Yesterday, Boris Johnson’s new government unveiled its first Budget, outlining its plans for the UK economy. Rishi Sunak, the Chancellor of the Exchequer, announced a number of measures which will impact businesses and their employees, both in terms of an immediate response to the Coronavirus (COVID-19) outbreak and for the longer-term future.

We’ve prepared a quick summary of the planned changes which will most affect payroll.

1. Temporary changes to Statutory Sick Pay

As the coronavirus outbreak looks set to expand in scale and severity over the coming weeks, the Prime Minister previously announced that as part of the forthcoming COVID-19 bill, Statutory Sick Pay (SSP) will be available to people suffering from coronavirus from Day 1, as opposed to Day 4. The Budget set out a further package to widen the scope of this measure, temporarily extending it to cover:

  • Individuals who are unable to work because they have been advised to self-isolate
  • People caring for those within the same household who display coronavirus symptoms and have been told to self-isolate

In the coming weeks, the NHS will introduce an alternative to the GP fit note. People who are advised to self-isolate will be able to obtain a notification via NHS111 which they can use as evidence for absence from work, where necessary.

Additionally, for businesses that employ less than 250 employees, the cost of paying SSP will be refunded by the government for up to 14 days.

2. Changes to Employment Allowance

The Chancellor also announced that the Employment Allowance for Employer National Insurance Contributions (NICs) will be increased from £3,000 to £4,000. This is estimated to reduce the costs of taking on staff for over half a million businesses.

Furthermore, from 6 April 2020, employers can only claim Employment Allowance if their secondary NICs were below £100,000 in the previous tax year.

3. Changes to National Insurance

The Chancellor announced that in April 2020 the threshold for the 12% National Insurance deductions will be increased for employees and the self-employed respectively, from £8,632 to £9,500. As a result, the government estimates that this will result in a tax cut for 31 million people, saving the average employee around £100 a year.

Furthermore, a new National Insurance holiday scheme will be introduced to businesses that employee military veterans. These businesses will be exempt from paying National Insurance contributions on these employees’ salaries up to the Upper Earnings Limit for the first year of their employment. A full digital service will be available to employers from April 2022, however, transitional arrangements will be in place in the 2021/22 tax year. This will effectively enable organisations that employ veterans to claim this holiday from April 2021.

**4. Changes to the National Living Wage

The government has pledged to increase the National Living Wage to two thirds of median earnings by 2024 – which is expected to amount to £10.50 per hour.

Currently the National Living Wage is set at £8.21 per hour, but that will increase to £8.72 per hour from April 1 2020, alongside increases to the National Minimum Wage for different age groups and apprentices.

At Zellis, we understand the complex nature of payroll and employment, putting precision, efficiency, and compliance at the heart of everything we do. To learn more how our payroll and HR software or our Managed Services can support your organisation, get in touch today.