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Employers must be prepared for changes to wages in 2022 to avoid penalties

More than 200 employers have been named and shamed by the Government at the end of 2021 for failing to meet the National Minimum Wage (NMW).

The employers that have underpaid workers did so in the following ways:

  • 37 per cent – Deductions that reduce minimum wage pay, for example workers out of pocket to comply with the dress code
  • 29 per cent – Unpaid working time, such as mandatory training, trial shifts or travel time
  • 16 per cent – Failing to pay the correct rate to apprentices
  • 11 per cent – not increasing NMW pay in line with Government increases or paying the wrong minimum wage rate based on a person’s age.

From April this year, employers must be ready for a number of changes to wages and National Insurance.

National Minimum Wage Increase

HM Treasury revealed last year that the National Living Wage (NLW), applicable to those over 23, will increase to £9.50 an hour as of 1 April 2022.

Announced a few days before the Autumn Budget, the rate will increase by 59p per hour from the current rate of £8.91.

It has been estimated that this will mean that the lowest-paid workers will see their annual income rise by £1,000. Not only have this, but the National Minimum Wage (NMW), applicable to those of at least school leaving age will raise too.

How much will pay increase for all ages?

 23 and over21 to 2218 to 20Under 18Apprentice
April 2021 (current rate)£8.91£8.36£6.56£4.62£4.30 
April 2022£9.50£9.18£6.83£4.81£4.81 

National Insurance Increase

The Government has announced a 1.25 percentage point increase to National Insurance contributions (NICs) from April, which will affect employees, employers and the majority of self-employed workers.

Despite pledges to not raise NICs during the current Parliament, the decision has been taken to bolster the nation’s health and social care budgets in response to the pandemic.

The move will help to raise more than £12 billion for the NHS and social care system but it will mean that many individuals and businesses face greater employment costs.

The increase in NICs will initially affect everyone over the age of 16, but below state pension age, earning more than £184 per week through employment or with profits of £9,568 or more a year in self-employment.

The 1.25 percentage point increase also applies to employer NICs, minus any reliefs that a business may be entitled to.

From 2023, the Health and Social Care Levy will formalise the new rules and will require individuals working above State Pension age to contribute as well. Currently, this group are not required to pay any NICs.

For a typical basic rate taxpayer earning the current UK median income for this group of £24,100, they will have to pay an additional £180 a year, while for those earning the median higher rate income of £67,100, they would have to pay an additional £715.

The increase will not apply to Class 2 NICs, which is the flat rate paid by the self-employed with profits above the Small Profits Threshold (currently £6,515 per year) or Class 3 NICs, made up of voluntary contributions from taxpayers to fill in gaps in their contributions’ records to qualify for benefits.

Don’t get caught out

If you manage a payroll you need to ensure that all workers are paid and taxed correctly. Employers often make common mistakes when it comes to payroll, such as forgetting to change the wage rate as an employee gets old or making incorrect reductions for clothing and equipment that is necessary for an employee’s role.

To reduce your chances of being penalised, please contact your Seymour Taylor representative today or for new enquires please contact our Payroll team email or call 01494552100.

This blog is for guidance only, professional advice should be obtained before acting on any information contained herein. The information was correct at the time of publishing 28 January 2022.