Jobs

What is the ‘Way to Work’ initiative, and how will it affect you?

by Madaline Dunn

At the end of January, the Department for Work and Pensions published its new plan to move “half a million people into jobs by the end of June.” The campaign is called ‘Way to Work’ and supposedly will “support people” back into work “faster than ever before.”

However, as positive as this sounds, the reality of the initiative is very different. Critics of the new campaign have called it “dangerous” and say that it “misses the point.”

So what exactly is the campaign all about and who will be affected by it? At The Salary Calculator, we’ll walk you through:

  • What the ‘Way to Work’ initiative is
  • Why the government has introduced it
  • What the impact of the scheme will be

What is the ‘Way to Work’ initiative 

The Way to Work initiative focuses largely on Universal Credit (UC) claimants who are looking for jobs and will be facilitated at UK Jobcentres by claimants’ Work Coaches. The initiative will see the introduction of new rules whereby claimants will have to expand their job search and apply for job vacancies outside of their preference zone at four weeks of unemployment. Currently, the period at which claimants must expand their search is three months. 

As outlined by Thérèse Coffey, the Work and Pensions Secretary, the drive behind the initiative is to get people into “any job,” rather than a job that fits their skills set, qualifications, or interests. 

Now, under the new initiative, Universal Credit claimants will face tough sanctions if, after four weeks, it is deemed they have failed to make “reasonable efforts” to secure a job or if they turn down any offer. Claimants will ultimately lose part of their universal credit payment.

The amount of Universal Credit benefit claimants receive varies depending on their personal circumstances, but already, the TUC has outlined that it’s not enough to live on, especially in light of rising energy costs and the soaring costs of living. 

Why has the government introduced this initiative?

According to the government, the initiative is a response to the number of job vacancies in the UK, which is now at a ‘record high’ at 1.2 million vacancies, a figure that’s 59% higher than pre-pandemic levels.

Speaking about the motivation behind the initiative, Coffey said: “As we emerge from COVID, we are going to tackle supply challenges and support the continued economic recovery by getting people into work. Our new approach will help claimants get quickly back into the world of work while helping ensure employers get the people they and the economy needs.” 

What will the impact be of the scheme?

Although the UK government argues that this initiative will help to fill vacancies and kickstart the economy, experts argue that the move is doomed to fail, and that coercion into jobs has been proven not to work. Regardless, with over 200,000 new claims per month, many people across the UK will find themselves impacted by this initiative. 

Elizabeth Taylor, CEO of the Employability Services Related Association (ERSA), outlined that a “one-size-fits-all” approach is ineffective, and the initiative, as a whole, is “at odds with the people centered methodologies that employment support providers apply.” Adding: “Individually tailored support which meets personal and local labor market needs must remain front and center of any quality employability provision.”

Taylor, writing in Forbes, says that rather than coercing individuals into jobs they aren’t suited to, providing “quality employment support” and finding ways to get people into the “right job” is not only better for the employer and the employee, but the economy as a whole, too. 

Likewise, Ruth Patrick, a senior lecturer in social policy at the University of York, states that pushing people to apply to any job, “underpinned” by the threat of benefit sanctions, is, in fact, damaging and “corrosive” to relationships between claimants and advisers. Patrick explains that this approach risks pushing people into “insecure and unsuitable employment.”

A review by a University of Glasgow team also found that overall, the kind of sanctions proposed by the UK government has detrimental effects on health and wellbeing, leading to material hardship, unemployment and economic inactivity. Moreover, while in the short term, sanctions can boost employment levels, job quality and stability are negatively affected in the long term. 

According to a statement by the Minister for Employment, Mims Davies MP last week, there are now “positive signs of recovery,” with unemployment “continuing to drop,” however, for the time being, it looks as though the tough sanctions of the new Way to Work initiative are here to stay.

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Friday, February 25th, 2022 Jobs No Comments

None of the content on this website, including blog posts, comments, or responses to user comments, is offered as financial advice. Figures used are for illustrative purposes only.

The great resignation: What is it and what does it mean for you?

by Madaline Dunn

The great resignation is the hot topic on everyone’s lips, with millions either leaving behind their old roles, or looking to in the near future. Much like the pandemic, it was unprecedented but bound to happen eventually.

