Client Newsletter

Payroll changes are coming – are you ready?

Beginning on 6 April 2024, the 2024/25 tax year is set to bring about a number of changes to the way employees are paid in the UK.

If you are an employer, you should be prepared to meet new requirements and ensure that your payroll is up to date to avoid breaching new regulations.

Changing rates of pay

The headline change, announced in the Chancellor’s 2023 Autumn Statement, is a landmark rise in the National Minimum Wage (NMW) and National Living Wage (NLW).

In one of the largest rises in these rates, from 1 April 2024, employees in the UK will be entitled to:

  • £11.44 – 21 years old and over
  • £8.60 – 18 to 20 years old
  • £6.40 – Under 18 years old and apprentices

Significantly, this rise will also extend the NLW to 21- and 22-year-olds for the first time, bringing many more working people into the highest minimum wage category.

Apprentices will still be entitled to the minimum wage for their age category once they have completed the first year of their apprenticeship.

You must ensure that any employees receiving NMW or NLW are paid in line with new rates from the date of introduction and that this is reflected on your payroll.

National Insurance

Employee National Insurance Contributions (NICs) are set to fall again from 6 April 2024.

Following a decrease from 12 per cent to 10 per cent in January, employee NICs will be set at eight per cent from April onwards.

You’ll need to ensure that your payroll reflects this so that you take the right amount of tax out of your employees’ gross income at source.

Statutory leave rates

It’s important to remember that rates of certain statutory leave payments are increasing.

Statutory Sick Pay (SSP) will rise to the rate of £116.75 per week from 6 April 2024.

Additionally, Statutory Paternity Leave is becoming more flexible for new fathers. From the new financial year, it can be taken either as a single two-week block or as two one-week blocks.

If you have staff leave due to ill health or paternity, you’ll need to make sure that your payroll reflects these changes and that employees are paid accurately.

Holiday pay for irregular and part-year hours

The way that holiday accrual is calculated for employees on irregular hours or part-year contracts is changing as a result of amendments to the Working Time Regulations 1998.

Holiday allowance will be calculated as 12.07 per cent of the hours worked in that pay period.

You will also be allowed to use the rolled-up method of paying holiday pay, splitting total holiday pay equally between pay periods and not paid in the pay period when the holiday was taken.

Allocating tips and gratuities

Following the introduction of the Employment (Allocation of Tips) Act 2023, employers may need to change the way they allocate tips and gratuity.

The legislation covers ‘employer-received’ tips, meaning those that are paid directly to an employer via a card payment before being distributed to employees.

Employers are no longer allowed to withhold any percentage of a tip paid directly to them from employees.

This means that you cannot, for example, use part of a tip to cover administrative costs or costs associated with paying by card.

To manage this, you must have a tronc in place – a system used to collate and distribute tips among employees.

Seeking support

Staying compliant with new regulations is a must. Otherwise, you could face significant penalties and reputational damage.

We can help you identify changes you need to implement to stay on top of your payroll and ensure your staff are compensated correctly.

For support and guidance on upcoming changes to payroll, please contact our team.