The Salary Calculator

April’s hotly-debated Employer National Insurance (NI) rise is fast approaching. A big ticket item in the Autumn Budget, the increase has been met with unease by some, concerned it will tighten purse strings, cut jobs and raise prices. But while change is incoming, it’s not all doom and gloom. 

If you’re wondering what this means for you, The Salary Calculator is here to clear up the confusion. This week, we’ll be answering: 

• How is Employer NI changing?
• Why are Employer NI rates increasing?
• What do the changes mean for businesses?
• How will the changes affect you?

How is Employer NI changing?

Back in October, Chancellor Rachel Reeves announced that in the new financial year Employer National Insurance — a tax employers pay on top of employee wages — will be increasing from 13.8% to 15%. 

The Autumn Budget also delivered news that the threshold at which employers pay NICs on employees’ earnings will decrease from £9,100 a year to £5,000. 

However, alongside this, Employment Allowance — which allows employers to reduce their annual National Insurance liability — will increase from £5,000 to £10,500, and the £100,000 eligibility cap will be removed, meaning more employers will qualify. 

The changes to Employment Allowance, Reeves said, will help “protect” the smallest companies. 

“This means that 865,000 employers will not pay any national insurance at all next year, and over 1 million will pay the same or less than they did previously,” the Chancellor explained.

These changes will be effective from 6 April 2025.

It hasn’t all been plain sailing, though. Peers in the House of Lords (HoL) voted to exempt care providers, charities, and small businesses from the rise, resulting in ‘ping pong’ between the two chambers. That said, the HoL amendments are “likely to be overturned” in the House of Commons (HoC), according to the Chartered Institute of Taxation (CIOT).

Why are Employer NI rates increasing?

According to Reeves, the changes to Employer NI aim to raise revenues to fund public services and “restore economic stability.”

Indeed, the Budget committed to providing an additional £22.6bn for the Department of Health and Social Care (DHSC) across the next two years and a £3.1bn increase in the capital budget.

Reeves called this a “record injection of funding” and the “largest real-terms growth in day-to-day NHS spending outside of Covid since 2010.”

The Employer NI increase, expected to raise £25bn, is part of a larger £40bn in tax rises. However, according to 2023 projections from the Centre for Progressive Policy (CPP), far more is required to keep public services afloat. The CPP estimates that the government will need to find an additional £142bn per year by 2030 “just to maintain current levels of public services.”

What do the changes mean for businesses?

The incoming changes mean some companies are facing higher costs. When assessing the effects of the government’s new policy measures, the Office for Budget Responsibility (OBR) said the NIC rise will increase employer payroll costs by just under 2%.

But it’s important to note that the bill footed by employers will vary depending on how much workers earn.

According to the Institute for Fiscal Studies (IFS), for each median earner (£33,000), employers are facing an additional £900. Meanwhile, for a full-time minimum wage worker (£22,000), the increase will look more like £770. 

“SMEs, in particular, will bear the brunt of this additional tax burden”

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“Whilst smaller employers might not feel the impact due to the rise in the employment allowance, SMEs, in particular, will bear the brunt of this additional tax burden,” said Emily Gaffney, Freeths Taxation Senior Associate, in a statement to The Salary Calculator.

This is echoed in new findings from iwoca, revealing that 66% of SME leaders estimate the rise will “cost them each over £10,000.”

How will the changes affect you?

Although the NIC rise won’t directly affect take-home pay, some businesses will be looking to find ways to offset the increase, which, in some cases, could impact workers and consumers. 

Indeed, in October, the CIOT warned that the changes to Employers NI could have “unforeseen consequences,” including businesses seeking “alternative arrangements to taking on people as employees.”

“Alternatives could include outsourcing or offshoring services and reducing the numbers of employees,” said Eleanor Meredith, Chair of CIOT’s Employment Taxes Committee.

The Chartered Institute of Personnel and Development (CIPD) reported that this is a move that 32% of the 2,000 firms it recently surveyed plan to make, with companies reducing headcount through “redundancies or recruiting fewer workers.”

Likewise, the National Insurance Pulse Survey by Towers Watson, which spoke to over 200 respondents from various industries, found that 28% are looking to make workforce cuts, and 33% have reduced planned salary increases.

The IFS has claimed that “just £16bn” will be raised from the Employer NI increase due to this impact on wages.

Reflecting on the situation, Gemma Alicia Long, HR Consultant and Director of HR & Co, said that small businesses are having to make “difficult decisions” to mitigate the increase in NI costs and safeguard their businesses.