This movement of people leaving their jobs en masse includes individuals from every demographic, too, reflecting a widespread frustration with traditional work and labour models.

At The Salary Calculator, we’ll walk you through:

  • What the great resignation is
  • What’s driving the great resignation
  • The pros and cons of the great resignation
  • How it will affect you and your work

What is the great resignation?

The great resignation, a term coined by business and management professor Dr Anthony Klotz in May 2021, refers to the current mass exodus from the workforce.

A study by recruitment firm Randstad UK recently conducted a survey of 6,000 workers and found that 24% of those polled were planning a job change within the next three to six months, 69% of which felt confident about their decision. Meanwhile, 16% felt anxious or concerned about finding a new role.

Employment Hero found that young people aged between 25 and 34 are those most looking towards a change, with a whopping 77% actively looking to leave their jobs within the next year. 74% of those aged 18-24 expressed similar sentiments. These were also the demographics that reported the most’ burn-out.’ Moreover, data published in i, showed one-third of millennials will seek out new employment if forced to return to the office full-time after the pandemic.

That said, those in more senior positions have also joined the great resignation. Executive outplacement firm Challenger, Gray & Christmas, found that in December, 106 CEOs said goodbye to their senior roles, and in the final quarter of 2021, this was up 16% on a year-over-year basis

It comes as no surprise then, that in the UK in July, job vacancies were at an all-time high, crossing the threshold of one million for the first time.

What’s driving the great resignation?

The great resignation has a number of different causes. One aspect is that following nationwide government-sanctioned lockdowns; remote working became the norm for many people. This life readjustment gave people time for reflection, and when compared with office work, many found they were able to spend less time commuting and more time with their family.

Remote working is also a good move for the wallet, with fewer expenses such as travel and eating out. Likewise, many are also quitting in search of better work opportunities and higher pay. There has also been a rise in the number of people deciding to be their own boss, and go self-employed.

It’s also important to note that certain industries are seeing more workers leave than others. Specifically, leisure and hospitality, retail and healthcare are the industries that have seen the biggest departures.

Should you join the great resignation?

Of course, when mulling over whether or not to leave your job, there are many factors to consider, and as with anything, there will be pros and cons.

Leaving your job and seeking out new employment or a different kind of employment can help you access greater flexibility, secure a more healthy work-life balance, and enjoy the benefits of a bigger salary. Likewise, those looking to leave their job may have come to the realisation that their work is no longer fulfilling or aligning with their values. As such, finding a company that shares similar guiding principles can mean much more job satisfaction.

That said, quitting one’s job is not necessarily an option for everyone. When thinking about quitting, it’s important to assess key questions such as:

  • Am I in a financial situation to do so?
  • Do I know what you want to do next?
  • Do I require further training or education?
  • Am I looking to join a new field?
  • What are my family obligations?

How will the great resignation affect you?

The great resignation is very much a workers revolution, and many are arguing that employees are now in the driver’s seat. That said, it’s important to note that it’s still competitive out there, and in order to succeed, you need to be able to sell yourself, negotiate and network. Keeping your Linkedin fresh, making sure your resume is updated and conducting deep job searches will help you make the most of this opportunity.

However, not everyone is quite ready to jump ship just yet. For those who are comfortable in their position, you may have questions about how the great resignation will affect you at work. Well, a study recently conducted by the Society of Human Resource Management in the US found that out of those employees who decided to stay on when their co-workers left, 52% had taken on more responsibilities, and 30% found themselves struggling to get “necessary” work done. As a result, 55% are now questioning their salary, and whether it’s enough.

So, it’s fair to say that workers are feeling the knock-on effect of their co-workers joining the revolution. However, it’s not all doom and gloom for those who wish to stay in their current job, it’s important to be assertive if you’re struggling.

Speaking to The Guardian, Rahaf Harfoush, a digital anthropologist and the author of Hustle and Float, says in the aftermath of coworkers leaving, you should: “Look at your original role,” and assess how much you’ve taken on, then spell it out: “Here’s what I was hired to do; here’s how my time is allocated now. So either we need to reprioritise or we need to reallocate.”

