As a new financial year approaches, employers may be taking this opportunity to review their employees’ pay. COVID-19 has unfortunately once again made this a more difficult decision than usual.
Many businesses will want to reward employees for their hard work over a difficult period, but some will find pay rises hard to justify in light of the financial impacts of the pandemic and the rising costs of supplies.
When setting the national living and minimum wage rates for 2022, the Low Pay Commission balanced the need to support lower-paid workers against the risk of creating additional costs for businesses that are already vulnerable to financial pressures. The national living wage is due to increase by 6.6%, to £9.50 for workers aged 23 and older.
April 2022 Increases
National Living Wage £8.91 to £9.50 up 6.6%
21-22 Year Old Rate £8.36 to £9.18 up 9.8%
18-20 Year Old Rate £6.56 to £6.83 up 4.1% 16-17 Year Old Rate £4.62 to £4.81 up 4.1%
Apprentice Rate £4.30 to £4.81 up 11.9%
Accommodation Offset £8.36 to £8.70 up 4.1%
Alongside legal minimums, employers will be keen to ensure that remuneration enables them to attract and retain the right talent in a difficult market for recruiters. In doing so, they will want to consider rates that competitors’ pay, the buoyancy of the jobs market, as well as regional differences, the level of demand for the skills employees have, and any changes in their roles over the past year.
Pay schemes and benefits
It’s also important to consider the way you structure your pay schemes as a whole – whether your employees are paid by the hour, on an annual salary, or by commission, for example – and consider whether it’s consistent across your team.
If your team has grown recently, or working practices and roles have changed, you might need to rethink the way your employees are paid. In any case, you should always agree changes with each employee, and seek professional advice to make sure you’re acting within employment law.
Many employers are also considering enhancing employee benefits and flexibility to give staff an additional incentive. Depending on what you offer, these may be tax deductible.
National Insurance contributions
National Insurance contributions (NICs) will increase, with the rate for each class rising by 1.25 percentage points. These will revert to their previous levels from April 2023, and be replaced by a new health and social care levy.
The primary threshold and lower profits limit will also increase to £12,570.
As of 6 April, the employment allowance will increase to £5,000, allowing small businesses to reduce their NICs liability by an extra £1,000. The Government says this will allow a small business to employ four full-time members of staff on minimum wage without the employer paying NICs.
The temporary 12.5% VAT rate for hospitality businesses, which was in place due to the impact of COVID-19, will revert back to 20%.
A weeks' basic pay (used for basic awards and redundancy calculations) increases from £544 to £571.
The maximum compensatory award for an unfair dismissal claim increases from £89,493 to £93,878
Weekly rates for statutory maternity pay, maternity allowance, paternity pay, shared parental leave and adoption pay move from £151.97 to £156.66.
From 6th April, statutory sick pay increases from £96.35 per week to £99.35