From April 2022, the government has introduced an increase on National Insurance contributions by 1.25%. Employees, self-employed, and employers will all feel the effect of this change. This includes workers over the state pension age, unlike other NICs. The hike in tax is to help fund health and adult social care as part of a new levy, the Health and Social Care Levy, which of course took a hit during the pandemic. 

What does this mean for employees?

Employee contributions are now: 

  • Workers earning between £180 – £967 per week currently pay 12% in NIC, this will increase to 13.5%.
  • Workers earning over £967 a week currently pay 14%, this will increase to 15.5%.

Remember that the amount will differ depending on how much the employee earns, according to which category they fall in.

Ultimately, employees are going to see a dip in their payslip. The duty falls on HR and Payroll professionals to ensure that employees are aware of what, why, and how their monthly pay will be changing. 

What does this mean for HR and Payroll teams?

In times of change, preparation and planning is key. Payroll teams will have to be prepared for this adjustment by ensuring that the legal obligations are being met and the correct tax deductions are going through. 

It’s also important that HR and Payroll teams are open with employees about this change and remind them that it’s coming up. Otherwise, employees might come to HR assuming that the dip is a payroll error or miscalculate how much they’re going to get in their pay, leading to financial strain. You must ensure that there is transparency surrounding the tax changes, to support staff financial wellbeing. 

An enormous 40% of people in the UK live payday to payday, so this change will have an impact on many employees. A suggestion is to speak to employees and help them calculate how much less they’re going to get, to financially prepare them for the tax hike. Another suggestion is to create an example payslip, so they can visibly see how the change is going to affect their monthly pay. HMRC are also asking employers, where appropriate, to include this message on payslips to communicate the reason for the uplift: ‘1.25% uplift in NICs, funds NHS, health & social care’.

How can HR software help to support a business and its employees in the wake of this change?

In large teams, it can be difficult to communicate effectively with all the people you need to. Especially with the majority of the UK workforce working remotely, email is a hugely bloated resource. With the average worker receiving roughly 120 emails per day, important news and information can get lost in the noise. This is especially true for HR and Payroll teams who might need to send out company-wide communications regarding new legislation, or any other HR and Payroll related issue, including the rise of NICs. By using HR software you can streamline these messages and be certain they’re going out to everyone who needs to read them. 

Do you need support preparing for the NICs increase? 

We’re HR and Payroll specialists that offer a range of managed payroll services to help Payroll teams of all sizes streamline their processes, reduce errors and complete their tasks faster. If you need support navigating payroll during this change, we can help. To find out more, get in touch with us today.

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