PIXIE PAYROLL Blog

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.

The timing of this has moved around a bit over the last couple of months but finally on Thursday, the new Chancellor of the Exchequer stood in parliament to deliver his Autumn Statement. It included changes to wages, pensions, benefits and taxation and so as we traditionally do, here’s a rundown of some of the details.

National Living Wage

With inflation so high, the Chancellor announced that the National Living Wage rate for those over 23 will increase to £10.42ph in April, up from £9.50ph now. The National Minimum Wage rates will also be increased for people aged 21-22 by 10.9% to £10.18 an hour, for those aged 18-20 by 9.7% to £7.49 an hour, for 16-17 year olds by 9.7% to £5.28 an hour, and for Apprentices by 9.7% to £5.28 an hour.

Income tax

Whilst no announcement was made about plans to either increase or decrease the rate of income tax, there is a plan to freeze personal allowances until April 2028. That means that, as pay increases, more people might start paying tax for the first time, or more people might tip into the higher rate.

The threshold for paying the highest rate of income tax, which is 45%, has been reduced to £125,140 from £150,000. This is a complete reversal of the situation in September, when it was announced that the 45% rate would be scrapped altogether.

Pensions & benefits

After months of speculation, it was confirmed that the ‘triple lock’ on pensions would be retained, which means the state pension will rise by 10.1% or £780 per year. In addition, pensioner households will receive £300 to help pay for energy bills. There is a review into the state pension age due in early 2023 so for some, the age they might retire at could change.

Benefits will also rise by 10.1% and those on means-tested benefits will receive a £900 cost of living payment – details on how that will be paid will be announced soon.

As always, if you need any help with working out what the budget will mean for your payroll and staff costs, just get in touch. A rundown of some of the other announcements made today around things such as windfall tax, capital gains tax and energy price cap can be found here: https://www.bbc.co.uk/news/business-63555313

The pandemic has ushered in many changes to the way we work including working from home and flexible working. But another change to our work week could be on the way soon – the four day week. Labour MP Peter Dowd has recently tabled a bill in parliament that would reduce maximum working hours from 48 to 32.

Around 70 companies in the UK are currently taking part in a pilot to see how a four day week might benefit their employees, their company, the economy and even the environment. Around 3,500 employees have been working a four day week with no loss of pay and an extra day off in the week. They can do what they like on that day – rest, life admin, volunteering or hobbies. Some are using it to reduce the cost of childcare or to help cope with other caring duties.

The deal these companies have made with their employees is based on a principle of the 100:80:100 model. Employees get paid 100% of their salary for working 80% of the time but commit to keeping to 100% of productivity.

On paper, it’s not difficult to see why a four day week might be attractive for employees but why are employers also very interested in the idea?

Benefits to employees

An extra day away from work each week can have more than just practical benefits for employees. More rest, time spent with family and friends or doing hobbies; or simply keeping on top of all those annoying bits of admin can lead to a real boost in work/life balance and noticeable mental health benefits.

Going to work costs money so one less day in the office can help employees with the increased cost of living, especially if it reduces childcare or travel costs.

Benefits to employers

There is evidence to show that moving to a four day week model actually increases productivity and boosts profits because of lower costs.

What’s more, employers who are offering a four day week will be able to attract the best talent and retention of those employees will be easier. Sick days will be reduced and incidences of stress and mental health issues should reduce.

Benefits to the environment

Working four days per week frees up employees to be able to lead a more sustainable lifestyle – they can grow their own food, cook from scratch or choose active travel options such as cycling.

And of course, it’s one fewer day each week when the car will be on the road or energy is used for all the office-based equipment.

Is a four day week right for your business?

A shorter working week won’t work for all companies and some employees might not be interested in the idea either so flexibility is going to be key. But if it’s something you want to explore further, start a conversation with your staff, perhaps via the HR department to see whether it’s something they’d welcome. If you have a union rep as one of your employees, it would be worth engaging with them too.

It will be important to reassure the team that it isn’t something you’re considering due to financial pressures and that they will still be paid the same. In fact, the only thing that won’t change if you move to a four day week, even on a trial basis, is your payroll!

The new Chancellor of the Exchequer Kwasi Kwarteng gave his mini-budget in parliament on Friday which actually turned out to contain some fairly major announcements. It contained some quite unexpected changes which the government hopes will drive growth and help with the cost of living crisis.

National Insurance

As was reported on Thursday, the Chancellor confirmed that the recent rise in National Insurance will be reversed and plans for the Health and Social Care Levy have been scrapped.

This means that from 6^th November, rates of National Insurance will go back to where they were before April so we will all see a bit more money back in our pay packets. The increase in the NI threshold that came into effect in July will be retained.

Income Tax

This announcement did come as a bit of surprise. There was always a plan to reduce the standard rate of income tax to 19% but that will now come from April 2023, a year earlier than originally planned.

In addition to that, the highest rate of income tax for those earning over £150,000 has been abolished so everyone earning more than £50,270 will pay 40%.

These changes mean that everyone who currently pays income tax will also see a bit more money in their pay from next April.

Corporation Tax

Another tax increase has also been cancelled. Companies were due to see their rate of corporation tax increase from 19% to 25% in April 2023 but this won’t now be happening.

Universal Credit and part time working

There will be new rules around looking for work and trying to increase earnings from January for those on Universal Credit. At the moment, anyone earning less than the equivalent of 9 hours per week on the National Living Wage has to meet regularly with a work coach and are expected to apply for new jobs or increase the hours they work at their current workplace.

From January, that will apply to anyone earning less than the equivalent of 15 hours per week with sanctions if the requirements are not complied with.

Other announcements

The Chancellor also announced that stamp duty thresholds will increase which means the cost of buying a new home will reduce.

He has also cancelled plans to increase the rate of duty on beer, cider, wine and spirits.

And finally, he said that the government will investigate setting up infrastructure and investment zones across the country where tax and planning rules could be relaxed to drive innovation and growth.

So all in all, that’s quite a lot to take in from what was billed as a ‘mini-budget’. It will also change the amount employees get to take home in their pay packets which, along with the freeze in energy costs also recently announced, may help with some aspects of the cost of living crisis.

If you’d like information on how the changes affect your employees or your overall staff costs, just get in touch.