Pay & Pensions: How will the April 2018 changes affect you and your employees?
Posted on: 4th Apr 2018 by: Dêmos HR Solutions
Spring is a time of change, and it’s not just the buds and bulbs that are blooming this month as bank balances stand to blossom a little too. With the arrival of April comes the start of the new tax year and companies have been busy preparing their payroll and policies to reflect changes outlined in the government budget announcement last year.
Employees across the UK stand to benefit from new rates of pay and tax contributions from 1st April 2018. The upcoming go-live date for GDPR will also impact your staff as we talked about in our blog last month. However, if you haven’t been able to get your head around all the changes, this latest blog from Dêmos HR Solutions provides some support below.
CHANGES TO THE 2018 NATIONAL LIVING WAGE AND NATIONAL MINIMUM WAGE
How will the new UK Living Wage and Minimum Wage affect employees?
Designed to cover the basic costs of living, the Living Wage offers employers guidance on the recommended minimum salary for workers aged 25 and over, across different regions of the UK.
From Easter Sunday, over two million workers should have received a pay rise of at least 4.4% as the government’s National Living Wage is increasing from £7.50 to £7.83 per hour for over-25s. For full time workers on basic pay, the increase will look to boost pay by more than £600 per year.
Workers paid the National Minimum Wage will also find an increase in their pay packets this month. Under 18s see a rise to £4.20 per hour, the 18-20 worker demographic will receive £5.90 an hour, and 21-24 year olds will get £7.38 per hour.
How will the new UK Living Wage and Minimum Wage affect employers?
Paying the Living Wage is a legal requirement and non-compliance could result in fines and criminal prosecution, so as an employer you will need to familiarise yourself with the new rates of pay. Ensuring employees receive the minimum National Living Wage or National Minimum Wage has been shown to boost productivity, reduce absenteeism, improve employee retention rates and reduce HR costs.
INCREASE TO UK PENSION CONTRIBUTIONS
How will the increase to UK pension contributions affect employees?
From 6th April 2018 we will see changes to auto-enrolment pension contributions with approximately nine million workers paying three times more in monthly contributions due to an increase from a minimum of 1% to a minimum of 3%. Although this is likely to mean extra contributions totaling hundreds of pounds each year, it is expected that this investment in pension payments will earn workers up to £17,000 a year more for their retirement.
How will the increase to UK pension contributions affect employers?
The 2018 increase in employee pension contributions will be matched with a 2% contribution by employers, combined with further tax relief from the government. If your employees are eligible for automatic enrolment through a workplace pension scheme, you have a duty to keep them informed of any changes that may take place that affects their contributions. Businesses must stay up to date with contribution rates based on the chosen pension scheme.
More information about workplace pensions is available here.
TAX IMPLICATIONS ON TERMINATION PAYMENTS
Termination payments or Payments in Lieu of Notice (PILON) are fairly common, with clauses often being included in employment contracts. Under current rules, certain PILON payments up to £30,000 have been tax-free, however from 6th April 2018, the government is applying changes that were originally announced at the 2016 Budget.
How will the changes to PILON (Payment in Lieu of Notice) affect employees?
The take-home pay as part of a termination package of any employee whose employment contract is terminated after 6th April 2018, could be significantly reduced, particularly those that have contracts that do not include a PILON clause, and those who do not receive other elements of termination payments exceeding £30,000.
How will the changes to PILON Payments affect employers?
As of 6th April 2018, the previous tax-free opportunity as part of PILON payments up to £30,000 will no longer apply and will be applicable for employer tax and National Insurance Contributions. Payments for employment termination that are over the amount deemed PILON under the new rules will benefit from a £30,000 tax and NIC exemption, with any excess being subject to income tax and employer-only (secondary) Class 1 National Insurance.
At the end of April, you will still have time to implement work to be done ahead of General Data Protection Regulations (GDPR) enforcement which is rolling out on 25th May 2018. However, now is the time to make your final checks to ensure your data protection activity is compliant with the new EU regulations. GDPR will have the most implications for HR practice, and you can find out more about what you need to do to prepare here.
DÊMOS HR SOLUTIONS ARE HERE TO HELP
At Demos HR, we can provide a range of services and support to businesses who need to implement changes to practice and policies surrounding pay and pension contributions.
Debbie Mosley, Owner and HR Consultant at Dêmos HR Solutions, has recently completed a GDPR practitioner course, offering further accreditation to her highly knowledgeable, and high-quality HR service and advice.
If you would also like a free resource template for employers, that will help with informing employees of the increase to pension contributions, please email firstname.lastname@example.org or call 07974 695 365.
Alternatively, complete our enquiry form to find out how your business can benefit from HR support.
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