Small business owners should be aware of changes that come into effect from April 2019. The national living wage will increase and so will minimum pension contributions. 
 
Here’s a quick summary of what’s happening. 
Wage increases 
In last October’s Budget the Chancellor of the Exchequer increased the national living wage in line with recommendations by the Low Pay Commission
 
As an employer you should know that these new rates aren’t optional and the regulations are monitored by HMRC. If you don’t make the correct payments, you could receive penalties and have to repay arrears to affected employees. 
 
The National Living Wage (NLW) is the statutory minimum for workers aged 25 and over. It will increase by 4.9% to £8.21 per hour. 
 
The LPC said that the UK economy has met the criteria for ‘sustained growth’, resulting in the recommended increase. Based on current forecasts the Commission estimates that the NLW will be £8.62 by 2020. 
 
Rates for younger workers will also increase above inflation and average earnings, making this year’s increases some of the highest on record. 
 
The National Minimum Wage (NMW) rates for: 
 
Current rate 
Future rate (from 6 April 2019) 
Increase 
NLW for 25-year olds and over 
£7.83 
£8.21 
4.9% 
21- to 24-year olds 
£7.38 
£7.70 
4.3% 
18- to 20-year olds 
£5.90 
£6.15 
4.2% 
16- to 17-year olds 
£4.20 
£4.35 
3.6% 
Apprentice rate aged under 19 or in  
the first year of an apprenticeship 
£3.70 
£3.90 
5.4% 
Accommodation offset 
£7.00 
£7.55 
7.9% 
Note: the UK Living Wage and the London Living Wage are voluntary benchmarks that employers can sign up to if they wish but they are not legally binding requirements. 
Pension contributions 
The minimum contributions you and your employees pay into your automatic enrolment workplace pension scheme will also increase. It’s your responsibility to make sure these increases are implemented. 
 
Who must take action? - Employers with staff in a pension scheme for automatic enrolment must make sure at least the minimum amounts are being paid into their pension scheme. 
 
This applies whether the pension scheme was set up for automatic enrolment or you are using an existing scheme. 
 
Who doesn’t need to do anything? - If you don’t have any staff in a pension scheme for automatic enrolment or if you are already paying above the increased minimum amounts, you won’t need to make any changes. 
 
If you’re using a defined benefits pension scheme the increases don’t apply. 
 
What are the increases? 
Date the rate applies 
Employer minimum contribution 
Staff contribution 
Total minimum contribution 
New - from 6 April 2019 onwards 
3% 
5% 
8% 
Current - from 6 April 2018 to 5 April 2019 
2% 
3% 
5% 
If you cover the total minimum contribution required, your staff won’t need to pay anything. 
 
The amount you and your employees pay into your pension scheme will vary, depending on the type of scheme you have chosen and the rules of the scheme. 
 
Your staff contribution may also vary depending on the type of tax relief applied by your scheme. 
 
The contribution calculation is based on earnings and the figures are reviewed each year by the government. When calculating contributions, a number of things should be included: 
salary 
wages 
commission 
bonuses 
overtime 
statutory sick pay 
statutory maternity pay 
ordinary or additional statutory paternity pay 
statutory adoption pay. 
 
Check your scheme documents to find out what elements of staff pay your scheme uses. If you are still unsure, speak to your scheme provider. 
 
 
Tagged as: Payroll
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