PIXIE PAYROLL Blog

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.

As I write this, we are into the last few days of summer and this time of year always makes me think of back to school and new starts, even though it’s been a long time since I was sewing name labels into clothes and will be a while yet before my grandson needs a school uniform.

So, for this month’s blog, I thought I’d take a look at a couple of aspects of back to school – ongoing training for you or your employees, and support for childcare costs.

Continuous Professional Development

Otherwise known as CPD, regular training and updates are a mandatory requirement for some professions and something worthwhile and productive for others. I myself do regular CPD to ensure I’m always up to date with the latest payroll legislation and as part of my Membership of the Chartered Institute of Payroll Professionals.

CPD in itself won’t have an effect on your payroll although you may be able to claim tax relief for the cost (as would someone who is self-employed). But being flexible around CPD in terms of allowing time off for study or exams, creating a supportive environment and structuring work to allow for real-time experiences will all be beneficial to your employee and make them more likely to stay on once their study is completed. Your business will also benefit from enhanced workplace skills and possibly more services you can offer clients and customers.

Help with childcare costs

With the summer holidays nearly over and life getting back to normal soon, many families will be getting back into a pattern of school, work and childcare. So we thought an update on support available to help pay for childcare might be useful.

Working parents (including those on parental leave, holiday or sick leave) can qualify for tax-free childcare; for every £8 the family pays into their childcare account, the government will contribute £2. The money can be used to pay for afterschool clubs and playschemes as well as childminders and nurseries.

There are some limits and qualifying criteria for tax-free childcare and more information can be found here: https://www.gov.uk/tax-free-childcare?step-by-step-nav=d78aeaf6-1747-4d72-9619-f16efb4dd89d

A contribution towards childcare can also be made if the parents are receiving Universal Credit or Working Tax Credits. Click the links for more information about how to check eligibility and apply.

The pre-school years have some specific tailored support. Parents and caregivers on selected benefits can get free education and childcare for 2 year olds. All 3 and 4 year olds receive 15 hours per week of free childcare with an approved childcare provider and some families can get 30 hours per week.

More information about childcare support for 2-4 year olds can be found here: https://www.cornwall.gov.uk/schools-and-education/pre-school-and-early-years/childcare-and-funding/

We hope you have had a good summer and have been able to enjoy some relaxing time away from work. Get in touch if you have any queries about payroll or want to start the new term afresh by asking me to manage your payroll for you.

Finding out a new baby is expected is a really happy and exciting moment. There’s lots to think about including how maternity and paternity leave will work for the family so as a follow on from last month’s blog about other statutory payments, we thought we’d look at payments available for new parents.

This is just a brief overview so it’s a good idea to check more specific details if either the employer or employee is unsure – we are always happy to help.

Statutory Maternity Leave & Pay

Statutory Maternity Leave is 52 weeks long; 26 weeks is called Ordinary Leave and the other 26 weeks is called Additional Leave. Employees don’t have to take all 52 weeks – the only leave they must take is 2 weeks after the baby is born or 4 weeks if they work in a factory.

They can also choose to start your maternity leave when they want but it can’t be earlier than 11 weeks before the baby is due.

Statutory Maternity Pay (SMP) is payable for up to 39 weeks. For the first 6 weeks, an employee will receive 90% of their average weekly earnings and then for the subsequent 33 weeks, the rate is £156.66 or 90% of the average, whichever is the lower amount. Employers are able to supplement SMP and the amounts and duration of that should be detailed in the Maternity Leave policy.

Legislation is currently going through parliament to extend maternity leave and pay if their baby is born premature – the proposal is that parents will get an extra week’s support for every week their baby is in neonatal care, up to 12 weeks.

Statutory Paternity Leave & Pay

Fathers are also entitled to take Statutory Paternity Leave (SPL) when their baby is born. They can either take 1 or 2 weeks leave starting from when the baby arrives.

The pay rates for SPL is the same as for SMP and employers can supplement the rate as with SMP depending what’s in their SPL policy.

Statutory Adoption Leave & Pay

If you are adopting a child, Statutory Adoption Leave (SAP) can be claimed. It is the same as SMP in terms of the rates and duration. Only 1 person in a partnership can get SAP although the benefits of Shared Parental Leave are also available to adoptive parents.

Shared Parental Leave

Parents can choose to share up to 50 weeks of Shared Parental Leave (SPL) after their baby is born and claim up to 37 weeks of Shared Parental Pay (ShPP).

SPL is triggered when the mother opts to stop her SML early and the balance of that is then allocated to Shared Parental Leave. For example, if the mother chooses to finish her maternity leave after 6 weeks, that leaves 46 weeks available for Shared Parental Leave and 33 weeks of Shared Parental Pay. Both parents can then split that time and pay between them either by taking time off at the same time or separately. For the father, Shared Parental Leave is over and above Statutory Paternity Leave.

Same sex couples

Same sex new parents are entitled to the same benefits as they welcome a new member to their family. The statutory leave may be a combination of maternity, paternity (or more properly the partner who hasn’t given birth), shared parental or even adoption leave – again it is best for the couple to discuss things with their employers to reach an arrangement that suits everyone.

Having just recovered from my short hospital stay, I thought an apt subject for this month’s blog is to give an overview of Statutory Sick Pay.

Statutory Sick Pay (SSP) is a payment an employee receives from their employer if they are ill and unable to work for a number of days. There is a legal entitlement to SSP as long as the employee meets a number of eligibility criteria.

Rate of SSP

The flat rate for SSP is £99.35 a week from the fourth day that an employee is unwell. Employees do not receive SSP for the first three days of illness although there was a now-closed exception to this during the pandemic where employees who had tested positive for Covid-19 were paid from the first day.

Eligibility for SSP

Most employees will be eligible for SSP although there are some exceptions. An employee must have a current employment contract and have done some work for the employer and must earn an average of at least £123 per week.

They must have been ill for at least 4 days in a row and have notified their employer of their illness in the way the employer asks or is detailed in their Sickness Policy. For example, if the policy says the employee must phone in sick by 9am on the first day, they may lose SSP entitlement if they don’t follow that policy.

Employees who are on maternity leave, have been on benefits before starting work for the employer, are in custody or on strike are not entitled to SSP.

Employees should also provide a ‘fit note’ (or sick note) from their doctor or hospital after the first seven days that details the reason why they have been unable to work. The time between the fourth day (the first day SSP is paid) and the seventh day can be covered by self-certification.

How long does SSP last?

Employees can only receive SSP for a maximum of 28 weeks.

An exception to this is if an employee has a series of linked absences if they have a long-term condition. An example might be where an employee has a week off and then successfully returns to work. Then a recurrence of the illness within 8 weeks means they need to take more time off (must be at least four days). This pattern can continue for up to 3 years until the employee can no long receive SSP.

Occupational sick pay

For many full-time employees, receiving only £99.35 a week might mean a significant drop in wages and the financial impact of being ill can add to the overall anxiety about the situation. Employers can therefore choose to top up pay over the statutory rate.

The details of this should be in the Sickness Policy but an example might be full pay for the first eight weeks of sickness, then only half pay for the next eight weeks and the statutory rate for the final 12 weeks.

After SSP

When an employee has used all their entitlement to SSP (usually after 28 weeks) and they are still not able to return to work, they can claim Universal Credit or Employment and Support Allowance.

This is also a situation where an employer’s Sickness Policy will come into play as there will be guidance on what to do and how to work with the employee to decide the best way forward.

It’s not unusual for employers to have to pay SSP so it’s best to be prepared both for short term sickness such as ‘flu or injury and longer term sickness due to serious illness. If you need any help with SSP, just get in touch.