Boss gives entire company pay rise to cover National Insurance hike – ‘really generous’
Boris Johnson refuses to rule out further tax rises
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Boris Johnson announced this week a Health and Social Care Levy would be introduced from next year to cover NHS backlogs and care costs. The Government detailed employees, employers and the self-employed will all pay 1.25 percent more NI from April 2022. This news will be disheartening for British workers who are already struggling with the ongoing impact of coronavirus, but some are already taking steps to mitigate the damage.
With the looming rising costs, a Gloucestershire based digital marketing company announced it will give its entire workforce a pay rise to cover the drop in income.
Edward Newman, the 34-year-old founder of 71a, has promised every member of his team a pay rise in addition to their usual annual salary increase to cover the sharp hike in NI.
Mr Newman commented: “I understand why national insurance contributions need to go up next year, but I didn’t want to see my team under financial pressure. This increase is enough to force them to have to think about what they might need to cut back on, and I didn’t want any of them worrying about it. We’ve all been through so much in the past year and a half; the least I could do is remove this stress.
“If they can afford to, I believe every business owner should follow suit. From what I understand, companies will take a double hit because of the increase in employers’ national insurance contributions as well, so it’s important you stress test your budgets before promising anything.
“I want to make sure my team don’t feel like they’ve had a pay cut and can continue with the lifestyle they’re used to. For some employees, the difference is an additional £42 month, which for those with single income families is a full tank of petrol or a couple of week’s worth of lunches.”
Amy Harker, a Marketing assistant at 71a, highlighted just how important this is to workers: “Ed just came in yesterday morning and announced that none of us had to worry about the National Insurance increase next year, and we were all a bit speechless.
“We had been chatting about it in the office and agreed the hike was the equivalent of our monthly mobile phone bill and how we’d have to go without certain things. We were all so relieved and delighted to hear the news this morning. Ed’s a really generous boss, and we’re very grateful.”
Unfortunately, most workers are likely to experience the opposite of this over the coming months.
Sarah Coles, a personal finance analyst at Hargreaves Lansdown, warned workers up and down the UK are more than likely to take financial hits from multiple angles in 2022.
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“The introduction of the Health and Social Care Levy will deal a body blow to those who are Just About Managing,” she said.
“It could spark family breakdowns, job losses, and wage stagnation. It could also make it harder for people to find work, according to Government analysis of the changes.
“The Government has assessed the impact of the tax rise, and warned that people who are only just making ends meet will have to deal with another blow to their finances. It says this could mean more couples split up, driven apart by money worries, and more families could break down.
“It has also said this is going to affect some of the decisions that businesses make around wage bills and recruitment. The fact they’re going to have to pay more national insurance for each worker could mean they decide to let staff go. Alternatively, they could freeze wages to absorb the extra cost, at a time when inflation is making life increasingly expensive. Or they might decide to halt recruitment, which is going to make it even harder for people to find work.
“For those people whose loved ones need care after October 2023, the cap on care costs could make an enormous difference. The pressure that caring puts on families can’t be underestimated, and the relief of knowing the state will eventually step in will help protect them from untold stress. However, it comes at a cost – one that looks set to push people who are Just About Managing over the precipice into Not Managing At All.”
On top of these issues, many workers could see their income plunge in the more immediate future as the furlough scheme comes to an end. According to analysis from OpenMoney, workers face a “huge drop in income” if their role is made redundant and they don’t quickly find an alternative as furlough payments stop from October.
In analysing the latest Office for National Statistics Business Impact Survey, OpenMoney found that overall approximately six percent of UK workers remain on full or partial furlough, but this figure is far higher in certain sectors. In the other service activities industry (which includes hairdressing and beauty treatments), it stands at 16 percent, while in arts entertainment and recreation, and administrative and support service activities almost 10 percent of workers remain on furlough.
Anthony Morrow, co-founder of OpenMoney, commented on the ONS figures: “While many businesses are recovering well from the effects of the pandemic and some are actually finding it hard to fill vacancies, others are still struggling to adapt to the changing consumer habits it brought about. The Coronavirus Job Retention Scheme has supported over 11.6 million jobs since last March and its looming closure raises real concerns over the future employment prospects for people currently on furlough. Given the diverse impact of the pandemic on different sectors, people may have to consider retraining to find lasting employment.
“Anyone losing their job following the scheme ending and unable to find alternative work quickly is likely to face a huge fall in their income, affecting their ability to pay essential bills. And for those needing to claim benefits as a result of the scheme ending, the removal at the start of October of the £20 Universal Credit boost will come as a double blow.
“The long-term impact on people with already vulnerable finances could be devastating. Our advice gap research earlier this year found that in the last 12 months more than a third (35 percent) of people ran out of money before their next payday at least some of the time. Among young people aged 18- to 34, who have been disproportionately impacted by the coronavirus crisis, the situation is worse, with nearly half (44 percent) running out of money before they get paid.
“If you are concerned about your financial situation, it’s important to review your finances now before any further changes come into force. Make sure you are claiming all the benefits you are entitled to and check your spending to understand where all your money is going – OpenMoney offers free tools and advice which can help you manage your money better. If you’re struggling to pay essential bills, speak to your lender, landlord or utility supplier to discuss delaying or reducing payments to make sure things don’t get any worse.”
Throughout 2020, the Government extended its coronavirus related support schemes a number of times in a bid to keep the economy afloat.
However, as Briton moved beyond the lockdown, Rishi Sunak, Thérèse Coffey and other Ministers remained adamant that all forms of support measures would be wound down from the autumn.
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