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After several relatively stable years in employment taxes, the change in government has changed all that.
The House of Lords have voted for changes to the employer NIC increase. These changes include protections for four specific sectors: health and care, certain charities, some transport providers, and businesses with low earnings or a small number of employees. It’s back to the House of Commons, creating a bit of a merry-go-round.
Following the consultation, plans are underway to clarify the definition of an umbrella company and transfer PAYE liabilities to the employment agency or end client when applicable.
The payrolling of benefits is still expected to be mandatory from April 2026. For many employers, the annual filing of Forms P11D will be replaced by real-time reporting of employee benefits in kind.
The rates of the NMW increase from April 2025 seeing an 18% rise in age-related and apprenticeship rates. A full-time employee earning the main rate of the NMW can expect a salary of approximately £25,000. When you factor in NICs, pension costs, and other expenses, your total cash outlay could approach £30,000.
Increased rights to certain statutory payments and leave; requirement to offer guaranteed hours for zero-hours contracts (seemingly, employees may reject); day-1 dismissal rights; and more.
Any reduction to employer NICs will be a welcome relief to employers who can benefit from this. However, implementing a two-tier NIC rate introduces complexity. With only a few weeks until payroll software needs to be updated, can this be accomplished in time? Additionally, where or from whom will the chancellor recover the ‘saved’ NICs?
Due diligence of your contingent labour supply chains to understand your obligations and exposure becomes paramount. Putting in place a checking process could help mitigate risk. What steps are you taking?
The anticipated HMRC guidance and draft legislation for payrolling benefits are expected in the summer of 2025. This leaves a short window for employers and payroll software companies to adapt for April 2026. How will your payroll function get the right information to report employee benefits accurately in real time?
NMW increases are a direct cost to the employer. Costing for these and revisiting your hiring strategy could be time well spent. Perhaps modelling alternative hiring strategies to identify potential savings?
Protecting employees from unscrupulous employers is important, but what about the ‘good’ employers? Enhancing interview techniques and establishing effective probation objectives can be a worthwhile investment. Investing in manager training can help ensure a positive employee experience, which in turn can reduce absenteeism and turnover rates.
How will you keep on top of and cope with all this change? Please contact John Manis or Dino Jangra at Crowe.
