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How employer costs are rising and what you need to know for 1 April

Starting from 1 April, employers will face an increase in costs – which could have a substantial effect on your business.

Fundamentally, rising employer costs are emerging from two pieces of changing legislation: workplace pension schemes and the National Living Wage.

To help you get ready for the change, we’ve put together this guide to the new legislation and what changes you can expect.

 

New contributions to workplace pension schemes

All employers must offer and enrol their workers into a workplace pension scheme.

Currently, the minimum contribution that an employer must pay into a pension is one per cent. From 6 April, this amount will double to two per cent.

Next year, the minimum contribution will rise again, to three per cent. These rises will give a total combined pension contribution of eight per cent in 2019 – with the option for staff to make up the remaining five per cent of the contribution.

Here’s how the workplace pension contributions will change over the next year:

Date Minimum Employer Contribution Total Combined Minimum Contribution
Before 6 April 2018 1% 2%
6 April 2018 2% 5%
6 April 2019 3% 8%

 

 

The National Living Wage is on the rise

 In addition to higher in contributions to the workplace pension, employers will also face an increased cost from a rise to the National Living Wage.

Every April, the new living wage is set by the Low Pay Commission.

Effective from 1 April, this year’s changes to the living wage are outlined below:

25+ 21-24 18-20 Under 18 Apprentice
Before 1 April £7.50 £7.05 £5.60 £4.05 £3.5
1 April 2018 £7.83 £7.38 £5.90 £4.20 £3.70

 

For both 18-20- and 21-24-year-olds, this change will represent the largest increase in a decade – resulting in a big impact on living wage businesses.

 

Get prepared for 1 April

The first of these changes come into effect on 1 April, so it’s important that your business is prepared and ready.

Peter Gillespie, Managing Director at QS Recruitment, said: “Having a rise to the National Living Wage and workplace pension contributions at the same time can have a significant effect on businesses. Combined with the recent introduction of the Apprenticeship Levy, employers are facing a huge jump in costs. That’s why it’s important you understand the changes and their impact before they come into effect.”

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