“For some, this may result in job losses,” said Long. 

These cascading impacts have led to some questioning whether the increase breaks the government’s pledge to “not increase taxes on working people.”

“The Labour party assured voters during the 2024 general election that there would be no tax increases on ‘working people’. From an economic perspective, there is a risk that an increase in employer national insurance, combined with the rise in the National Minimum Wage for young adults, becomes effectively that – a tax increase borne by working people,” said Gaffney. 

“Many companies plan to pass on the additional costs to consumers due to the increased operational costs”

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In hospitality, among the industries set to feel the biggest shock, trade bodies have warned that the changes will cost £1bn by bringing 774,000 into the eligible threshold. According to UKHospitality, in January, businesses were already making decisions to cut investment and jobs, freeze recruitment, and reduce hours.

Elsewhere, a survey of 52 leading retailers by the British Retail Consortium found that 56% plan to reduce ‘number of hours/overtime’ and 46% plan to cut back on ‘stores headcount’.

That said, according to the Trades Union Congress (TUC), employers are “more likely to absorb the increased contributions than shift the burden to their staff.”

Firms are also exploring price adjustments. “Many companies plan to pass on the additional costs to consumers due to the increased operational costs,” said Long. 

Indeed, data from the Office for National Statistics revealed that in late February, 49% of businesses with 10 plus employees shared their intentions to increase prices in response to future rises in employment costs. 

With the NIC changes right around the corner, Long notes that businesses will be looking to prioritise operational efficiency.

“Businesses are exploring cost-saving measures such as outsourcing and automation to maintain profitability without compromising service quality,” she said. 

Financial planning is also key. “Small businesses are revising their budgets and financial forecasts to accommodate the higher NI contributions, ensuring they maintain healthy cash flow and profitability,” said Long. 

However, as businesses seek to reduce costs with outsourcing, it’s key that employers are mindful of ‘false self-employment,’ something the CIOT has warned against. 

“We are concerned that the increase in employers’ NI could lead to an increase in ‘false self-employment’, where businesses trying to save money turn to arrangements where the worker is not directly employed by them, without necessarily appreciating the rules and risks of such arrangements,” said the CIOT’s Eleanor Meredith in October. Such arrangements can have consequences for both employers and employees. 

Another option for employers looking to minimise impact is salary sacrifice arrangements. A government-backed scheme, these arrangements reduce entitlement to cash pay in return for a non-cash benefit, which, in turn, can help save on NICs. Salary sacrifice arrangements come in many forms, including pension contributions, bike-to-work schemes and car schemes. For more insight into other avenues employers might explore to mitigate the NI rise, head here. 

Ultimately, with no rule book instructing employers on which option to choose, the impact of the rise will play out differently from business to business. But, for workers concerned about the consequences, the TUC advises that the National Living Wage and the Employment Rights Bill will provide “important protections.”

Chancellor Jeremy Hunt has given his Autumn Statement today, including a number of changes to National Insurance contributions for both employees and for the self-employed.

The standard rate of NI for employees (Class 1) will be reduced with effect from 6th January 2024 (i.e., before the start of the next tax year on 6th April), from its current 12% to a lower 10%. This rate of NI is paid by employees earning more than £12,570. The rate you pay on earnings over £50,270 will remain at 2%.  This change could save employees up to £754 per year.

The self-employed will also benefit from 6th April, with their (Class 4) NI rate being reduced from 9% to 8%, and Class 2 NI (£3.45 per week) being abolished.

If you’d like to see how much of a difference the NI change will make to your payslip from January, The Salary Calculator has been updated with the new NI rates, which are displayed in the results table in an extra “From January 2024” line. I hope that you find it helpful!

For many, it feels like ChatGPT came out of nowhere, only to completely shift day-to-day living. OpenAI launched its language model-based chatbot back on November 30, 2022, and in the short amount of time it’s been out, it’s had a BIG impact, and competitors have since come onto the scene with their respective offerings.

But, what does it all mean? AI experts are warning of danger ahead, and already, companies like IBM and BT have signalled that they will be making AI-related job cuts.

In all the hubbub, it can be difficult to know where you stand, so in this week’s article, we’ll explore the following:

• The potential scale of impact on jobs
• How people from the world of work are reacting
• How is the government dealing with the potential threat

The scale of the issue and impact

When listening to the experts, it seems as though the advancement of AI is unavoidable and inescapable, and it will undoubtedly have a presence in our lives. But how will it impact the world of work?

