Tricky to explain, I normally do an annual wage increase of around 3% but this is to include & helps offset any AA percentages taken over the last few years.
I think I have not quite worked it correctly in the past (To my staffs benefit) & want to make sure I do it right this time.
So from 6 april 2019 I do not want my total wage costs to go up more than 3%.
Scenero's as I see it. (Ignoring possible benefits from higher thresholds **)
I now use Xero (From Sage) so not sure how contributions are actually worked out software side
1) If I increase basic salary by 3%.
Company contributions will go up 1%.
Staff 2% would be offset by wage increase so take home about the same ** but at least not go down & increased contributions to pension.
I think therefore the employers 1% would be compounded/on top of the 3% so perhaps nearly 4% actual. Can't get my head around this.
2) Increase basic salary by 2%
I doubt staff will get the overall benefit from the full 3% in the pension or perhaps they will. Not sure how to calculate that
3) No salary increase
My contributions go up 1% but staff take a 2% hit.
It may all be wrong anyway with my calculations base on each years increase rather than the total 3&5% since AA start.
I did wonder what happens when someone reaches 22 years old.
If they have been on a salary, are you expected to take the 3% extra costs on day one & they take the further 5% hit.
I really would not do this but did wonder if you are actually legally allowed to reduce someone salary on that day to compensate.
I do not want to appear the mean employer & try to be fair.
My income has reduced slightly over the years theirs has been increasing mostly due increase wage bills, I do OK but don't want to give the impression that mine is increasing faster or even as fast at staff's