The British Payroll and Facilities Management

More and more employment costs are being loaded onto facilities management departments and outsourced FM companies. 2017 sees the continuation in the rise of the new National Living Wage for 25 year olds and over, another rise in the minimum wage, the impact of pension auto enrolment, and the introduction of the Apprenticeship Levy for companies with wage bills of £3m or more.

The National Living Wage and the minimum wage – both rising this year

Every full-time worker on the current level of National Living Wage will see their wages go up by £500 a year because of the increase to £7.50 an hour in April 2017.

The minimum wage also rises for 21-24 years old to £7.05 per hour. 18-20 year olds enjoy an increase to £5.60. Under 18s see a small hike to £4.05 and apprentices benefit from an increase to £3.50.

Whilst every individual and company support the idea of paying staff as highly as possible, many FM departments and service providers are particularly worried about the level of mandated and compulsory wage increase for the lowest skill jobs outpacing the level of inflation and any increase in turnover.

The Government have pledged to increase the National Living Wage to £9.00 per hour as a minimum by April 2020. This would mean that over 25’s minimum rate of pay would increase from £6.70 in 2015 to £9.00 in 2020 – a jump of 34%, or 4.9% per annum compounded.

Auto enrolment increasing payroll by up to 3% per annum

Although dealing with the increase in wages will present many challenges to both facilities managers allocating human resources and the finance departments and directors they answer to, the introduction of compulsory workplace pensions is a double whammy in costs and compliance.

In addition to the 13.8% paid on top of wages for National Insurance Employers’ Contribution, companies and organisations will feel the squeeze from this increase in labour-related costs.

Eventually, employers will be mandated to contribute 3% of an employee’s gross salary to the scheme. The level of contribution starts at 1% from launch however the Government have guaranteed that it will rise to 3% by April 2019.

By April 2019, employees must pay 5% minimum of their gross wage to their workplace pension. We await with interest to see what effect this will have on the motivation of staff currently not paying into a pension as, to them, this may look and feel like a pay cut, especially if their retirement age is many decades away.

There have been many complaints from various different business and employment organisations about the complexity and cost of setting up and running a scheme.

Apprenticeship levy on firms with a £3m+ payroll

Announced in 2015, the goal of the Apprenticeship Levy is to fund three million apprenticeships in the UK by 2020. If your organisation (including charity or public sector) spends more than £3m a year on wages (including commissions and pension contributions), you will be affected.

You’ll have to pay 0.5% of your annual wage bill across for the Apprenticeship Levy from April 2017. All companies and organisations paying the Levy will receive a £15,000 training allowance. This training allowance can be used to take on and train young and/or inexperienced staff on brand new apprenticeships.

If you’ve spent all of your allowance, the government will continue to pick up 90% of the bill for training and paying a new apprentice. To take full advantage, all you have to do is make sure you choose a recognised training provider as your partner.

New year, big changes

Everything is going up this year when it comes to the cost of staff. Wages, auto enrolment, and the apprenticeship levy. 2017 offers great opportunities in FM but there are a number of challenges we all have to cope with as well.

Let us know how you intend to work with these big changes. Call us today on 0207 118 4848 or email us at info@maxwellstephens.com