We have summarised the main payroll changes coming into effect in April and what this means for your business and your employees.
We have also given some suggestions on what you can do to prepare in advance, to minimise the impact to your employees.
Please note, this is guidance only and does not constitute legal advice. If you have any specific queries please get in touch.
National Insurance Contributions 1.25% increase
From 6 April 2022, a new health and social care tax of 1.25% will be introduced across the UK, to pay for reforms to the care sector and NHS funding in England.
This new health and social care tax will apply to both employers and employees who pay Class 1, Class 1A and 1B National Insurance Contributions.
The levy will be administered by HMRC and collected through the current reporting and collection procedures for National Insurance Contributions (NIC’s) i.e. Pay As You Earn.
For the tax year 6 April 2022 – 5 April 2023, the levy will be collected through NIC’s, meaning employees and employers will see a 1.25% increase in their NIC’s (see worked examples below).
From 6 April 2023, National Insurance contribution rates will go back down to 2021 to 2022 levels, and the 1.25% increase will become a separate new tax called the ‘Health and Social Care Levy.’
From 6 April 2023, it should appear as a separate item on all wage slips, called “Health and Social Care Levy”.
Employee contributions
Current NIC % rate = 12.6%
New NIC % rate = 13.25%
Employer contributions
Current NIC % rate = 13.8%
New NIC % rate = 15.05%
Income tax – personal allowance rates
- 2021 personal allowance (i.e. amount you can earn tax free) £12,570.00 per annum
- 2022 personal allowance – no change to 2021 (still £12,570.00 per annum)
Standard tax code will therefore remain as 1257L – no changes needed from Payroll department.
National Living Wage (NLW)
Applicable to everyone aged 23+
Current rate (up to 31.03.22) = £8.91 (per hour)
New rate (from 01.04.22) = £9.50 (per hour)
% rate increase = 6.6%
Note – You may wish to review some of your current salaries based on this NLW increase. For example, an employee on a £20,000 salary working 40 hours per week earns £9.62 an hour. That is only 11p an hour more than the new National Living Wage. This could impact recruitment and retention and so you even if you do not have any employees on minimum wage, you may wish to review your existing salaries, particularly the lower ones, as it may mean that from April, they are not far off the new National Living Wage!
National Minimum Wage (NMW)
Apprentices
Current rate (up to 31.03.22) = £4.30 (per hour)
New rate (from 01.04.22) = £4.81 (per hour)
% rate increase = 11.9%
16 – 17 year old’s
Current rate (up to 31.03.22) = £4.62 (per hour)
New rate (from 01.04.22) = £4.81 (per hour)
% rate increase = 4.1%
18 – 20 year old’s
Current rate (up to 31.03.22) = £6.56 (per hour)
New rate (from 01.04.22) = £6.83 (per hour)
% rate increase = 4.1%
21 – 22 year old’s
Current rate (up to 31.03.22) = £8.36 (per hour)
New rate (from 01.04.22) = £9.18 (per hour)
% rate increase = 9.8%
Note – The National Living Wage and National Minimum Wage are essentially the same thing. The difference is that the National Living Wage applies to anyone aged 23 and over. The National Minimum Wage applies to anyone aged 22 and under.
Statutory Sick Pay (SSP)
Current rate (up to 05.04.22) = £96.35 per week
New rate (from 06.04.22) = £99.35 per week
Statutory Family Pay (Maternity, Paternity, Adoption, Shared Parental, Parental Bereavement)
Current rate (up to 02.04.22) = £151.97 per week
New rate (from 03.04.22) = £156.66 per week
Statutory Compensation limits
The Employment Rights (Increase of Limits) Order 2022 will come into force on 6 April 2022.
As a result, the following core compensation increases will apply to dismissals occurring on or after 6 April 2022:
- 1 week’s pay (basic award / redundancy payment) – £571 (increase from £544)
- Maximum compensatory award – £93,878 (increase from £89,493)
Bank holidays 2022
The bank holidays for this year are confirmed as follows:
- Friday 15 April: Good Friday
- Monday 18 April: Easter Monday
- Monday 2 May: Early May bank holiday
- Thursday 2 June: Spring bank holiday (moved from last Monday in May)
- Friday 3 June: Platinum Jubilee bank holiday (additional day for 2022 only)
- Monday 29 August: Summer bank holiday
- Monday 26 December: Boxing Day
- Tuesday 27 December: Christmas Day (substitute day)
As you may already be aware, Friday 3 June is an additional bank holiday for 2022 only, to celebrate the Queen’s Platinum Jubilee. Whether you must give your employees this additional bank holiday off work (or pay it in lieu if they work bank holidays) will depend on the wording in their contract of employment. If the wording leaves the decision down to your discretion, the advice is to remain consistent with all employees (and workers). Please get in touch to discuss individual situations.
Actions to consider taking
- Review all of your employee’s salaries (particularly the lower ones) as it could bring employees close to the new NMW/NLW if they are not increased, which could impact recruitment and retention.
- Communicate the information regarding the NIC increase and the fact that there will be no change to their tax code this year (and what this means) to all employees, well in advance of the change in April. Don’t assume they all know from the news/media. Communicating in advance will help your business by minimising payroll queries in April when people see less NET pay. It also means employees have plenty of time to put any plans in place to ensure they can still make their monthly repayment commitments and can afford to get themselves to work etc.
- Ideally, add a message to all individual payslips from April 2022, with wording to the effect of ‘25% uplift in NICs funds NHS, health and social care.’
This guidance is correct at 16.03.22
