Much has been written on LinkedIn recently about HMRC’s ‘request’ for software developers to facilitate a standard payslip message to explain the UK Government policy of increasing National Insurance Contributions in 2022/23. 

It’s time for me to make my comments.

The suggested wording reads:  

Similarly, employers have been asked to put this message on employees’ payslips.

Where developers are unable to payslip templates directly, but software allows employers to add free format messages, HMRC asked software developers to include the following information in help / support text:

Whilst I am a great believer in education and communication, I am not a believer in educating and communicating a UK Government policy.  To attempt to do this in 52 characters, including spaces, is something that is a monumental first in my payroll career.

Let us consider the message in a number of contexts, remembering that the intention is to reduce queries to the payroll department:

It is not mandatory that employers show this message that conveys the UK Government’s policy intentions.  There is no legislation that says this has to be done.

The message is a request only:

• As the above announcement says, it will help ‘ensure taxpayers understand that their increased NICs is helping fund public services’
• As the February 2022 Employer Bulletin said it will ‘explain their increased National Insurance contribution’

Where it exists in software, employers use this to communicate a variety of messages such as advising about employment-related matters (‘please send payroll queries to x’ and ‘December’s payday will be bought forward’ etc). 

If software developers mandate the political message and employers accept this, they will no longer be able to use the facility for employment-related issues.  

It is the National Insurance percentages that are uplifted by 1.25%, e.g. 12% to 13.25% for the employee on category letter A.  This equates to 1.25p for every £1 subject to National Insurance Contributions, i.e. every £1 of earnings over the Primary Threshold. 

It does not mean that the value of National Insurance are uplifted by 1.25%. 

There is a difference.  For example, assume an employee earns £450 per week meaning that, in 2021/22, earnings above the Primary Threshold are £266 and contributions are, therefore, £31.92 (£266 * 12%):

• Ignoring the fact that the Primary Threshold has increased slightly in 2022/23, a 1.25% uplift in percentages means Contributions will be £35.24 (£266 * 13.25%).  The percentage rate uplift of 1.25% means that Contributions have actually increased by 10.4% (£31.92 * 10.4% = £35.24)
• A 1.25% uplift in the value of Contributions, as implied by the payslip message, would equal Contributions of £32.32 (£31.92 * 1.25%)

There is an especially major difference between saying an employee’s National Insurance will increase by 1.25% and saying that the percentage contribution rate has been increased by 1.25%.

The 1.25% uplift is all part of the UK Government’s plans to fund the NHS and reform health and social care in England:

• In 2022/23, 1.25% is added to National Insurance Contribution percentages and the increased funds raised will be used to fund the NHS to help clear the waiting list backlog
• In 2023/24, the National Insurance Contribution percentages reduce to 2021/22 levels and a separate tax will be introduced as a statutory deduction.  The Health and Social Care Levy Act 2021 says that, after HMRC have deducted their collection and compliance expenses, the remaining funds will be allocated to fund the health and social care policies in England, Wales, Scotland and Northern Ireland

Here is an important consideration.  The NHS and health and social care policy are devolved functions.  We know England’s plan (Build Back Better ) but that plan is not the same as the ones developed in the devolved nations.

So, whilst the monies from the increased National Insurance and the levy (after HMRC’s expenses) will be ringfenced to go towards the NHS and health a social care in each of the UK nations, the way that it is spent depends on the decisions of the individual Governments:

• In England, this is the UK Government
• In Wales, this is the Welsh Government
• In Scotland, this is the Scottish Government
• In Northern Ireland, this is the Executive

It is true to say that the monies will be for the NHS and health and social care.  However, it is not true to imply that this will mean increased monies, as each nation decides on the necessary funding depending on their own policies.

There are employees that will not pay NICs at all, for example those over State Pension age (on category letter C) and those earnings under the Primary Threshold (£190 per week / £823 per month in 2022/23).

Plus there are payrolls that are solely paying pensions where there is no NI liability at all.

Is it correct that a payslip message appears for these people?  Surely a message saying there has been an uplift will prompt more confusion and queries.

Although, to be fair, HMRC’s guidance ‘Prepare for the Health and Social Care Levy ’ does say that they are only asking for the message to be displayed ‘where appropriate’.  I do not think it is appropriate to use the employment-related payslip messaging facility to advise something that is not even relevant.

The increased National Insurance bill for employers could have knock-on consequences in tax year 2023/24, for example:

• Employers are only eligible to claim the £4,000 Employment Allowance if their Secondary (employer) Contributions were less than £100,000 in the previous tax year.  Will the temporary increase to percentages in 2022/23 mean that some employers become ineligible to claim in the following tax year?
• Employers can qualify for Small Employer’s Relief if the value of their Class 1 National Insurance was £45,000 or less in the previous tax year.  This means that payments such as Statutory Maternity Pay can be reclaimed at 103% rather than 92%.  Again, will the temporary increase to percentages in 2022/23 mean that employers may lose eligibility for this?

This is not meant to be an article that advises against this payslip message.  Even though I have not met one employer that does want to convey this political message, these employers sometimes have their hands tied by the software developer that is putting it on anyway.

It is, however, an article to outline that there are many things employers should consider, not least whether they want to be conveying a political message that is not accurate anyway.

I would advise employers to contact their software developers in the first instance to ascertain their plans for this message.  I would have thought, at the very least, it should be an option that an employer can choose.

For payroll agents and bookkeepers that run multiple payrolls, the position is more complicated.  I believe that clients should be contacted to see whether or not they want this message appearing for their employees. 

Remember, it is not mandatory that this message conveying a UK Government policy announcement is shown on payslips.  However, I do believe that it is necessary that employees are contacted and advised about the scale of this increase.  Though not by using a payslip message that is incorrect and misleading.

Employers – take back control over what goes on your employees’ payslips.