Moreover, during this time, negotiating power is in the hands of employees, so it could be the right time to ask for a pay rise or a loyalty bonus.

 

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Thursday, February 3rd, 2022 Jobs No Comments

The gender pension gap

by Madaline Dunn

While many are all too familiar with the gender pay gap, the gender pension gap gets a lot less coverage but is, unfortunately, a reality for many women. Now, warnings are being issued around the gap, with many calling on the government to do more as women live longer with smaller pensions.

At The Salary Calculator, we’ll walk you through and explain:

  • What the gender pension gap is
  • How the gap has widened
  • How to navigate the gender pension gap

What is the gender pension gap?

The gender pension gap refers to the percentage difference in pension income between female and male pensioners. According to research from Legal & General, the gap is 17% at the beginning of a woman’s career, reaching 56% at retirement when compared to men.

Moreover, the average pension pot of a woman is less than half that of a man’s, and the gap even penetrates female-dominated industries.

Research from Prospect outlines that some of the reasons behind the gender pension gap include:

  • An imbalance in the level of occupational and private pension saving between men and women
  • The gender pay gap
  • Indirect gender discrimination
  • Women taking breaks or reducing hours to look after family

This imbalance, of women having to work 14.5 more years to access the same pension savings as men, occurs despite women contributing more of their income to pension savings.

Research from SunLife’s survey also found 30% of women hope to depend on their partner’s pension when they get older. However, this doesn’t take into account potential separation, divorce or early widowhood. On top of that, when it comes to divorce, research shows that three in five divorcees fail to bring up pensions when discussing their financial settlement.

Commenting on the inequality relating to pensions, Juan Yermo, Chief of Staff to the OECD Secretary-General, said: “Still today, the design of retirement savings arrangements sometimes disadvantages women compared to men, for example when eligibility criteria based on working hours or earnings restrict plan access, when contributions stop during periods of maternity leave, or when women do not get their share of retirement benefit entitlements upon divorce.”

How has the pension gender gap widened?

The pandemic has, unfortunately, worsened an already dire situation. Research from More2Life and the Centre for Economics and Business Research outlined that during the pandemic, the gap widened to £184,000 in 2021. That was £26,000 more than the previous year.

The study also found that 30% of women had found their financial situation worsened, impacting their ability to save; comparatively, 24% of men agreed.

More2Life said that the research revealed 62% of women worried about being able to “pay enough into their pension” compared to 57% of men.

How to plug the pension gap

Many pension experts and organisations are calling for government intervention to plug the pension gap.

Some of the recommendations made by Prospect include:

  • Introducing a statutory requirement for the government to report to Parliament on the gap and outline plans for closing it
  • Commencing an inquiry by the Work and Pensions Committee into the gender pension gap
  • Implementing changes to the tax system to address and resolve the ‘net pay anomaly’, which means low earners “do not benefit from tax relief on their contributions.”

While these recommendations, if implemented, could be fruitful, change isn’t going to happen any time soon, and in the meantime, there are ways that you can safeguard your future.

Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, outlined there are steps that women can take: “It’s not too late to make a difference to your pension value by continuing to contribute after the age of 55. You should also check with your employer to see if they will match any further contributions as this can give your retirement planning a real boost.”

It’s a good idea to check in on your National Insurance contributions and review whether there are any gaps to ensure you’re eligible for the full state pension. Also, plan ahead of time, and if possible, pay into your pension if you take maternity leave.

If you’re planning on taking a career break for another reason, it’s wise to top up your pension, too, as a way of compensating for any losses.

Ultimately, saving as soon as possible is a wise plan because even if you contribute a small amount to your pension each year, you can make full use of compound interest.

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Monday, December 13th, 2021 Jobs, Pensions No Comments

Should you register as a sole trader or form a limited company?

by Admin

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A key decision when starting a business is which legal structure do you choose when registering. The three most common options are sole trader, limited company and ordinary business partnership, although most people become a sole trader. Sole traders make up about 59% (3.5m) of the total UK business population of 5.9m, and they include many freelancers, contractors and agency workers.

