Salary Budgets - New Minimum Wage

Have you thought about your staffing levels and salary costs?

There are a number of factors that could impact your staffing costs, which are quite often the highest singular cost within a business.  Failure to plan for the year ahead can leave you short of resources or short of money at critical times in your business.

The end of the tax year often coincides with financial year-ends.  You may be thinking 'that is still a while away', but actually now is the time to start planning.

You need to start thinking about what your staffing requirements for the next 12 months are:

• Are you growing your business? Do you need more staff? Do you know what types of staff you will need?

• Is your business downsizing? Have you thought about the timing of the process and the costs involved?

• Are you looking at taking over services from another business, or asking someone else to deliver services on your behalf?

• What training and development opportunities do you want to offer your staff?

All of these factors will have a significant impact on your salary budget, as well as your employee relations within your company. You need to understand the timescales involved in things like recruitment, consultation, notice periods, redundancy pay, etc.

What do I need to think about this year?

In addition to the traditional costs such as salary, company NI, overtime, bonuses, leave, etc, there are a few things you need to take into consideration this year. One such consideration is the wage you pay your employees.

As of the 1st of April 2022, the rate of pay will increase for all age brackets. Therefore, you need to know the age profile of your staff as the National Minimum Wage is set at different levels for Apprentices, Under 18, 18-20, 21-22 and 23+.

The new wage rates are as follows:

RATE CURRENT APRIL 2022

National Living Wage £8.91 £9.50
21 – 22 Years Old £8.36 £9.18
18 – 20 Years Old £6.56 £6.83
16 – 17 Years Old £4.62 £4.81
Apprentice £4.30 £4.81

If you have staff who are paid the National Minimum Wage, then you need to check who is aged 23 or over as you will be required to pay them the new National Living Wage rate from the 1st of April this year.

Are you aware that Apprentices aged 19+ are only paid the apprenticeship rate in the first year of their apprenticeship? After this, they move on to the national minimum wage for their age bracket.

Pension Fund Auto-enrolment:

Every three years you must put certain staff who have left your pension scheme back into it. This is called re-enrolment.

Whether you have staff to put back into your scheme or not, you must complete a re-declaration of compliance to tell the Pensions Regulator how you have met your duties. Remember, re-enrolment and re-declaration are your legal duties and if you don't act you could be fined. More information can be found here.

Planning:

Having a salary budget that is meaningful and can be achieved requires planning - hence the reminder to start thinking about this now.

Salary costs have a 'knock-on' effect on all other support costs, for example, if your business is looking to add 10 new staff, that might mean 10 new computers, 10 new desks and chairs, refurbishment of an office, or additional machinery, additional payroll costs, etc.

Salary costs are quite often the highest cost of a business. It’s really important to give this business factor the time and attention it deserves.

If you need any support, please do not hesitate to contact us.