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Double hit for employers

Written by admin on . Posted in Employment Tax, National Insurance Contributions, National Living Wage, National Minimum Wage. No Comments on Double hit for employers

The October Budget was not particularly kind to employers, with the cost of employer national insurance contributions (NICs) going up substantially from April 2025, combined with inflation-busting increases to the National Living/Minimum Wage.

Employer NICs

From 6 April 2025, the rate of employer NICs will increase from 13.8% to 15%, and the starting annual threshold will be lower at £5,000 (it is currently £9,100). For example, for someone employed on £50,000 per annum, the employer NIC cost will be just over £1,100 higher for 2025/26:

  • The increased 15% rate will also hit employers if they provide taxable benefits, such as medical cover, to employees.
  • The £5,000 threshold will stay in place until 5 April 2028. The threshold reduction will have a disproportionate impact on employers with a large number of low earners.

On the plus side – especially for smaller employers – the employment allowance is being increased from £5,000 to £10,500. Currently, this allowance is not available where employer NICs were £100,000 or more in the previous tax year. This restriction will be removed.

Although four full-time workers on the National Living Wage can be employed without any NIC cost for the employer, the changes are likely to see employers being increasingly careful with their recruitment policies.

National Minimum/Living Wage

Minimum wage rates will see substantial increases from 1 April 2025, with younger workers and apprentices benefiting the most:

  • For those aged over 21 and over, the hourly rate will go up by 6.7% to £12.21.
  • For 18- to 20-year-olds, there is a 16.3% increase to £10.00.
  • For apprentices and those under 18, the increase to £7.55 represents an 18% hike.

This follows similarly high increases in April 2024. Employees will welcome the uplift, but many employers will struggle with the additional cost; especially those in the hospitality sector. For full-time employees aged 21 and over, the increase is worth £1,400 a year. For 18- to 20-year-olds, the annual benefit is potentially worth over £2,500.

The rates of National Minimum/Living Wage can be found here.

Photo by Rob Wicks on Unsplash

National Living and Minimum Wages increase

Written by admin on . Posted in Employment Tax, National Living Wage, National Minimum Wage. No Comments on National Living and Minimum Wages increase

Minimum wage rates will see substantial increases from 1 April 2024 – welcome news for younger workers and apprentices, but not so much for those employers struggling in the current economic climate.

Eligibility for the National Living Wage is to be extended by reducing the age threshold so that 21 and 22-year-olds are included. Current and future rates of National Living/Minimum Wage are:

Current From 1 April 2024 Increase
Age Rates Age Rates %
23 and over £10.42 21 and over £11.44 9.8%
21 to 22 £10.18 12.4%
18 to 20 £7.49 18 to 20 £8.60 14.8%
Under 18 and apprentices £5.28 Under 18 and apprentices £6.40 21.2%

Employers can only pay the apprentice rate if the apprentice is aged under 19 or, if older, is in the first year of their apprenticeship. Apprentices over 19 who have completed the first year of their apprenticeship must be paid the rate for their age.

The provision of accommodation is the only benefit counting towards the National Living/Minimum Wage, with the maximum offset from 1 April 2024 set at £9.99 a day (£69.93 a week).

Real Living Wage

Some 14,000 employers – covering over 460,000 employees – now pay the Real Living Wage. This is on a voluntary basis, with the Real Living Wage independently calculated based on actual living costs.

  • The current hourly rate of Real Living Wage outside of London is £12, so – with the latest increase – the National Living Wage is not far off parity.
  • Where the government’s rate falls down, however, is for London-based employees where a Real Living Wage of £13.15 is deemed necessary due to the higher costs of working and living in the capital.

Also, the National Living Wage covers employees aged 21 and over, but the Real Living Wage applies from age 18.

HMRC’s National Living and Minimum Wage calculator for employers can be found here.

Photo by Desola Lanre-Ologun on Unsplash

Businesses failing to pay minimum wage

Written by admin on . Posted in HMRC Investigations, National Living Wage, National Minimum Wage. No Comments on Businesses failing to pay minimum wage

Just over 200 businesses – including some of the country’s best-known retailers ­– have failed to pay the minimum wage and will have to repay workers and face penalties of up to £7 million.

The minimum wage rules can be complex, and the fact that some major retailers have been caught out shows just how difficult compliance can be.

Uniforms

One particular area where businesses were not compliant was in regard to uniforms. The rules differ depending on whether uniforms are required as a condition or employment or if they are optional.

  • If employees are required to wear specific uniforms, any deduction by the employer to cover the cost reduces pay for minimum wage purposes. Similarly, if an employee has to reimburse their employer or has to purchase the uniform themself.
  • If uniforms are optional, pay is only reduced where the employer makes a deduction from the employee’s pay.


Working time

The other major problem area was paying correctly for time worked. This is not anywhere as simple as might first appear as illustrated by these examples:

  • Being on standby near the workplace counts as working time, but not if the worker is on standby at home nearby.
  • Travelling between assignments counts, but from home to the first assignment, and then from the last assignment back home does not – unless the first and last trips are by train and the employee is working on their laptop.


Penalties

A penalty of up to 200% of the unpaid wages can be charged, subject to a maximum penalty of £20,000 for each employee. However, the penalty will be cut in half if the unpaid wages and penalty are paid within 14 days.

Non-compliant employers will also be named and shamed, even where minimum wage underpayment is not intentional.

It is worth taking advice if an employer has any uncertainty over their wage position. A business can check if it is paying the correct amounts of National Living Wage and National Minimum Wage using HMRC’s calculator here.

Photo by Emily Morter on Unsplash