Ordinary business partnership members make up about 7% (405,000) and basically these are sole traders who go into business together. The UK also has about 2m (34%) active private limited companies. So, why do so many people in the UK who work for themselves operate as sole traders?

What is a sole trader?

Being a sole trader is the same as being self-employed. In law, you and your business are the same thing, which makes you personally responsible for your sole trader business debts. If you don’t build up large debts and your business is successful, this won’t be an issue, of course.

To become a sole trader, you must register for Self Assessment (SA), the system (UK tax authority) HMRC uses to collect tax from sole traders. You’ll then pay Income Tax on your profits during the tax year (20%, 40% or 45% depending on your income/earnings). You work out your profits by deducting your expenses and any allowances from your income/earnings/sales.

Sole trader NICs

Most self-employed people pay their National Insurance contributions (NICs) via SA:

  • Class 2 if your profits are £6,515 or more a year (£3.05 a week) and
  • Class 4 if your profits are £9,569 or more a year (9% on profits between £9,569 and £50,270 and 2% on profits over £50,270 – all figures quoted are for the 2021/22 tax year).

Declaring sole trader earnings and VAT

Sole traders aren’t required to submit annual accounts to HMRC, but they must maintain accurate financial records (which can be checked) and submit details of their income and business costs in their annual SA100 tax return, which must be filed each year.

If your VAT-taxable earnings/turnover goes over £85,000 a year (the current VAT threshold) or you know they will, you must register for VAT. You’ll then have to charge VAT, collect it and pay it to HMRC. This also applies to limited companies.

The advantages of being a sole trader

It’s very easy to register online for Self Assessment so you can start your sole trader business. There are no costs and the process is very quick (minutes not hours or days). The tax admin is much easier when compared to a limited company, which means it can be done quicker. This saves cost, whether you do it yourself or pay an accountant to do it for you.

The paperwork and financial record-keeping requirements when you’re a sole trader are minimal; completing your SA tax return is more straightforward and any losses you make can be offset against other income.

Many customers won’t care whether you’re a sole trader or not, as long as your prices, products and/or services meet their expectations. In any case, you can easily change to a limited company structure later if you wish. And sole traders can employ others and their businesses can grow and prosper.

Being a sole trader can give you much more flexibility and control over your business, because you’re not answerable to shareholders – and you won’t have to share your profits with them either. You will enjoy more privacy, too, because the annual accounts of limited companies must be published on the Companies House website, which means anyone can view them. Sole traders do not have to publish their annual accounts.

Sole trader v limited company: which is more tax-efficient?

Example 1

Sole trader profit = £50,000 Net income = £38,717

Ltd co profit = £50,000 Net income = £40,109

Difference = £1,392

 

Example 2

Sole trader profit = £100,000 Net income = £67,752

Ltd co profit = £100,000 Net income = £69,469

Difference = £1,717

 

Example 3

Sole trader profit = £150,000 Net income = £91,723

Ltd co profit = £150,000 Net income = £92,057

Difference = £334

 

These examples assume that all profits are extracted from the business, salary up to Secondary National Insurance threshold (£8,840) is taken and the remainder paid as dividends (2021/22 rates).

Conclusion

As the above examples show, operating as a limited company can reduce your tax bill. However, if you need to pay an accountant each month to look after your tax admin and complete your annual accounts and Corporation Tax returns, in reality, any financial advantage as the director of a limited company can be minimal or non-existent.

Each year, hundreds of thousands of people in the UK who decide to work for themselves register as a sole trader and many go on to establish and grow highly successful small businesses. In many ways, being a sole trader is the easier and cheaper choice and it need not hamper your business or your ambitions.

About GoSimpleTax

Income, expenses and tax submission all in one. GoSimpleTax will provide you with tips that could save you money on allowances and expenses you might have missed.

The software submits directly to HMRC and is the solution for the self-employed, sole traders and anyone with income outside of PAYE to file their self-assessment giving hints and tips on savings along the way. GoSimpleTax does all the calculations for you so there is no need for an accountant. Available on desktop or mobile application.

