According to Ian Holloway, head of legislation and compliance at Cintra HR & Payroll Services, April 2017 will be the advent of so much change that it has been difficult enough to keep up with it, let alone digest it.
• Marriage and other allowance change. These are UK-wide
• Tax code uplifts
• Two UK tax regimes – Scottish Income Tax (SIT) and rest of the UK (rUK)
• Threshold changes
• Basic Earnings Assessment for childcare vouchers to use rUK thresholds
• No rate changes
• Threshold changes UK-wide
HMRC have made available guidance on National Insurance Contributions for the 2017-18 tax year:
• CA38 ‘National Insurance Contributions Tables A, H, J, M and Z’
• CA40 ‘Employee only Contributions’
• CA41 ‘National Insurance Contributions Tables B and C’
• CA42 ‘Foreign-going Mariners and Deep-sea Fisherman’
• CA44 ‘National Insurance for Company Directors’
• Booklet CWG5 ‘Class 1A National Insurance Contributions on Benefits in Kind’
Note that the CA33 ‘Class 1A on National Insurance Contributions on Car and Fuel Benefits’ was withdrawn from 06 April 2017 (though it is still available but marked ‘do not use’).
Tax and National Insurance:
• CWG2 ‘Employer Further Guide to PAYE and NICs’
• No change to £3,000 value
• HMRC will be monitoring ‘abuse’ throughout 2017/18 though
• Plan 1 and 2 thresholds increased
• SSP rates change effective 06 April
• SMP / SAP etc change effective 02 April
• Employment law payments and awards Great Britain effective 06 April – e.g. a week’s pay for redundancy. Northern Ireland is a big question mark as to the effective date of changes to their payments and awards. Look out for announcements from the Department for the Economy (DfE)
• New ‘tax’ for 2017/18 for eligible employers UK-wide at 0.5% of the employer’s paybill
• Levy Allowance £15,000 per employer for 2017/18
Optional Remuneration Arrangements (OpRA – aka salary sacrifice)
• Big changes to benefit and flexible remuneration packages – and last-minute ones as well. Look out for:
• Things that are not affected, e.g. childcare
• Things that have a grandfathering period
• Things that are affected, i.e. everything else!
• Key words
o The trigger point
o The relevant amount
• See Finance Bill 2017 and HMRC guidance
National Minimum and Living Wage
• New effective date for National Minimum Wage is 01 April – aligned with National Living Wage
• New rates payable for pay reference periods starting on or after the effective date.
National Minimum Wage/Living Wage rates increased on Saturday 1 April 2017 as follows:
• Workers aged 25 and over £7.50 per hour (from £7.20)
• Workers aged 21 to 24 £7.05 per hour (from £6.95)
• Workers aged 18 to 20 £5.60 per hour (from £5.55)
• Workers under 18 £4.05 per hour (from £4.00)
• Apprentices* £3.50 per hour (from £3.40)
- For apprentices under 19 and those aged 19 or over who are in their first year. All other apprentices are entitled to rate applicable for their age.
To be specific, the statutory requirement is that the hourly rates increase for pay reference periods that start on or after 1 April. The pay reference period is the period of time for which the worker is paid – i.e. the week, the month etc. Therefore, if a weekly pay reference period starts on 27 March 2017 and ends on 2 April 2017, there is only a statutory obligation to pay at the rates in force at the start of the period (27 March). Possibly, the best guidance on what constitutes the pay reference period is on NIbusinessinfo in Northern Ireland. This website details employment-related issues that apply UK-wide (like the Minimum Wage) and ones that are Northern Ireland specific.
Therefore, there are two initial steps for employers to take to ensure that they are paying at the correct national rates:
1. Look at the start date of the pay reference period; and
2. Look at the age of the worker on that date
• In Public Sector Bodies (PSBs), as defined in legislation
• Certain people who were off-payroll now have to go on the payroll if the payment is being made on or after 06 April
• They are not employees or workers but their deemed employment payments are included in the value of the employer’s paybill
• Key information
o Income Tax – Clause 1 and Schedule 1 Finance Bill 2017
o National Insurance – The Social Security (Miscellaneous Amendments No. 2) Regulations 2017
o The new Employment Service Status tool
o HMRC guidance
• I have a hunch that this regime may be extended to all employers at some time in the future. In quiet times, it’s probably a good idea to have a browse through all the off-payroll information to make sure you are prepared.
Gender Pay Gap (GPG) reporting
• For private and voluntary sector employers in Great Britain and public sector England where:
o The ‘relevant employer’ has 250 or more ‘relevant employees’ on the ‘relevant date’ – do some research!
• Be aware that GPG obligations already exist in public sector bodies in the devolved nations (Wales, Northern Ireland and Scotland)
• GPG should come to private and voluntary sector employers in Northern Ireland and Regulations were expected in June 2017.
