Businesses get to grips with rise in employment costs

Employers across the UK were faced with sudden increases in employment costs last month, following a rise in workplace pension contributions and minimum wage costs.

The sharp increase in expenditure on staff couldn’t come at a worse time for business who are experiencing growing uncertainty over the UK and wider global economy.

Minimum contributions for workplace pensions rose to eight per cent from April, with a minimum contribution of three per cent from employers.

The five per cent gap between minimum employer contributions and the minimum overall contributions must be made up by contributions from the employee. However, employers can increase their contribution to reduce the impact on employees, should they wish.

The minimum contribution only applies to employees earning £10,000 a year or more and percentage contributions are calculated using only the employee’s earnings between £6,136 and £50,000. This is an increase from 2018’s income threshold of £6,032 to £46,350.

Meanwhile, many employers will also see wage costs increase with the introduction of new statutory wage levels. As of 6 April 2019, employers must pay the following hourly rates for staff on the minimum or national living wage:

  • 25 and over (national living wage) – £8.21
  • 21 to 24 – £7.70
  • 18 to 20 – £6.15
  • Under 18 – £4.35
  • Apprentice – £3.90

In some cases, the increase in the statutory minimum wage could push up the additional amount that employers are required to pay towards workplace pensions, meaning that employers with a large number of minimum wage workers, will be hit harder.

For more information on the new rules relating to payroll and advice on how your business can ensure it remains compliant, please contact our dedicated payroll team.

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