Payroll Changes From April 2020: Are You Ready?
In April this year new legislation comes into force which will affect your payroll.
Simply put, the new rules will bring important changes to holiday pay entitlement; the national wage rates and how people who work off-payroll are paid.
As an employer, you are responsible for making sure your staff are paid correctly and on time, so it’s important you get it right. Get it wrong, and you could be looking at HMRC penalties or face grievances from employees which might result in a tribunal.
If your payroll is already proving to be problematic, then you won’t be looking forward to a whole raft of new laws. Now could be the ideal time to outsource your payroll function to professionals like HR:4UK, freeing you of that worry and leaving you to focus on running your business. Outsourcing can also be much more cost-effective than employing your own in-house payroll staff.
We’ll be taking a closer, more detailed look at the impact of this new legislation and what it will mean for you as April approaches. But, in the meantime, here’s a brief guide to the rule changes.
National Minimum Wage & National Living Wage Increases
The government announced increases to the national wage rates on New Year’s Eve which will take effect from 1 April 2020 as follows:
National Living Wage
Age 25 and over: Increase of 6.2% from £8.21 to £8.72 per hour
National Minimum Wage
Age 21 to 24: Increase of 6.5% from £7.70 to £8.20 per hour
Age 18 to 20: Increase of 4.9% from £6.15 to £6.45 per hour
Aged under 18: Increase of 4.6% from £4.35 to £4.55 per hour
An apprentice: Increase of 6.4% from £3.90 to £4.15 per hour
Holiday Pay Entitlement
From 6 April 2020, the holiday pay reference period is to be lengthened from 12 to 52 weeks.
The new regulations will ensure that workers in seasonal work or those with unusual working hours receive the paid holiday to which they are entitled.
If an employee has worked for you for at least 52 weeks, then, under the new rules, their holiday reference period is extended from 12 weeks to 52 weeks. If their employment is less than 52 weeks, the holiday reference period will be calculated using the number of weeks worked.
The off-payroll working rules have been in place since 2000, but as of 6 April 2020 it has shifted responsibility for operating the off-payroll working rules from the individual’s PSC (Personal Service Company), to the business or organisation that the individual is supplying their services to.
Changes to the off-payroll working (IR35) rules will affect contracts entered into or payments made on or after 6 April 2020. They will apply to any contractors working through a personal service company (PSC), recruitment agencies and all large and medium-sized end clients in the private and third sectors.
They do not apply to self-employed people.
There is an exemption for end-clients who are ‘small businesses’ and who meet two or more of the criteria as defined by the Companies Act 2006. In this case changes do not apply, and it remains the PSC’s responsibility for determining the IR35 status of a contract.
As you can see, there’s much to digest in the new payroll legislation, so if you’d like friendly, expert help and advice or want to discuss outsourcing your payroll and pensions, please get in touch with HR:4UK.
Our team are here to help please call 01455 444 222 or email or you can click here to visit our webpage.
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