According to a report by investment bank Goldman Sachs early this year, AI could potentially replace a quarter of work tasks in the US and Europe – however, it will impact sectors differently.

While 46% of tasks in administration and 44% in legal professions could be replaced by automation, for construction, the figure stands at 6%.

It’s also worth noting that this displacement will also likely be experienced differently for men and women, with women dominating in clerical work. Indeed, research shows that more than twice the share of female employment could be affected.

High-income economies are also more likely to be affected, at a rate of 5.5 per cent, versus 0.4 per cent in low-income economies. That said, experts say that many places aren’t yet prepared for the disruption ahead. Some figures show that over 50 million Chinese workers will require retraining, while in the US, this figure stands at 11.5 million.

It’s also important to note that forecasts vary widely, too, and while there have been a number of potentially catastrophic forecasts, including from Cred CEO Kunal Shah, who recently warned that 90% of people could lose their jobs in the next ten years, the likes of Forrester predict that generative AI will “influence 4.5 times more jobs than it replaces.”

Responses from the world of work

But how do those in the workforce feel about AI? It’s really quite mixed.

According to some research, 36% feel that AI will make them feel more stressed, while 37% are concerned it will mean their work is less accurate. Meanwhile, 38% shared data privacy concerns.

Elsewhere, Censuswide, on behalf of Visier, found that those already using AI in the workplace saved around 1.55 hours a day – or 390 hours a year and 40 per cent think it will enhance their work-life balance.

Further to this, around 31 per cent believe it can help close the skills gap in the UK. This is huge, considering that 73% continue to report skills gaps, only 11% of UK workers have digital skills and 54% of organisations don’t have specific skills initiatives in place for specific talent pools. 67%, meanwhile, believe that developing AI skills will be important for their future career growth.

Speaking about this, Ben Harris, Director UK MD at Visier, said: “The workplace has been disrupted by rapid innovation and everyone has a role to play in its smooth adoption. With skills gaps widening across the UK, AI can alleviate a wide range of pain points. But, with opportunity comes responsibility.”

In order to survive and thrive in the new world of AI, some have suggested that workers learn how to code, become more data literate, and hone in skills that are AI-proof, such as communication, collaboration and adaptability skills. A central focus for people in this new world of work will also be becoming lifelong learners.

How is the government dealing with the potential threat?

Considering opinions are so divided, and the technology will reshape the world we live in so dramatically, you might be wondering what the government plans- on doing to regulate it and keep things in check. There’s also a lot of support for regulation, with almost 60% of British people wanting regulation to be introduced for AI in the workplace, according to Prospect Trade Union.

The government set out the need to legislate in an AI white paper earlier this year, but has been urged to speed things up due to how quickly AI is evolving.

Recently, the Science, Innovation and Technology Committee chair and Conservative MP Greg Clark said: “If there isn’t legislation passed in this session, then assuming the election is in late 2024, the earliest that new legislation can reach the statute book is mid to late 2025.”

Clark pointed out that, by then, two years will have passed, by which time, AI will have continued to be deployed and developed without the “statutory means to govern it.”

“And other jurisdictions such as the EU or the US will be proceeding themselves, and there is a danger that what has become embedded in Europe and in the US could become the default means of regulation, even if we had a better model in mind. That’s another reason for getting on with it.”

Elsewhere, the TUC recently launched an AI taskforce, bringing together leading specialists in law, technology, politics, HR and the voluntary sector for legal protections for both employers and workers. It reportedly aims to publish an expert-drafted AI and Employment Bill early in 2024 and will also lobby to have it incorporated into UK law.

The taskforce says that the UK is “way behind the curve” on the regulation of AI, and outlines that AI capabilities, left unchecked, could result in “greater discrimination, unfairness and exploitation at work across the economy.”

It appears there’s still a long way to go when it comes to implementing regulation around AI and while the UK plans to hold an AI Safety Summit in November, that’s still quite some way off.

There’s no denying we are living in challenging times right now. The cost of living crisis isn’t subsiding, financial insecurity is on the rise, the climate crisis is worsening. We’re also living in an era where technology is reshaping quite literally everything, including the world of work with AI and automation ramping up.

Universal Basic Income (UBI) is being proposed as a way of safeguarding against these disruptions, bolstering income security and reducing poverty.

In this week’s article, we’ll walk you through:

• What universal basic income is
• Where, why and how is it being trialled
• The pros and cons of the introduction of universal basic income.

