July’s increase in the workers NIC threshold from £9,880 to £12,570 (aligning it with the income tax personal allowance) and the reversal this month of the 1.25% NIC increase, due to the removal of the Health & Social Care Levy, provided welcome savings of £480 per annum on average.
Freezing the NIC thresholds for workers and employers alike comes as no surprise, but for employers this will represent a real-terms increase in their employment costs with the secondary threshold remaining at £9,100 until April 2028. The Employment Allowance remains at £5,000 per annum and the government estimates that this will mean 40% of employers will not be affected by the freezing of the thresholds.
However, those employers who are affected by rising NIC costs will also have to cope with the increase in the National Living Wage to £10.42 per hour (representing an increase of a little over £1,600 per full time NLW employee per year) from April 2023. This will mean that it is more important than ever to ensure that employment spend is targeted where it is most effective, on the benefits most valued by employees.
Furthermore, employers need to ensure that they do not risk having to pay interest and penalties if they get their employment taxes wrong.
Prudent employers should review both the benefit package offered to employees and their compliance policies and procedures to ensure that they maximise the value of their employee spend.