The constantly changing world of payroll  

One thing that is certain about working in payroll is that things rarely stay the same for long! For this week’s Three Counties Payroll blog, we’ve rounded up the changes that have been embraced by our team in 2022. Read on to learn more about the constantly changing world of payroll.

Health and social care levy

The newlevy was set at 1.25% for the 2022/23 tax year only and added to national insurance (NI) rates. Payroll teams needed to prepare both employee and employer for the additional costs.  Then employers had to take action to ensure they allocated sufficient budget to this new employment cost.

National Living Wage

2022 saw another step towards the government’s target for minimum wage. On April 1 2022, the national living wage (NLW) increased to £9.50 per hour. In 2021, the real living wage (RLW) was set at £9.50. The key difference being that this applies to everyone aged 18 and over. The new RLW rates have been set at £9.90 per hour across the UK and £11.05 in London.

The increase in the NLW was welcomed by many. However, the 1.25% increase created by the social care levy, and a 6.6% rise in NLW, employers will be looking to introduce measures to offset additional employment costs. These measures could see future rises in the overall cost of living as the costs are passed on to the consumer. Payroll teams also needed to evaluate the payroll carefully to ensure that employees did not fall into a non-compliant state.

Flexible, hybrid and remote working

The pandemic created an opportunity which challenged the traditional perception that payroll processing can only take place in the office. Working from home became the norm in payroll in 2020 and 2021, and we are only at the beginning of the journey to understand if working from home is here to stay.

Many businesses have already issued permanent policy changes to facilitate a more flexible approach to the traditional working day. With the removal of the temporary home working rule on April 6th 2022, employees who work from home due to Covid are no longer be able to claim for the £6 per week tax relief. Instead, they must show they are eligible under section 336 of the Income Tax (Earnings and Pensions) Act (ITEPA) rules, which are more restrictive.

Pay gap reporting

In September 2021, Parliament debated the introduction of ethnicity pay gap reporting. Payroll teams are familiar with gender pay gap reporting but ethnicity pay gap reporting could create a more significant statistical challenge. Gender pay gap reporting is completed using the male and female comparison. Conversely, the number of ethnic groups that would need to be considered could easily hit double digits.

Before this calculation can become mandatory, government would need to define how the data should be analysed to present a clear picture. There is no mandate to provide employers with ethnicity, therefore, the information may not be available to produce the calculation. However, despite the challenges, Parliament recognised that, without mandatory reporting in this area, the gap was unlikely to get any smaller.

Here at Three Counties Payroll we keep up with the latest changes in employment law so that our clients can get on with running their business. Call us on 01905 622245, fill in our contact us form or email

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