When managing pay and benefits for your staff, while navigating legislation, it’s often all about your age. The statutory regulations, retirement planning, the amount you have to pay and the money you receive revolves around how old you are.
Here we look at nine considerations for UK payrolls and HR professionals and how and why age matters:
1. National Minimum Wage (NMW) and Age Bands:
The UK has a tiered system for the National Minimum Wage (NMW) that varies on age with rates changing when an employee reaches an age-threshold. It is only when aged 23 or over that you qualify for the full National Living Wage.
2. Pension Auto-Enrolment:
Under the UK’s automatic enrolment pension scheme, employers are required to automatically enrol eligible employees into a workplace pension scheme. Again, age is a significant factor determining eligibility. Employees aged 22 or over but under the state pension age and earning over a certain threshold must be enrolled.
3. State Pension Age (SPA):The state pension age in the UK is gradually increasing. The current SPA age, which is currently 66, will start gradually increasing again from 6 May 2026.
4. Age Discrimination:
Employers in the UK must adhere to the Equality Act 2010, which prohibits age discrimination in employment, including in payroll practices. Age should not be a factor in decisions related to pay, promotions, or benefits.
5. Taxation Considerations:
Age can influence tax planning, especially regarding personal allowances and tax codes. For example, individuals over a certain age may be entitled to a higher personal tax allowance.
6. Employee Benefits:
Many companies offer age-related benefits, such as healthcare plans, life insurance, or additional leave days, which may be dependent on an employee’s age or years of service. With health insurances for SMEs the higher premiums will reflect the P11D payments your older employees have to pay.
7. Termination & Redundancy Pay:
Redundancy pay calculations in the UK take an employee’s age, length of service, and weekly gross pay into account. Older employees with longer service are likely to be entitled to larger redundancy payments.
8. Flexible Working Arrangements:
Older employees may request flexible working arrangements, reduced hours, or phased retirement.
9. Pension Contributions:
Employers need to be aware of any changes in pension contribution rates based on the age of employees, especially with regard to auto-enrolment requirements.
It’s crucial for businesses to stay updated on relevant legislation as these seem to be ever-changing. For example, a new Bill received Royal Assent only last month that also affects pensions. Royal Assent means that this new law may be implemented at any time. However, the Department of Work and Pensions are launching a consultation on implementing any new measures and so it is not yet known when this will become ‘live’. THE PENSIONS (EXTENSION OF AUTOMATIC ENROLMENT) ACT 2023 aims to usher in changes to the age and earnings thresholds for automatic pension enrolment. More on this when we know more.
This is where advo’s Payroll, HR and employee benefit experts can add real value to SMEs, helping navigate the legislation and numerous age-related matters.