The way that employees are paid in the UK has changed in a number of ways, from holiday accrual to a rise in the National Minimum Wage.

As an employer, compliance with new regulations needs to be your number one priority – ensuring that your payroll is up to date to avoid breaching the rules and potentially incurring penalties and damage to your reputation as an employer.

Are your employees being paid correctly?

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

Employees in the UK are now entitled to the following rates of pay as a legal minimum:

• £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.

You must ensure that any employees receiving NMW or NLW are paid in line with new rates and that your payroll reflects this.

If this significantly impacts your cash flow and ability to meet staff costs, we can also provide support with financial planning and debt repayment for businesses.

Got the right National Insurance rate?

Employee National Insurance Contributions (NICs) have fallen twice in quick succession, so an inaccurate payroll could cost you and your employees significantly.

Following a decrease from 12 per cent to 10 per cent in January, employee NICs are now set at eight per cent – which you will need to make sure is reflected in your payroll at the correct rate.

It’s also important to note that Employer NICs have not changed, so you will need to continue to pay these at the same rate.

Are you giving the right amount of holiday?

An amendment to the Working Time Regulations 1998 has substantially changed the way that holiday accrual is calculated for employees on irregular hours or part-year contracts.

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

This can be paid in one of two ways:

• Accrual – Employees can receive holiday pay at the time they take their leave, which is the more traditional method.
• Rolling up – Employees can receive holiday pay for the year split equally across all pay periods, effectively including holiday pay in regular payroll payments.

Here’s a little tip!

Following the introduction of the Employment (Allocation of Tips) Act 2023, you may need to change the way you 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.

You are no longer allowed to withhold any percentage of a tip paid directly to them from employees, even if this was standard practice within your business in previous years.

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.

Statutory leave rates

Under certain circumstances, you must make statutory payments to employees to meet your obligations as an employer – for example, if an employee cannot work due to illness or maternity.

Getting this wrong can easily go unnoticed until it has grown into a significant problem, so you must prioritise making payments at the right rates.

Most important to note is that the rate of Statutory Sick Pay (SSP) has risen to £116.75 per week.

Additionally, Statutory Paternity Leave can now be taken either as a single two-week block or as two one-week blocks in a bid to make the policy more flexible for new fathers.

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.

Need help?

Staying compliant with new regulations is a must. Otherwise, you could face significant penalties and reputational damage – which we know you could do without!

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

Contact our team today for more information about your payroll obligations and the latest regulations.