrote about the 4 day week campaign and how some companies were taking part in a pilot to see how it would work for them and their employees in reality.

Well, the results of that pilot have just been released and they make for some very interesting reading.

Headline results

61 companies took part in the pilot and of them, 92% have decided to continue with the four-day week. 71% of employees reported lower levels of burnout and reduced stress. Both mental and physical health improved, and levels of sickness, anxiety and sleeplessness decreased.

For employers, revenue stayed broadly the same which suggests there’s been no dip in productivity, especially given how challenging the last 6 months have been for businesses.

Employer perspective

The companies which took part in the pilot were from different sectors and of different sizes and not everyone took a simple ‘close on a Friday’ approach to a 4 day week. They worked in consultation with their employees to ensure the change worked for them too and so some staggered the extra day off and some switched to an annualised hours model.

Although employees were working fewer hours, no employers reported a corresponding drop in productivity. Overall a majority of businesses said they were satisfied with company performance during the pilot.

The pilot period coincided with a time that some were calling the ‘Great Resignation’ where people were reassessing their work life after the pandemic. However, in the companies switching to a 4 day week, the data shows fewer resignations which suggests the new working pattern was a significant incentive to retaining employees. There was also a fall in sickness and absence rates.

Employee perspective

It’s perhaps easier to anticipate that reducing working hours would have a positive impact on employees but still the results of the pilot are very interesting.

It should be said that not everyone went straight down to working just four days with some variation in exactly how many hours a week people worked. But that said, 71% of employees said their working hours reduced to an average of 34 hours per week.

In terms of employee wellbeing, 39% said they felt less stressed at the end of the pilot and 48% saying they felt more satisfied with their work than before the study started. 43% said they felt an improvement in their mental health and 37% said their physical health had improved.

There was also a significant positive impact on family life with employees reporting more time with family, feeling less tired and 60% said they had found it easier to balance care responsibilities. People had more time to look after children or elderly relatives, to spend on hobbies or volunteering in their community. There was also more time to cook from scratch which could have a positive health impact too.

Conclusion

The 4 day week pilot has had some perhaps unsurprising benefits for employees but also some quite unexpected benefits for employers too. And it is testament to those benefits that so many businesses are continuing with the model now the pilot has finished.

As the 4 day week campaign gains momentum, employees will look for employers who offer this working model and so we think it’s important for other employers to learn from the pilot and perhaps consider implementing it in their businesses in some form.

You can read about the pilot and download the full report here. The 4 Day Week campaign website can be found here which has lots more support and resources for employers and employees.

We’ve nearly made it to the end of January in this new year and there are some very early signs of spring around, despite last week’s snowfall. As is usual at this time of year, we are going to look forward to the upcoming months in this blog and try to guess what might happen.

National Living and National Minimum Wage rates

The government has already announced the rates that will be coming into effect from April this year

	Current Rate	New Rate from April 2023
National Living Wage	£9.50	£10.42
21-22 Year Old Rate	£9.18	£10.18
18-20 Year Old Rate	£6.83	£7.49
16-17 Year Old Rate	£4.81	£5.28
Apprentice Rate	£4.81	£5.28

These new rates represent an uplift of around 10% for all tiers which means they are just about keeping up with the current inflation rate which is good news given the current cost of living crisis.

As always, if you need any help calculating what the new wage rates mean for your payroll just get in touch.

Energy Bills Discount Scheme

We’ve all seen our energy bills rise recently but for some business, the increases have been huge. The current Energy Bill Relief Scheme ends in March and is being replaced by the Energy Bill Discount Scheme. This will focus help on those businesses with high energy costs such as those that fixed their rates before wholesale costs started to come down again and manufacturers who use a lot of energy.

The discounts will be automatically applied to those businesses who qualify and any queries about the scheme should be directed to a business’s energy provider.

Covid-19 support

Life does seem to have somewhat gone back to normal now although it was only a year ago that the Omicron restrictions were lifted, and people were returning to the office. All Covid-19 support schemes have now closed and let’s hope there’s no resurgence of the virus in 2023.

