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Will the Health and Social Care Levy Cost More than Anticipated?

on Thursday, 17 February 2022.

The 2021/22 pay award for Green Book employees remains unresolved and ballots are continuing this month.

The 'final offer' is 1.75% and as the tax year draws to a close, employers might be considering making payments to employees on account.

One reason payments might seem attractive this year is that from 5 April 2022, the Health and Social Care Levy (the Levy) will be collected through National Insurance Contributions (NICs). NICs are calculated based on the date of the payment to the employee and not the period to which the payment relates which means that the Levy will be payable on any back-dated payments for 2021/22 if made after 5 April 2022.

Employers are able to make payments 'on account' whilst pay awards are pending provided that their decision-making is robust. We recommend that you take the following steps if considering this approach:

  • Seek your Unions' agreement so as to avoid any possible allegation of unlawful inducement.
  • Have a solid rationale for making the payment (noting that paying above the final offer of 1.75% could be perceived as trying to avoid tax).
  • Ensure Trustees / Governors are fully informed of the proposal and rationale and approve the decision at a board meeting .
  • Diarise to assess the position once the pay award has been agreed to take further advice on any next steps that may be needed (if, for example, the determined pay award is higher or lower than the payment made on account).

For legal advice on payments on account and / or unlawful inducement, please contact Lorna Scully in our Employment Law team on 07500 846624, or complete the form below.

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