What is universal basic income?

The idea of Universal Basic Income stretches as far back as 1516 in Sir Thomas More’s Utopia, and it’s essentially a guaranteed income for everyone in society. As of late, following the disruptions of the COVID-19 pandemic, the rise of automation and AI, it’s becoming a serious conversation.

It’s been tried in many places all over the world. In the US, for example, there are long-running UBI schemes, including in Alaska. It’s also seen in the Eastern Band of Cherokee Indians Casino Dividend in North Carolina. Elsewhere, Finland has trialled UBI schemes, as have Spain, the Netherlands, Kenya, India and more. Currently, in Wales, there is a basic income pilot for 18-year-olds leaving the care system. Over 500 participants are receiving £1,600 a month for two years after turning 18.

As noted, the pandemic really revitalised conversation around UBI, and back in 2020, over 170 MPs and peers actually called for a basic income. As we know, this didn’t go forward, and instead, the government introduced furlough.

At the time, the now Prime Minister and then Chancellor, Rishi Sunak, told the Commons: “We’re not in favour of a universal basic income, although we have strengthened the safety net for the most vulnerable in our society with over £7bn invested in improving our welfare system.”

Speaking about the increasing need to pivot toward UBI, Will Stronge, the director of research at the thinktank Autonomy, said: “Our society is going to require some form of basic income in the coming years, given the tumult of climate change, tech disruption and industrial transition that lies ahead. This is why building the evidence base and public engagement now is so important, so the ground is well prepared for national implementation.”

What’s going on with the trials?

The UK is currently running a micro pilot scheme to test this out. Led by Autonomy, the scheme will run in central Jarrow, in north-east England, and East Finchley, in north London. A total of 30 people will be randomly selected from a group of volunteers, with 20% of places allocated to people with disabilities. They will receive £1,600 every month for two years. This will cost £1.15m across the two-year period.

Alongside this group, there will also be a control group, which will not receive the basic income amount, and their experiences will be monitored alongside the other group.

The likes of Green MP Caroline Lucas welcomed the plans and said: “It’s so exciting to see these plans for England’s first ever basic income pilot scheme,” she said. “We are in such uncertain times – worsening job insecurity, spiralling cost of living and a welfare state creaking at the seams.

“We need big, bold ideas to provide security and dignity for all – tackling poverty, improving wellbeing and transforming society. The government can’t ignore this idea any longer,” she added.

The Green Party has long advocated for its introduction. Back in 2019, for example, it became the first political party to promise a fully costed Universal Basic Income for every resident by 2025.

Meanwhile, Cleo Goodman, a co-founder of the initiative Basic Income Conversation, commented: “We’re hopeful that this plan will result in the first ever basic income pilots in England. No one should ever be facing poverty, having to choose between heating and eating, in one of the wealthiest countries in the world. Basic income has the potential to simplify the welfare system and tackle poverty in Britain.”

According to estimates, if this kind of UBI programme was implemented on a national level, it would reportedly cost just under £1 trillion.

Weighing up the pros and cons

There’s no escaping the working landscape looks very different on the horizon, and indeed, Stronge notes: “With the decades ahead set to be full of economic shocks due to climate change and new forms of automation, basic income is going to be a crucial part of securing livelihoods in the future.”

Further, he added that “all the evidence” demonstrates that it would “directly alleviate poverty” and “boost millions of people’s wellbeing.” He says that, ultimately, the potential benefits are “just too large to ignore.”

But, it’s not without its critics, and, as we’ve outlined above, it would be expensive, as well as requiring a huge overhaul of both our tax and social security systems. But, with such big disruptions to work and living in store, large-scale changes seem almost inevitable.

There are also critics who argue that UBI would de-incentivise people from working and result in inequity. That being said, regarding the former point, a Finnish study on UBI found that there was actually a greater incentive to work, and also meant that people had more time to pursue business ideas.

With the trial running for two years, it will be some time until we have data to analyse, but it’s an idea that’s increasingly entering the mainstream.

Although the energy price cap dropped to £2,074 on 1 July 2023, it’s still significantly higher than it was before, and many are still struggling to pay their energy bills. As a result, many are looking for ways to make their homes more energy efficient with green upgrades. In fact, research shows that 72% of homeowners want to make their homes more energy efficient, and 40% reportedly have plans to make improvements before the end of the year.