Gender pay gap (GPG) reporting will become a reality with legislation effective 2017 – The Equality Act 2010 (Gender Pay Gap Information) Regulations 2017.
The legislation is significant, as we have been waiting for this for ages it seems. However, it is the guidance that we were also waiting for that will give an interpretation of how GPG reporting will work in practice.
On 28 January 2017, the Government Equalities Office announced the publication of guidance in collaboration with the Advisory, Conciliation and Arbitration Service (ACAS). This says that there are “four types of figures” that relevant employers will be required to produce on an annual basis from 6 April 2017. As I have said before, let’s try and be specific and say that there are actually six pieces of factual pieces of pay information that have to be presented:
1. The difference between the mean average hourly rate of pay for males and females, expressed as a single percentage
2. The difference between the median average hourly rate of pay for males and females, expressed as a single percentage
3. The difference between the mean average bonus pay for males and females, expressed as a single percentage
4. The difference between the median average bonus pay for males and females, expressed as a single percentage
5. A bonus eligibility statistic, expressed as a single percentage for men and women (i.e. two figures)
6. A quartile representation, showing the proportions of males and females in each of the four pay quartiles
This all revolves around the number of people at the “snapshot date” and the pay and bonuses received in the relevant pay reference periods surrounding it.
The publication of this guidance is a great start to help employers in Great Britain comply with the new GPG publication requirements.
Note that the guidance is only for private and voluntary sector employers in Great Britain. There is no equivalent guidance, yet, for the new public sector England GPG reporting.
Don’t forget that there are GPG reporting obligations of public sector already in Wales, Scotland and Northern Ireland.
• Public Sector scheme rate amendments (LGPS, TP etc)
• Auto-Enrolment thresholds (QEBS) changes in Great Britain and corresponding values in Northern Irish legislation
• Pension advice allowance introduced
• Employer-arranged pensions advice introduced
• Lifetime ISA introduced (not strictly payroll-related but one to keep an eye out for)
• Monthly Data Collection for Teachers’ Pension mandatory from December 2017
• Official rate of interest reduced to 2.5%
• Cars and van changes
• Making good dates aligned (for non-payrolled benefits)
Why offer benefits?
A competitive base salary and the offering of benefits will differentiate you as an employer and make your business more attractive to existing and future employees.
According to Richard Ashley, Recruitment Sales Manager, Chase Moulande, a recent survey found that 80% of job hunters enquire about a potential employer’s benefits package. Staff receiving benefits will have a monetary incentive for perks such as health plans, which the employee may have otherwise funded themselves.
Benefits provide a boost to employee morale; the same survey found that 70% of employees are more motivated and likely to stay at a company when offered attractive benefits. Consequently, benefits will minimise the threat of disruption to day-to-day business and avoid the cost of replacing employees.
Although providing employee benefits will cost the business in the beginning, the results will definitely outweigh that cost. The expenditure can be justified through employee retention, a more productive workforce and, if healthcare is provided, a healthier one – eliminating the amount of sick days.
Flexible benefits could include health schemes or various insurance, including critical illness, long-term disability or life assurance.
Other areas of flexible benefits include enhanced pension or holiday entitlement – these are usually described as core benefits. Non-core benefits could include superior health entitlement, such as family cover and the provision of gym membership.
Other types of benefits include ‘voluntary’ benefits. If offered, these are benefits that employees can choose to opt into. As with flexible benefits, employees can use part of their salary in exchange for the employer paying. In a salary sacrifice arrangement, the employee relinquishes their right to part of the cash remuneration due under their contract of employment. The sacrifice is made in return for the employer’s agreement to provide them with a non-cash benefit. Some of these arrangements are tax efficient, including areas such as childcare vouchers, cycle to work schemes and increased pension contributions.
A recent survey of UK employees found that half of us would sacrifice 5% of our annual income for benefits such as an enhanced pension and more annual leave.
The UK has come a long way in providing enhancements other than salary, but job seekers and employees are increasingly seeking ‘lifestyle’ benefits.
While employees will tolerate exchanging some of their salary for the best benefits, employers need to be pioneering and go the extra mile to keep their best workers through the right perks.
Innovative areas adopted by some of the leading employers include additional days off for employees’ birthdays, a day off for Christmas shopping, or time off for paid volunteering days – examples include working directly for a charity or through health or education support.
Softer perks could include providing breakfast and free or subsidised lunches. Generous benefits might include complimentary or discounted air travel or holidays, and paid sabbaticals in recognition of long service. While all these have a tax and National Insurance implication and undoubtedly would be a headache to administer, employers need to pay attention to what a more demanding and modern workforce desires, rather than assuming the minimum is adequate.