PIXIE PAYROLL Blog

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.

Not everyone can be happy all the time at work but as we see regularly in the news headlines, bad behaviour in the workplace is not unknown. People’s mental and even physical health can be affected if they experience or witness such behaviour and it is the employer’s responsibility to take action if a situation arises. There can be serious ramifications, including employment tribunals, if complaints aren’t resolved.

Process and procedures

Companies that foster an open and accessible culture can often avoid formal grievance procedures if employees know they can talk over a problem before it becomes too big. In-house HR, a freelance HR consultant or an approachable line manager should be the employee’s first point of contact and all efforts should be made to resolve an issue at this point.

In addition, it is a legal requirement that all companies should have a written grievance procedure so employees know the steps that will be taken and the likely outcomes. ACAS has a grievance process template here that is free to use. 

Formal grievance procedure

If after an initial complaint, the employee feels the situation hasn’t been resolved or if the issue is very serious such as sexual harassment, they may want to make a formal complaint. That complaint should be in writing to their manager and after that, a meeting should be arranged to discuss the matter, at which the employee has the right to be accompanied.

The meeting will be followed up soon after with a response detailing a decision or to let them know that more investigation is required.

Dealing with the person the grievance is against

As well as the employee making the complaint, the employer also has a duty of care for the person against whom the complaint is being made, especially before the outcome of any investigation is known.

Particularly for very serious allegations, suspending that employee might be a suitable course of action if it will help the investigation and prevent further harm.

For lesser complaints, a suspension might still be desirable but it may be possible for both parties to remain in the workplace while the process is going through.

Grievance resolution

Sometimes, the outcome of a grievance complaint is clear, especially if the complaint is upheld. But it will also be important to take into account the wishes of the employee with the grievance as they may welcome mediation or training to resolve the issue.

If the employee isn’t happy with the outcome, they can make an appeal. The process will include that for appeals but is essentially a similar series of actions but may include a more senior staff member overseeing the complaint and making the investigation.

Conflict in the workplace is never pleasant but it can have serious implications for all parties involved – including the employer – if complaints aren’t dealt with in a timely, fair and open way. ACAS (www.acas.org.uk) has information about handling complaints and individual employees may get support from their union. HR specialists can also offer help and advice if required.

A new bill was recently given Royal Assent which will change the way employers and employees work. Its official title is Employment Relations (Flexible Working) Act 2023 but is known more usually as the Flexible Working Bill and will come into force next year.

The Bill gives employees greater access to flexibility over where, when and how they work. It also asks employers to make decisions quicker and give reasons why a request might be declined.

Requesting flexible working

Currently, an employee has to be working for an employer for six months before they can make a request for flexible working. In the short term that won’t change as the new law isn’t explicit about this, but it is expected that secondary legislation next year will make it a ‘day one’ right to request flexible working. An employee can also only make one flexible working request in a year and that will increase to two.

Once the request has been made, employers now must make a decision on that request within two months, reduced from three. Should an employer want to decline a request, they must consult with the employee first and must give their reasons for declining.

Up to now, employees had to explain the effects on the employer if their request for flexible working was granted and suggest mitigations for those effects but this requirement has been removed in the new legislation.

Types of flexible working

There are a number of grounds for requesting flexible working including:

• Reducing working hours to work part-time
• Making a change to the start and finish time
• Flexitime – which means having flexibility to start and finish times as long as the set hours are worked over an agreed time i.e. a week or month
• Compressed hours – where more hours are worked on some days to lead to shorter hours or even a day off at another time
• Flexibility over location i.e. if some days of the week are done at home
• Job share

Why might flexible working be a good thing for everyone

As we have seen with the 4 Day Week campaign, new and innovative ways of working are becoming more popular as employees seek a better work/life balance and switch from a ‘live to work’ to a ‘work to live’ mentality.

Employers who offer options for flexible working or make it clear that they are open to a discussion about flexible working often find they are able to recruit more easily and have a more productive and happier workforce.

Flexible working that enables parents, carers or people with disabilities to work also means a workforce that is more diverse and fairer and will enable employers to recruit from a wider talent pool, which will be good for everyone.

It’s going to be a little while yet until the legislation comes into force but employers might want to start thinking about their flexible working policies now and how they might handle requests from employees. As always, if you need any advice regarding the payroll impact of any changes, just get in touch.

In our blog last month about pensions, we mentioned that people need 35 years of national insurance contributions before 2016 in order to qualify for the full state pension (and there are different calculations for those who have contributed fewer years or have contributed after 2016 – you can read more here).

It is possible to top up national insurance contributions and as some deadlines have recently changed, we thought it was worth devoting a whole blog to talking about that.

Gaps in the record

Many people who are planning for their retirement find they have gaps in their national insurance record. This might be because they lived and worked outside the UK, were unemployed but not claiming benefits or were employed but on low earnings or self-employed and only earning small profits.

These gaps may mean there are not enough qualifying years to receive the full state pension.

It is possible to fill the gaps by making additional voluntary payments to top up the account.

Checking the national insurance record

The first step in deciding whether a top up is required is to check the national insurance record which can be done by following this link https://www.gov.uk/check-national-insurance-record . This will show the total number of qualifying years and if there have been any years where there have not been enough contributions.

Checking eligibility

If there are gaps, then head to this link https://www.gov.uk/voluntary-national-insurance-contributions/who-can-pay-voluntary-contributions to check on eligibility to pay additional NI contributions. Most people will pay Class 3 contributions while those who were self-employed will pay Class 2 – each class has a different weekly rate.

Looking back at the years

Individuals can usually only pay voluntary National Insurance contributions for the previous 6 tax years and the deadline is 5 April each year. So the deadline for topping up contributions for the 2020/21 tax year is 5 April 2027.

The transitional arrangements around the introduction of the New State Pension in April 2016 meant the years back to 2006 could be topped up and at the beginning of this year, HMRC had a deadline to top up gaps in years between then and 2017 of 5 April 2023. Just before that deadline was reached, it was extended to 31 July 2023 and it has recently been extended again to 5 April 2025.

That gives everyone more time to check their national insurance records and decide whether to top up their contributions. It also gives more time to afford and make those payments.

It also means that men born after 5 April 1951 and women born after 5 April 1953 who were also part of the transitional arrangements on the introduction of the New State Pension have until 5 April 2025 to make voluntary contributions if they are eligible.

This is quite a complicated subject and we have only summarised the situation in this blog so if anyone wants more information, they should look at the HMRC website, look at their personal tax account or possibly consult their financial advisor to see if topping up contributions would be worthwhile.