rising payroll costs

Rising payroll costs, what’s next?


There are various economic factors impacting the increase in wages, with some changes to taxation and minimum wages to arrive in April 2022. Action is needed to navigate your company through these changes. Before we talk about minimising risk, we’ve put a brief overview of the impact to the payroll cost of your business to come.

Vacancies and labour shortage

In February the Office of National statistics published that the rate of vacancies reached an all-time high of 4.3 vacancies to every 100 employee jobs. This means finding the right candidate during recruitment takes longer, leaving remaining staff to shoulder a larger workload. Scarcity in available employees drives up wages and related recruitment cost.

“The great resignation” means that you might not only struggle to fill existing vacancies, but also have the risk of your staff being poached by competing companies. For example, since the hospitality sector reopened in 2021 there have been wage increases by as much as 14%.

Covid impact

The government has announced an increase to National Insurance Contributions (NIC) of 1.25% which is to come into effect from April 2022.  This increase in NIC is aimed at increasing spending on health and social care and will become a separate levy from the 2023 tax year. The current NI rate moves from 13.8% to 15.05% - an effective increase of your NI bill of 9%, assuming all other things stay the same.

National living wage & minimum wage

The government has been rolling out regular increases in National Living Wage and National Minimum wage, and for April 2022 there is an increase of 6.6% planned on the living wage, which drives up your gross payroll cost, as well as the NIC cost mentioned before.


current rate

from April '22


23+ Years (NLW)




21-22 Years




18-20 Years




16-17 Years




Apprentice Rate




Armstrong Watson can help you navigate through the changes impacting your payroll process. By completing your payroll in an HMRC compliant way, we can give you peace of mind that you are paying the correct wages bill.

If you are looking to reduce recruitment and staff retention efforts within your finance function, and for ways to drive efficiencies across your wider business, we would like to discuss the potential to create and manage a virtual finance department for you. Please get in touch with Guy Kerkvliet to discuss your options.

Get in touch with Guy for more information by emailing guy.kerkvliet@armstrongwatson.co.uk or call 0808 144 5575

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