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Payroll sector prepares for key changes in 2019/20

The next 12 months will see a number of new changes to payroll policy that could have an impact on a wide range of businesses.

To give an overview of how businesses could be affected by these changes, below are some of the highlights that employers will need to prepare for.

Private Sector IR35

From April 2020, where an individual is engaged by a medium or large-sized business in the private sector and works through a company, the employer will be responsible for assessing the individual’s employment status under the off-payroll working rules (IR35).

Where the rules apply, the business or agency will be responsible for deducting income tax and National Insurance contributions (NICs) via PAYE and will be required to pay employer NICs.

Businesses will be able to use the Check Employment Status for Tax (CEST) service, which is available to help businesses determine whether the off-payroll working rules apply. These new rules will not affect small businesses.

Postgraduate Loans (PGL)

From April 2019, taxpayers will be required to start repaying PGLs if they meet the threshold of £21,000 (England and Wales only). If they do meet the threshold, a deduction of six per cent will be taken from their wages.

The existing starter checklist provided by the Government will be updated to include a section for PGL. Employees’ P60 forms will also be changed to include a new box for PGL deductions, however, the existing P45 form will remain the same.

Parental Bereavement Leave and Pay

Employers will have to get to grips with a new workplace right to Parental Bereavement Leave and Pay for parents who lose a child under the age of 18.

This new right will include parents who have suffered a stillbirth after 24 weeks of pregnancy.

Those who qualify for the new right, which will commence from 6 April 2020, will be entitled to two weeks of paid Parental Bereavement Leave.

During this period, they will be paid at the statutory flat weekly rate of £145.18 or 90 per cent of average earnings (whichever is lower), if the person has at least 26 weeks continuous service at the date of their child’s death and earnings above the Lower Earnings Limit.

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Businesses get to grips with new employment costs

Employers across the UK are starting April with a sudden increase in employment costs 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 have risen to eight per cent this month, 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.

Link: National Minimum Wage and National Living Wage rates & Workplace pensions

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