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Budget 2020: What does it mean for HR and payroll teams?

By 13/03/2020June 22nd, 2021Employment Law, News, Statutory Sick Pay
Budget 2020: What does it mean for HR and payroll teams?

Earlier this week, Chancellor Rishi Sunak announced a number of initiatives, funding and plans for the UK economy.

Taking place against a backdrop of both the COVID-19 outbreak and Brexit; the government’s plans to ‘level up’ the British economy were outlined.

This week’s Budget includes a number of ‘fiscal stimuli’ that include support for businesses throughout the coronavirus outbreak, increases to the National Living Wage and changes to the National Insurance Contribution thresholds.

But there are significant announcements from this week’s Budget that will directly impact HR and payroll departments across the country.

Statutory Sick Pay entitlement for self-isolating staff

One of the most significant announcements to come out of the 2020 Budget is a change to an employee’s eligibility for Statutory Sick Pay if they are self-isolating with symptoms of, or have been diagnosed with coronavirus.

On the 4th March, PM Boris Johnson announced emergency legislation that changed the entitlement to Statutory Sick Pay (SSP) for those employees that have been advised to self-isolate with symptoms or a diagnosis of COVID-19. This legislation enforces the payment of SSP from day one of an employee’s isolation, for a maximum of 14 days. Typically, SSP is only payable to employees on the fourth day of an employee’s sickness.

These changes have been made to ensure employees don’t feel the financial pressure to return to work while still poorly, thus risking the spread of the virus.

What does this mean for HR and payroll teams?

As a result of these changes, HR teams will have to change the ways in which they calculate Statutory Sick Pay to accommodate for the additional three days’ pay.

While this will (hopefully) only be a temporary measure, the changes announced this month have been passed as emergency legislation. This means that HR departments need to keep a record of those employees that are entitled to SSP as a result of the coronavirus in order to ensure they are paid correctly.

This is of course, in addition to those employees that are receiving ‘usual’ SSP entitlement.

Statutory Sick Pay refund for employers

The Chancellor also announced a £7bn support package for small business in this year’s Budget in order to support those with fewer than 250 employees throughout this tumultuous time.

Along with tax cuts, loans and grants for small businesses; Mr Sunak also announced that the government will be covering the cost of Statutory Sick Pay for all those that have been advised by medical professionals to self-isolate.

SMEs with less than 250 staff will be entitled to a refund of up to 14 days of SSP payments per employee. Employers will only be able to reclaim expenditure for any employee that has claimed SSP (under the new eligibility criteria) as a result of the coronavirus, not for any other sickness absence.

What does this mean for HR and payroll teams?

While this change to Statutory Sick Pay doesn’t require the provision of a fit note from a GP (this is to minimise the risk of spreading the coronavirus in GP practices), HR will be obliged to maintain accurate records of employee absences in order to claim a refund.

Importantly, HR departments will need to keep track of which employees are self-isolating because of the coronavirus in order to be able to inform HMRC of the expenditure to apply for this newly announced reimbursement. Integrated

Increases to the National Living Wage

The National Living Wage (NLW) is the obligatory minimum hourly wage that can be paid to all employees aged 25 and over.

With the NLW already set to rise as of 6th April 2020 by 6.2% to £8.72 an hour for workers; the government has this week announced plans for the NLW to be over £10.50 an hour by 2024 to support the lowest paid full-time workers.

What does this mean for HR and payroll teams?

It is the responsibility of employers to ensure compliance with the new NLW rules. Failure to do so could result in a maximum financial penalty of 200% of any amount in arrears, up to a maximum of £20,000 per employee. You could also face prosecution and directors could be banned from being a company director for up to 15 years.

If you’re a Living Wage employer, these increases in pay will no doubt be welcomed by your employees. But it is important to make sure that both your HR and payroll software are fully prepared to accommodate these changes in rates of pay.

In addition to ensuring your employees are paid the correct rates of pay, you also need to make sure you know when an employee becomes eligible for the NLW (i.e. when they turn 25). Most good integrated HR and payroll software can help in ensuring correct rates of pay are observed, and notifications are sent out as employees near their 25th birthdays.

Changes to National Insurance Contribution thresholds

As of April 2020, the threshold at which point employees start paying National Insurance Contributions (NICs) will also be raised, the Treasury announced on Wednesday.

This week’s Budget confirmed the government’s plans to increase the threshold NICs for both employees and the self-employed from £8,632 to £9,500 per year.

This means employees can earn almost an additional £1,000 per year before paying any National Insurance Contributions.

What does this mean for HR and payroll teams?

Much like the changes to the National Living Wage, it is important to make sure your provider of payroll software can accommodate these changes to NICs to ensure there are no costly mistakes in pay for your employees.

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