Try for free – Add up to five income and expense transactions per month and see your tax liability in real time – at no cost to you. Pay only when you are ready to submit or use other key features such as receipt uploading and HMRC direct submission.

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Thursday, September 9th, 2021 Income Tax, Jobs, National Insurance No Comments

How to claim mileage allowance when you’re self-employed

by Admin

If you use your own car for business, you may be able to claim a proportion of the actual total cost of buying and running your vehicle, including such things as insurance, repairs, servicing, fuel, etc. However, keeping track of every cost and working out the exact proportion of business use for your vehicle takes time and effort.

Instead, many self-employed people claim mileage allowance, a flat-rate scheme that provides a much simpler way to claim back the cost of using your own vehicle for business. Mileage allowance is part of a range of “simplified expenses” options that HMRC offers to self-employed people. They’re designed to make tax admin easier and quicker.

How much mileage allowance can you claim?

If you’re self-employed, you can claim a mileage allowance of:

  • 45p per business mile travelled in a car or van for the first 10,000 miles and
  • 25p per business mile thereafter
  • 24p a mile if you use your motorbike for business journeys.

If you travel with someone else who also works for your business, as the driver, you can claim an additional 5p per mile for each extra passenger. So, if three of you travel together, you can claim 45p + 10p per mile (two x 5p per mile for the two additional passengers) for the first 10,000 miles, then 25p + 10p per mile thereafter.

Need to know! Claiming mileage allowance doesn’t stop you claiming for other business travel expenses, such as train tickets and taxi rides. Parking tickets and toll fees while on business can also be claimed as a legitimate business expense.

When can’t mileage allowance be claimed?

You can’t claim mileage allowance for personal journeys, they must be made “wholly and exclusively for business purposes”. And neither can you claim mileage allowance for journeys to and from your usual place of work (ie your commercial business premises). You can claim for travel to a temporary workplace, for example, if you’re a plasterer who needs to travel to different sites and jobs.

Need to know! You cannot claim simplified expenses for a vehicle you’ve already claimed capital allowances for or one you’ve included as an expense when you worked out your business profits. Where necessary, seek guidance from an accountant.

Working out your business mileage

Logging your business mileage is a good idea, as it can make it far easier to later work out and claim your mileage allowance. And your claim is more likely to be accurate and credible if HMRC can see precise details of dates, miles travelled, journeys and reasons. HMRC can request proof during an investigation.

Manually recording your business mileage takes more time and effort, while scraps of paper and notebooks can go missing, so it’s better to record and store your mileage details in a spreadsheet/software, with data stored safely online. Many apps have been created to help business owners track and record their business travel mileage (some even use GPS to automatically measure business mileage).

Some self-employed business owners simply estimate their business mileage, by claiming for a percentage of their vehicle’s total annual mileage. So, if your car does 1,000 miles a month and you can show that half of that is for business use, you can claim mileage allowance of 6,000 miles a year (ie £2,700).

How to claim mileage allowance

Good accounting software will do all of the hard work for you, saving you lots of time and hassle. You enter your business mileage and it calculates your mileage allowance, which you enter into your Self-Assessment tax return. The amount is taken into account and your tax liability is reduced as a result.

If you use simplified expenses to claim mileage allowance, you cannot claim for motoring costs such as insurance, road tax or fuel, because these are accounted for within the mileage allowance.

Need to know! Deliberately inflating your mileage allowance claim can lead to penalties. HMRC takes a very dim view of anyone who deliberately enters false information into tax returns.

Further reading

Visit government website Gov.uk to read Travel – mileage and fuel rates and allowances. There is also an online tool that enables you to Check if simplified expenses could save your business money.

About GoSimpleTax

Income, Expenses and tax submission all in one. GoSimpleTax will provide you with tips that could save you money on allowances and expenses you might have missed.

The software submits directly to HMRC and is the solution for the self-employed, sole traders and anyone with income outside of PAYE to file their self-assessment giving hints and tips on savings along the way. GoSimpleTax does all the calculations for you so there is no need for an accountant. Available on desktop or mobile application.

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Wednesday, July 14th, 2021 Income Tax, Jobs No Comments

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