Is HMRC’s payslip message on the NIC increase appropriate?by
HMRC has asked employers to use the payslip messaging facility to communicate the 2022/23 increase in national insurance contributions to employees. But should it fall to employers to communicate this UK Government policy decision?
Many potential queries to the payroll department are foreseen and solved by educating and communicating with our employees. For example, if an employer wants to bring forward the December payday, they may choose to use the payslip messaging facility to advise employees. This messaging capability, when facilitated in software, has many employment-related uses and employers should always consider this as a communication tool, yet only where it is appropriate and applicable to all employees.
Which leads onto HMRC’s “request” that employers use this employment-related facility to communicate in the 2022/23 tax year. For the first time I can remember in my career, software developers have been asked to facilitate and employers have been asked to communicate a standard payslip message designed to explain the UK Government’s policy decision to increase national insurance contributions by 1.25 percentage points.
The suggested wording read: “1.25% uplift in NICs funds NHS, health & social care.” Basically this 52-character standard message is saying to employees, on behalf of the UK Government, that the only reason for the 1.25%-point increase to the national insurance is to fund the NHS and plans for health and social care reforms. HMRC’s February 2022 Employer Bulletin says that the message will help employees understand that the reason for the increase is to help fund public services. Their “Prepare for the Health and Social Care Levy” guidance asks that employers use this message “where appropriate”.
The online Cambridge Dictionary defines the word as “suitable or right for a particular situation or occasion”. So, the point of this article is to consider whether or not it is appropriate for employers to be the ones to communicate this UK Government policy decision.
HMRC’s role in this
HMRC’s own summary of activities states that they are “the UK’s tax, payments and customs authority” that collects monies later spent on public services. They are a non-ministerial department, meaning they are impartial, as ministers are politically appointed. They are staffed by civil servants (employees) who must serve the government, regardless of their political persuasion.
So, is it appropriate that impartial employees of the UK Government even request the communication of this political message?
What the legislation says
Software developers and employers focus on ensuring their products and operations are legislatively compliant. For many, it’s a black and white situation. If it’s in legislation then you must do it, if it’s not then you don’t.
There is nothing in legislation that says that software developers must facilitate and employers must display this message. It is purely HMRC’s request that this brief message is displayed, all in the name of explaining a UK Government policy decision.
Using the functionality
Before employers consider whether it is appropriate to display this message, consider that this is for employment-related issues. At least that is what it has always been used for before. So, if it is used, the functionality will no longer be available for communicating messages such as changes of pay dates, change of contact details, reminders about timesheet deadlines and so on.
Is the message accurate?
Employees should be made aware that national insurance contributions (NIC) will increase from April 2022. Indeed, making them aware should achieve the goal of reducing queries to the payroll function.
However, is the suggested message relaying the correct information? It is not the value of national insurance contributions that are uplifted by 1.25%, it is the percentages themselves. For an employee on NI letter A in 2022/23, this means that they will pay contributions of 13.25% on all earnings between the Primary Threshold up to and including the Upper Earnings Limit. This compares with 12% on the same band of earnings in 2021/22.
Let’s review the increase in contributions, assuming an employee’s monthly salary near the UK average of £2,500.
- In tax year 2021/22, an employee’s national insurance contributions equal £204.36.
- In tax year 2022/23, ignoring the Primary Threshold increase, an employee’s national insurance contributions equal £225.65.
There is a big difference between a value uplift of 1.25% and a percentage increase of 1.25%. When we are looking to communicate accurate information, is it appropriate to convey a message that implies national insurance will increase by 1.25% when the actual increase is 10.4%?
Will the increase go where it says?
NHS and health and social care policies are devolved responsibilities. This means that decisions on funding and policy are made by:
- The UK Government for England
- The Welsh Government for Wales
- The Scottish Government for Scotland, and
- The Executive for Northern Ireland.
England’s plan (Build Back Better), gives rise to the increase in national insurance in 2022/23 with increased funds going to NHS England. In 2023/24, percentages will reduce but a new 1.25% tax will be imposed to fund England’s policy reforms.
While monies will also go to the devolved nations that will be ringfenced for NHS and health and social care policies, it does not necessarily follow that the uplift will result in increased monies going to these public services.
Is it appropriate to convey a message about an uplift when each nation has the power to decide the necessary funding needed for their own policies?
Is a generic payslip message appropriate?
There will be many employees who do not pay national insurance contributions at all. For example, those earning below the Primary Threshold and those over State Pension age. That is to say nothing of the many pension payrolls that pay monies not subject to national insurance.
The concept of the message is to help individuals understand the UK Government’s policy decision and, therefore, reduce queries to the payroll function. If the individual has not seen any increase at all, is it appropriate to communicate, as this will surely increase queries?
More than ever, it is time for employers, agents, bureaux and bookkeepers to consider whether it is appropriate and correct to communicate a UK Government policy decision. Yet, this consideration is worthless if their software will impose the payslip message anyway.
So, ask three questions:
- What is my payroll software going to be doing regarding the payslip message?
- What is appropriate for my company?
- What is appropriate for the individuals who will see this message?
For more insight from Ian Holloway tune in to the 'Prepare for the start of the new tax year' episode of Any Answers Live on Monday 14 March at 9am.
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Ian Holloway is a highly respected payroll practitioner, writer, advisor and trainer and has worked in the payroll profession for over 30 years. Ian has hands-on experience processing payrolls from all sectors, large and small.
In 2011 he shifted focus to his passion for educating the profession, and also worked on improving Payroll...