Five important Payroll legislative changes to be aware of in 2019

Running payroll can be a challenge no matter how big your business is. Keeping up-to-date with taxes, employment law and HMRC requirements is difficult when you have other responsibilities and that’s when compliance issues can creep in costing time and money.

With changes to auto enrolment contributions and minimum wages to name a few there are a host of reasons your payroll function requires special attention for 2019.

As payroll service providers, all too often we come across problems with businesses who have been simply running their payroll software without understanding the broader implications and keeping up-to-date with continual changes in the law.

To help keep you on track we have highlighted some of the main employment law changes for 2019 that you need to be aware of:

 1. Increases in the National Minimum & Living Wage

As announced in the 2018 budget, there will be an increase in both the National Living Wage (NLW) and National Minimum Wage (NMW) from April 2019.

National Living Wage:

• Minimum hourly rate for over 25’s will increase from £7.83 to £8.21

National Minimum Wage:

• Minimum hourly rate for between 21-24 will increase from £7.38 to £7.70
• Minimum hourly rate for between 18-20 will increase from £5.90 to £6.15
• Minimum hourly rate for those over compulsory school age and under 18 will increase from £4.20 to £4.35
• Minimum hourly rate for apprentices will increase from £3.70 to £3.90 (if under 19 or 19 and over in first year).

These new rates can be entered into your payroll system to allow for flagging should a salary come below the national rate.

2. Increased statutory family and sick pay

An increase in the weekly amount for statutory family pay will increase on 6th April to £148.68. This rate applies to maternity pay, adoption pay, paternity pay and shared parental pay.

In terms of statutory sick pay the rate will increase to £94.25 per week from 6th April.

3. Auto enrolment contributions

The minimum contributions for auto enrolment pension schemes will increase in April for both employers and employees. Currently set at a minimum of two percent employer’s contribution and three percent employee contribution. The contributions will change to three percent and five percent respectively.

It’s important that this change is communicated to your employees prior to the revision in April.

 4. Payslip revisions

From the 6th April onwards the right to receive a payslip will extend to every worker on the payroll, not just those classified as ‘employees’. So, moving forward this will include contractors, freelancers and other types of ‘non-employee’ workers.

For those employees whose wages vary depending on their hours worked, employers will also need to include an itemised confirmation of the total number of hours worked on these payslips. This can be shown as either total hours worked or as an itemised list for different types of work and rates of pay. This change allows variable-time employees to reconcile their work hours with their pay and establish if they are being paid the national minimum wage.

If you require further guidance, the government have issued guidance on the new rules.

5. Student loan repayment thresholds are changing

The current annual threshold for student loan repayments is £18,330 on plan 1 and £25,000 on plan 2 with employees over this salary range needing to repay 9% of their salary. From 6th April the repayment threshold for pre-2012 (Plan 1) will rise to £18,935. The repayment threshold for post 2012 (Plan 2) will rise to £25,725.

The DfE have also introduced a new loan type from 6th April, called the Postgraduate Loan (PGL) for which the 2019/2020 threshold is £21,000. Earning above this threshold will be calculated to be repaid at 6% of salary.

You can monitor the Student Loans Company website for any further amendments.

Additional things to watch out for

Dynamic Tax Codes

HMRC dynamic tax codes continue to create challenges for payroll teams. The dynamic codes were implemented to allow for in-year adjustments such as when bonuses are paid early or mid-year. Many have found that their system does not have the facility to advise HMRC of a one-off payment, which has led to misinterpretations. Employers are advised to check tax codes where one-off payments have been made.

Welsh Taxation

In April there will be a new addition of Welsh Tax Rates, meaning UK employers may need to manage three different taxation rates covering England/Northern Ireland, Scotland and Wales. If the basic rate does not remain the same across all countries, as we hope it will, pensions will become much harder to manage so this is something to be aware of.

Make sure you’re prepared!

In order to capture and report the correct information required for each of these scenarios there may be changes that you need to implement to your processes or payroll software.

As the deadlines for each amendment are approaching it is time to adjust your payroll setups and to run a health check on your internal processes to ensure you avoid fines or penalties in the longer term. Please contact our Payroll specialist James Alesbury on 023 8046 1222 for a no obligation discussion or visit our Payroll Service page for more information.