The King’s Coronation

Following the sad passing of HM Queen Elizabeth II in September last year, we now know that the King Charles III’s Coronation will be on Saturday 6^th May. We have been granted an extra bank holiday on Monday 8^th May which of course is very close to some other regular bank holidays we always enjoy in the spring.

We know from our clients that bank holidays aren’t always that straightforward in terms of rotas, extra pay and holidays. An extra bank holiday can also sometimes have an impact on an employee’s annual holiday entitlement so if we can help with any aspect of this additional day off, just get in touch.

Tax and National Insurance

2022 was a bit of a rollercoaster regarding tax and national insurance and we won’t know what’s planned for the future until the Spring Budget on 15^th March 2023. Keep an eye on our Facebook page nearer the time as we’ll be posting updates on the details as we get them.

We’re looking forward to working with our clients in 2023 and also meeting new ones as the year goes on. If you think 2023 is the year you ask someone else to manage your payroll for you, just get in touch.

It seems quite strange to think that when this year got underway, we were still working under Covid-19 restrictions and a lockdown was in place. That all seems so long ago as it’s been yet another tumultuous year and this time, that wasn’t just caused by the pandemic. As we’re close to the end of 2022, here’s our usual look back at the twelve months just gone.

National Insurance

We mentioned in our blog post at the beginning of the year that National Insurance rates were due to increase by 1.25% in April 2022. That rise did take place and for a while, we all paid a little more into the pot. However, as the cost of living crisis deepened and just before that increase kicked in, the then Chancellor Rishi Sunak announced in the Spring Statement in March that the threshold after which workers would pay National Insurance would increase in July to match the income tax threshold. That meant that although the rate increase would stay, the lowest earners would not have to pay NI at all and others would pay less.

In a further move, another Chancellor Kwasi Kwarteng announced in September that the rise would be scrapped from November although the increase in the threshold would stay. The current Chancellor did not reverse that step in his own Autumn statement last month.

So, it’s been a confusing year for National Insurance but we end it paying less overall than we were at the beginning. We will see in 2023 whether there are further developments.

You can read more about the early changes to National Insurance in our May blog here and the September mini-budget here.  

Cost of Living Crisis

We’ve all noticed the increase in the price of everything this year whether it’s our energy bills or a tin of beans at the supermarket. That has driven inflation which has, in turn, driven employees’ requests for a pay rise. Interest rates have also increased in response to higher inflation which has impacted the cost of mortgages.

Overall, it’s been a difficult year financially for many families and employers and we can only hope for some green shoots of recovery next year. If you’d like any help with calculating what a pay rise for your employees would mean for your business, just get in touch.

And if you want to see if you or your employees are eligible for any of the government’s cost of living support schemes, all the details can be found here.

Staff shortages

Many of our clients, especially those in the hospitality sector, have continued to report staff recruitment issues this year with some coping with another busy summer on sparse teams. Others have had to adapt their offering or even close on some days to give their staff a break.

However, data released by the Office of National Statistics this week suggests that unemployment is rising very slightly, the number of vacancies dropping and that more over-50s are choosing to return to the workforce. That does suggest that 2023 might see fewer staff shortages although of course, the reality is never that simple.

2022 for Pixie Payroll

There’s no doubt that this year has been another incredibly busy year for Pixie Payroll as we’ve helped our clients navigate challenges both old and new. Starting the year still in the grip of Covid-19 and managing the impact of sickness and absence as employees continued to contract the virus has been a characteristic of the entire year and we are expecting that to continue into 2023.

We have also been supporting our clients as they help their staff tackle the cost of living crisis which has sometimes involved calculating pay rises and enhanced benefits quite rapidly for their teams.

And of course, we have all had to deal with the death of Her Majesty The Queen in September and the resulting days of mourning, coming so soon after the extra bank holidays for the Platinum Jubilee. We can now look forward to another extra bank holiday in 2023 as the nation marks King Charles III’s coronation in May.

We’d like to wish everyone a happy and peaceful Christmas and best wishes for the New Year.