As a new financial year approaches, employers may be taking this opportunity to review their employees’ pay.
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.
When setting the national living and minimum wage rates for 2024, the Low Pay Commission focussed on the need to support lower-paid workers.
A key change is the lowering of the threshold for the NLW to 21 (it is currently only payable from the age of 23). From 1 April 2024 there will be:
a 9.8% increase to the NLW for those aged 21 and over (from £10.42 to £11.44 per hour)
a 14.8% increase for those aged 18-20 (from £7.49 to £8.60 per hour)
a 21.2% increase for those aged 16-17 and apprentices (from £5.28 to £6.40 per hour).
Alongside legal minimums, employers will be keen to ensure that remuneration enables them to attract and retain the right talent. 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.
You could also consider providing employee benefits to give staff an additional incentive. Depending on what you offer, these may be tax deductible.
2024/25 Payroll Considerations
National Insurance contributions
The primary rate for class 1 National Insurance (NI) contributions will reduce from 12% to 10% from 6th January 2024.
From 6 April 2024, the thresholds for repaying student loans will increase to £24,990 for those on plan one, and is frozen at £27,295 for plan two.
If an employee’s pay exceeds the threshold for their student loan plan, employers will need to make the correct deductions from their pay and report this to HMRC.