Autumn Statement 2023: Payroll perspective

by Rob Montgomery

01/12/2023

The key items to take away from this year’s Autumn Statement from a payroll compliance perspective are the National Minimum Wage (NMW) and National Living Wage (NLW) uplifts effective from 1 April 2024.

National Minimum Wage and National Living Wage uplift

	NMW rate from 1 April 2024	Increase in pence	Percentage increase
National Living Wage (21 and over)	£11.44	£1.02	9.8%
18 – 20 year old rate	£8.60	£1.11	14.8%
16 -17 year old rate	£6.40	£1.12	21.2%
Apprentice rate	£6.40	£1.12	21.2%
Accommodation offset	£9.99	£0.89	9.8%

This is the annual uplift in hourly rates for all employees, from 1 April 2024 all employees must be on the minimum hourly rate for their age, it is important to consider the use of salary sacrifice and how this can have an impact on the employees NLW and NMW rate. Another thing to consider is any employees on maternity leave and they have salary uplift’s due to NLW and NMW increases the company will need to consider the Alabaster payment – which is an uplift in the employees maternity pay from the start of their maternity pay (this will be the difference between the old maternity pay figure and the new maternity pay figure based on the salary uplift).

Examples

Under NMW/NLW

Employee 25 years old is being paid £21,500.00 pa working 37.5 hours a week this means £21,50000/52/37.5 = £11.0256p from 1 April 2024 this hourly rate will be below the NMW/NLW.

Therefore the new uplift would be:

£11.44 x 52 x 37.5 = £22,308.00pa will be the new salary to be paid to employee to meet NMW/NLW.

Salary sacrifice and NMW/NLW

We will use the same scenario an employee is 25 being paid £22,308.00pa working 37.5 hours a week this means there hourly rate is £11.44. However, the employee has a salary sacrifice for cycle to work which works out to be a £1,000.00 for the year.

Therefore the hourly rate would be:

£22,380.00 - £1,000.00 = £21,308.00 / 52 / 37.5 = £10.92 per hour this is under NMW/NLW from 1 April 2024, therefore an uplift of £0.52p per hour will need to be applied.

Alabaster payment

An employee on maternity leave and is in receipt of maternity pay. Originally their maternity pay was based just on their gross salary of £1,791.67 per month on 1 April 2024 the employee has a salary increase to £22,380.00 pa which means the monthly salary has now increased to £1,859.00 per month. The maternity pay for the first six weeks was originally based on the average of the gross salary of £1791.67 and the average of 90% over an 8 week/ 2 month period of this figure. Now the salary has been uplifted to £1,859.00 which now gives a difference of £67.33 per month. So the new maternity pay would be based on:

Gross total - £1859 – £1,791.67 x 2/ 8weeks x 6 weeks x 90% = £90.90 would be added to next maternity pay run with this uplift in maternity pay.

Changes to National Insurance Employee Contributions

Employee National Insurance contributions will be reduced from 12% to 10% on earnings above £1,048.00 per month to £4,189 per month. This will come into effect from 6 January 2024. Please note that with the reduction in national insurance contributions this will also reduce the amount being saved through salary sacrifice schemes.

	Employees Contributions
Contribution Table Letter	Payment of earnings made on	Earnings below LEL	Earnings at or above LEL up to and including PT	Earnings above the PT up to and including UEL	Balance of earnings above the UEL
A, F, H, M, V	6 April to 5 January	NIL	0%	12%	2%
A, F, H, M, V	6 April to 5 January	NIL	0%	10%	2%
B, I	6 April to 5 January	NIL	0%	5.85%	2%
B, I	6 April to 5 January	NIL	0%	3.85%	2%
C, S	6 April to 5 January	NIL	NIL	NIL	NIL
C, S	6 April to 5 January	NIL	NIL	NIL	NIL
J, L, Z	6 April to 5 January	NIL	0%	2%	2%
J, L, Z	6 April to 5 January	NIL	0%	2%	2%

Source - CIPP

Changes to Director NI employee threshold for the 2023 2024 tax year

For Directors on the cumulative annual method of National Insurance the percentage for this tax year has changed from 12% to 11.5% for employee contributions for earnings between £12570 per year to £50,268 per year.

	Employees Contributions
Contribution Table Letter	Payment of earnings	Earnings below LEL	Earnings at or above LEL up to and including PT	Earnings above the PT up to and including UEL	Balance of earnings above the UEL
A, F, H, M, V	When applying the standard method, use these rates for the whole 2023/24 tax year	NIL	0%	11.5%	2%
B, I		NIL	0%	5.35%	2%
C, S		NIL	NIL	NIL	NIL
J, L, Z		NIL	0%	2%	2%