The new increase in employer National Insurance Contributions (NIC) and both the National Minimum Wage and National Living Wage have impacted charities more than most businesses.
It is no secret that charities must be particularly stringent about how they utilise their finances as they strive to put donations to work where they are most needed.
However, a charity would not be able to function without a dedicated team of top talent as someone who manages a charity, you are aware of how vital attracting and retaining a dedicated work force is.
Careful financial planning will help you to work with the new changes to stay compliant while handling rising costs to ensure that you can keep doing the good work you have set out to do.
Changes to National Insurance Contributions and Minimum Wage
Although the Government has pledged to protect employees from facing an increase to their NICs and Income Tax, employers are not so fortunate.
The changes to NIC are twofold with both being likely to impact your charity.
Your NIC has now increased to 15 per cent and the threshold where you need to start paying has fallen to £5,000.
This will result in you paying more in contributions for a greater number of employees than before.
In tandem with this, National Minium Wage and National Living Wage have increased. At present, the rates are:
- 21-year-olds and over must be paid 12.21 per hour.
- 18 to 20-year-olds must be paid £10.00 per hour.
- 16 to 17-year-olds must be paid £7.55 per hour.
Given that you are likely to be employing younger workers and those on lower incomes, it is important to be aware and consider the impact, of these changes on your current financial structure.
What can I do?
Smart financial planning is always a good idea.
In the case of increasing wage costs, it is a good idea to get to know the staff who work for you.
Pay attention to when their birthdays are, as you may find employees aging into higher wage brackets.
The new wages will apply from the start of the next pay reference period on/after their birthday. E.g. if they are paid 1st – last of April, and their birthday is on the 3rd April, the new rate should be paid from the 1st of May as this is the next pay period rather than pay part month at one rate and part month at another rate.
There is of course nothing stopping them from changing the rate mid-month but for NMW purposes it is based off the information at the start of each pay period.
Having honest conversations with your employees may help alleviate some of the challenges in this current time.
Many charities are feeling pressured by these changes and are struggling to establish and maintain a pay structure that mirrors the hierarchy of the organisation.
There are suggestions that the Government may establish some help for charities although nothing is confirmed yet.
Ultimately, the path forward must keep your running costs low and your staff happy, which can sometimes feel like an impossible challenge.
We can help you to figure out your finances to ease your burdens and free you up to do what you do best.
Noncompliance and an inability to handle additional costs may threaten your future financial security, so talk to our team today.