Hiring a graduate? Make sure your payroll is ready.

As a new cohort of students has collected certificates and tossed their mortarboards in the air, it’s time to get payroll ready for graduate hires.

While graduates offer fresh ideas and perspectives, they also bring extra payroll considerations that need to be prepared for.

If your business is planning for a strategic inclusion of new talent, speaking to an accountant can help get your payroll up to scratch.

Student loan repayments

The amount of student loan debt depends on a few factors, including the length of a degree programme and how much borrowing was needed to fund it.

However, student loans are tied to different repayment plans depending on their university enrolment dates:

• Plan 1: Threshold is £26,900 a year (nine per cent repayment rate) for students who started before September 2012 in England and Wales or Northern Irish borrowers.
• Plan 2: Threshold is £29,385 a year (nine per cent repayment rate) for English and Welsh students who started between September 2012 and July 2023.
• Plan 4: Threshold is £33,795 a year (nine per cent repayment rate) for Scottish students (Student Awards Agency Scotland).
• Plan 5: Threshold is £25,000 a year (nine per cent repayment rate) for English and Welsh undergraduate students starting courses from August 2023.
• Postgraduate loan: Repayments begin over earnings of £21,000.

To ensure you remain compliant with payroll regulations, you should make yourself aware of any undergraduate or postgraduate loans that need to be repaid.

As the statutory minimum pay increases, it’s important to note how graduates working on the National Living Wage (NLW) are only a few hundred pounds off the plan five threshold.

The current UK NLW is £12.71 for workers aged 21 and over.

This amounts to an annual pre-tax salary of £24,784.50 for a 37.5-hour week, or £26,436.80 for a 40-hour work week.

This means that even jobs that would historically not trigger student loan repayments are now well within reach for those on Plan 5. Most graduate roles are likely to pay above the threshold for the other plans.

Your payroll information needs to be accurate and student loan repayments need to be handled for those eligible to repay.

What happens if you get graduate payroll wrong?

As graduates might lead to additional obstacles for payroll, it’s important to avoid mistakes to prevent financial and administrative problems.

If you don’t have accurate information about an employee’s student loan payment obligations, you might deduct incorrect amounts.

Graduates might pay too much or too little towards their loans, which can lead to disgruntled employees or correction requests from HMRC.

HMRC might also issue penalties or interest charges if payroll submissions are inaccurate or reporting obligations are missed.

Investigating errors and making payroll adjustments can lead to increased administrative costs for businesses, so speaking to an accountant can save you money in the long term.

Speaking to an accountant

Our accountants can make sure student loan repayments are accurately deducted from wages and employee records are kept accurate.

While we understand that graduates can be a great strategic investment for businesses, the payroll side can be a bit overwhelming.

We will make sure your firm stays compliant whilst cashing in on the added enthusiasm and fresh thinking of a graduate hire.

Book a consultation with an accountant today – Get your firm’s payroll ready for a graduate hire.