Small business payroll service
As usual, National Minimum Wage rates will increase in April. The hourly rates for 2025 are:
Apprentice* U18 18-20 21 and over £7.55 £7.55 £10 £12.21 *If under 19 or in first year of apprenticeship (otherwise refer to age bands).
Statutory Sick Pay increases from £116.75 to £118.75 per week.
Parenting pay (maternity, paternity, adoption pay) rises from £184.03 to £187.18 per week.
As an employer, you may have heard something about the Employment Allowance, but what’s it for and how do you get it?
First, a bit of background. The PAYE you must pay to HMRC has three components: (1) the income tax and (2) the National Insurance Contribution (NIC) that you deduct from each employee’s gross pay, plus (3) a NIC that comes from the employer.
To encourage job creation, the Employment Allowance was introduced to help toward the latter – the green piece of pie.
It effectively allows you to underpay the employer’s NIC. From 6 April 2025 the EA covers up to £10,500 in a tax year.
Many small businesses no longer pay any National Insurance at all. Yay!
A couple of examples:
Each month, Medium Size Co Ltd pays employer NICs of £2000.
That’s the whole £10,500 Allowance used up, so from October, they’ll pay the full £2000 again.
On the other hand, Teeny Tiny Co Ltd only pays employer NICs of £40 per month.
So their total claim for the year is £480.
If you use a payroll agent they should take care of this. Otherwise, you’ll need to use your own payroll software or HMRC’s Basic PAYE Tools to file an Employer Payment Summary (EPS) every tax year, telling HMRC you are using the Allowance to cut your payments.
Gov.uk overview and detailed guidance – the rules and regs
If your company has underpaid its workers, the consequences could be severe:
You must pay arrears to the worker immediately and you may end up paying more than you would have if you had paid the correct amount to start with. In one instance, a national retailer was forced to make back payments of £193,000 for almost 3,500 workers after it required them to be at work before and after opening hours without pay.
HMRC will now publicly name any employer, big or small, who breaks minimum wage law.
On top of the arrears, employers risk financial penalties of up to £20,000.
Criminal prosecution is rare but the most serious cases can be heard in a Crown Court, meaning that there’s a potential for an unlimited fine.
HMRC have the power to check your wages at any time – it’s your responsibility as an employer to keep records proving compliance with NMW and you have to keep these for 3 years. You could be randomly targeted or a worker’s complaint could trigger an investigation.
Out of the blue, our biggest client received a random minimum wage inspection. The HMRC inspectors spent a full day digging into the payroll and payment records.
We handled the entire assessment on behalf of our client and were happy to host the compliance team at our premises. They delved into the current year’s files as well as the previous three years’ files, picking staff at random and tracing their wages from timesheet to bank account.
We spent the day making them tea and being quizzed in depth, using paper and electronic records to prove compliance. With a good understanding of the business, we could answer HMRC’s questions with confidence.
The client passed the inspection with flying colours.
The rates change in April each year. Rates for previous years can be found at gov.uk.
A good payroll provider will watch out for NMW compliance issues as part of the service.
ACAS gives free impartial advice to employers and workers.
Follow this link to report NMW breaches.
This article updated Oct 2024.
Image credit: University of Liverpool Faculty of Health (CC BY 2.0)
National Minimum Wage rates will increase in April, and staff aged 21 and over are now brought into the top band. The hourly rates for 2024 are:
Apprentice* U18 18-20 21 and over £6.40 £6.40 £8.60 £11.44 *If under 19 or in first year of apprenticeship (otherwise refer to age bands).
Statutory Sick Pay increases from £109.40 to £116.75 per week.
Parenting pay (maternity, paternity, adoption pay) rises from £172.48 to £184.03 per week.
Whether you employ 1 person or 100s – all employers now have workplace pension duties. Even if you think you won’t need to put your staff into a pension scheme, your responsibilities begin on the day your first member of staff starts work.
There are 3 tasks you must carry out to meet your legal duties.
If your staff meet the criteria below, you must put them into a pension scheme and pay into it.
You must write to all your staff within 6 weeks of your duties start date. This tells them how automatic enrolment applies to them – regardless of whether or not they are put into the pension scheme.
Within 5 months of your duties start date, you must complete an online declaration of compliance. This tells The Pensions Regulator how you’ve met your legal duties.
Then every 3 years, you must re-enrol anyone who opted out and re-declare your compliance.
Workplace pensions are not a one-off effort.
These tasks will increase the cost of running your payroll.
Only 30% of small businesses surveyed would think twice about clicking on a link directing them to HMRC
You should think twice.
Scammers regularly send fake emails that look like they are from HMRC, banks and other organisations like eBay, PayPal, Royal Mail or couriers like DPD. They aim to trick you into revealing personal information which they’ll use for fraud and identity theft. It’s known as phishing.
The Self-Assessment deadline is looming so this particular dodgy email is common around this time of year. It says you’ve got a refund of £x due to you, and offers a link to “get your rebate now”.
The link takes you to a site that looks convincing to a casual observer – but it’s not the real deal.
Often these messages end up in your Spam folder and you never see them. If they do get to your Inbox, remember HMRC’s golden rule:
A 2013 poll found that 60% of UK workers will fall for a phishing scam unless they’ve been trained to spot one.
Engage your brain!
Imagine the email is someone standing at your front door asking the same questions.
Would you give them this information?
If the answer is ‘no’ then it’s probably a scam.
If you wouldn’t do it on the street, don’t do it online!
It’s not just email – scammers are also using fake text (SMS) messages to reel in unsuspecting victims. This is known as smishing.
We know from experience that the taxman’s figures can be a work of fiction. But even by HMRC standards, this is extreme.
A Bristol man got a letter to say he owed over £14 TRILLION in tax!
Imagine getting home from the pub and opening that brown envelope.
https://metro.co.uk/2016/08/10/rail-worker-gets-tax-bill-for-14301369864489-6059075/
HMRC uses penalties to encourage compliance. There are 2 types to watch out for.
There are deadlines for paying your taxes. If you’re late in paying, expect to receive a penalty. You may also be charged interest every day until you pay the bill.
Cheques can get lost in the post. Paying electronically e.g. via online banking is quick and easily trackable.
However you pay, always include your accounts office reference, otherwise your money will end up in an HMRC slush fund instead of being correctly applied against your account!
You must report Pay As You Earn (PAYE) wages in “real time” – in other words, on or before payday.
Weekly, fortnightly, monthly, whatever. Every time someone gets paid through payroll, you must tell HMRC.
That’s why it’s so important that you tell us – in advance – about any changes to your payroll.
You may have to prove to HMRC that you weren’t careless in making an error.
