Health & Social Care Levy - all you need to know
27th January 2022
Written by: Paul Gibbons, Chief Operating Officer - PayDashboard
The Health & Social Care Levy comes into effect for UK workers in April, but thousands are still in the dark about how it will affect their net pay. In fact, many will think they've been paid incorrectly when they receive their April payslips.
In this article, PayDashboard COO and Product Owner, Paul Gibbons MCIPPdip explains how the H&SC Levy is going to impact employees, and the role that PayDashboard will play in supporting those affected.
A breakdown of the Levy
From April, taxpayers will see an increase in their NI contributions when the Health & Social Care Levy comes into effect. And for the first time ever, HMRC has asked employers to play a role in communicating this legislative change to their employees, with the following message to be added to their payslips:
“1.25% uplift in NICs funds NHS, health and social care.”
The purpose of this article is not to address the Levy itself, but to highlight the issues that could arise if employees are not adequately prepared, and to offer a solution.
WATCH THE FULL HEALTH & SOCIAL CARE LEVY UPDATE FROM CIPP
How employees will be affected
The Levy will impact anyone in the UK on PAYE. For those not getting a pay rise this April, their net pay will fall. In previous years, tax bands and personal allowances have either stayed the same or increased, resulting in take home pay either staying the same or increasing slightly year on year. But this year, take home pay for many is going down.
And employees are going to feel the pinch.
How much will be deducted?
For example, an employee earning £30K before tax could see their net pay decrease by over £20 per month. Which might not seem like much, but against the current backdrop of rising living and energy costs, this could be a significant financial hit.
84% of employees say the first thing they look at on their payslip is net pay1
Ideally, employees will have received information in advance of April, to help them be prepared and to budget accordingly. And employers across the UK are looking for ways to offer this support. And it’s clear that this support is needed! For example, PayDashboard’s Health & Social Care Levy guide has already been requested over 700 times!
The PayDashboard solution
In our continuing commitment to providing value for our users, we are launching an in-platform Health & Social Care Levy calculator and accompanying guidance article. The calculator will allow employees to calculate what their take-home pay will be before the tax rise in April, and the guidance article will provide a complete breakdown of the Levy. In other words, this new feature will enable employees to be adequately prepared and adapt their budgets accordingly.
LEARN MORE ABOUT THE HEALTH & SOCIAL CARE LEVY CALCULATOR
Why is this feature so important?
With research showing that 1 in 10 employees feel confused by their payslip every payday, and almost two-thirds admitting to being confused by their pay at some point, imagine how many employees will feel confused when they see their first payslip in April and find that they are being paid less!
Not only is that stressful for the employee, but no doubt many will assume they have been paid incorrectly and will complain to their employer. By proactive communication and forewarning to our users, we aim to pre-empt these questions and reduce the number of questions or complaints sent to the HR or Payroll Team.
PLUS! By introducing this feature in January, our users will have almost three months to prepare for the change to their net pay.
So why PayDashboard?
Providing employee financial education underpins the PayDashboard product and has been our ethos since our launch in 2015. Our in-platform financial education guides receive hundreds of thousands of hits per year, revealing just what a valuable resource they are.
A study by CIPP1 found that 55% of employees would be interested in short videos or guides on specific areas of their payslip, yet only 31% feel comfortable talking to their employer about their earnings. There is a clear need for employees to be pre-emptively empowered and prepared with adequate payslip guidance and education.
GET YOUR 2022 NEW TAX YEAR EMPLOYEE GUIDE
The Health & Social Care Levy will be the biggest tax hike in 70 years2 – at a time when UK workers are already feeling the squeeze from soaring living costs. But there’s good news. Solutions are available to enable employers to take an active role in reducing this impact. It begins with providing employees with the tools and guidance to be financially prepared where it all starts – with the payslip.
The interactive and scalable SmartSlip integrates with your payroll software, to provide a seamless and efficient employee payday experience. Innovative new platform features enable time and cost savings across your organisation or bureau, while helping employees to budget, save and spend better. It’s a simple and efficient solution offering a secure, single platform for payslips, PAYE forms, document sharing, and communications.
Find out why PayDashboard is the chosen payslip for over 18,000 UK companies, or why we received the Reward Strategy Customer Service award in 2021. Get in touch with us today for a quick chat or book a demo at a date that is suitable for you.
We’d love to learn more about you and show you the platform!