This week, at The Salary Calculator, we’ll walk you through the following:

• Green tips that can help you cut back on energy usage and save cash
• Some of the top green upgrades, how much they cost and how much they save
• Grants and incentives to assist you access upgrades

Green tips that save cash

You’ll be glad to hear that green upgrades don’t have to cost the earth and small changes can indeed have a huge impact. LED bulbs are one of these small changes. These bulbs are far more energy efficient than halogen bulbs. They last five times longer and use 80% less energy while producing the same amount of light. Aside from this, there are emissions savings to be had. In fact, the Energy Saving Trust found that if everyone made the switch, yearly, 1.7m tons of carbon emissions could be saved!

So what’s the full cost versus savings breakdown?

The upfront costs of a LED light bulb are around £5.40 upfront, and with £19 in energy costs across a 20,000-hour lifetime, this amounts to £24.40. However, research shows you can save £153.40 by upgrading just one bulb to LED.

Weather strips are also a low-cost way of both weatherising your home and saving money. Air leaks in your home can mean that both hot and cold air escape. Some estimates are that you can access between 10-20% annual energy savings. So what’s the initial cost? Just £3. The savings? As much as £669 after five years, according to some estimates.

Smart thermostats, meanwhile, have also been highlighted for their ability to assist in keeping bills low. Once you’ve got a smart thermostat installed, you’ll be able to be in control of your heating – even when you’re not at home, adjusting your home’s climate. Makes like Tado even provide you with monthly bill predictions and room-by-room comparisons. While varying from around £100-£200 for installation, Google’s Nest estimates that people can save up to 16.5% of their energy usage. Tado, meanwhile, says this can go up to 31%.

And, from one smart device to another, smart metres can also help people be greener and get more insight into their energy usage, which, in turn, can help you take action. Research from Smart Energy GB found that if everyone made the switch, savings could go as high as £560 million.

If you want more ideas on green tips, Nationwide recently launched a tool which gives people more insight into how to make their properties greener.

Green upgrades

Beyond small changes like LED lights and weather strips, if you want to make some larger changes, there could be even more savings to be had. Roof installation, for example, magnifies the impact of weatherstripping, helping you reduce both heat loss (up to a 25% reduction) and heating bills. While you’ll spend an average of £550, you could save £2,079 after five years. Not only that, you’ll also shrink your carbon footprint by around 530kg a year.

Double glazing can also be a barrier to heat loss. Estimates are that people in Britain lose between 10- 40 per cent of their heat through their windows. However, double glazing can lead to big savings – up to £235, while reducing your carbon footprint by 6%. Some research has found it can even boost house value. It’s an investment that takes time to pay off, but there will be a payoff. Head over here for a full breakdown.

Rooftop solar panels are another way to make big savings – although there are also some big upfront costs, too. Prices will vary depending on system size and number of panels, but research shows that:

• Installing a 3kW panel system with 12 panels could cost you between £5,000 to £6,000 to set up, but will save you around £850 a year on bills, and after 25 years, around £21,250
• For a 5kW panel system with 20 panels, you’ll be set back between £8,000 and £9,000, saving you £1,460 and up to £39,550 after 25 years.
• If you decide to go bigger than this, with a 6kW panel system that has 24 panels, you’ll pay between ​​£8,000 – £9,000 but save over £1,460 and over £40,325 after 25 years.

Grants and initiatives

These bigger investments in green upgrades can set you back quite a bit, as we have seen, despite their long-term savings.  However, there are grants and initiatives which can assist you in greening your home.

While the Green Homes Grant, which is no longer open to people, might have been deemed a “slam dunk fail” by the Public Accounts Committee (PAC) report, there are other schemes being delivered regionally.

For example, back in March 2023, the government announced that £1.4 billion would go to authorities, providers of social housing and charities to upgrade homes and off-grid households with energy efficiency measures.

Cumberland Council and Westmorland and Furness Council are some of the recipients of funding from the government Home Upgrade Grant Phase 2 (HUG 2) scheme, having been successful in their bid for a minimum of £12.4 million.

The ‘Bright Green Homes’ project across the South West will also see over 500 households in Bristol, North Somerset and Bath & North East Somerset (BANES) receive funding for energy efficiency and renewable upgrades.

Similarly, the Cambridgeshire and Peterborough Combined Authority Consortium secured £82,313,888 in its Home Upgrade Grant Phase 2 funding bid.

A full list, along with eligibility criteria, can be found here. 

Some energy companies also offer free insulation or grants to assist you with making your home more energy efficient, in line with the Energy Company Obligation (ECO) Scheme. Learn more about that here.