Important payroll changes in 2024: an overview for global employers

Payroll is subject to a myriad of different rules and regulations that are linked to employment, taxation, and compensation laws. Ensuring payroll compliance is an important part of the tasks involved in payroll management. This includes keeping up with legal changes that affect payroll and making the necessary adjustments.

What tax and payroll changes are on the horizon for 2024? From pay transparency to minimum wage rates, here is an overview of the legal changes that will affect the way you process payroll in 2024.

Increase of OASDI wage base

There is an announced change to the maximum income that will be subject to social security contributions. The maximum earnings limit up to which OASDI (Old-Age, Survivors, and Disability Insurance) contributions need to be calculated will rise from USD 160,200 to USD 168,600. This means that the new maximum amount payable by an employee is USD 10,453.20, based on the current contribution rate of 6.2%.

Changes in the federal income tax brackets

The federal income tax brackets will change in 2024, leading to a slight decrease in employee payroll taxes. Here is an overview of the new tax brackets (brackets valid for single taxpayers):

• USD 0 to USD 11,600: 10%

• USD 11,601 to USD 47,150: 12%

• USD 47,151 to  USD 100,525: 22%

• USD 100,526 to USD 191,950: 24%

• USD 191,951 to USD 243,725: 32%

• USD 243,726 to USD 609,350: 35%

• Over USD 609,350: 37%

Slight increase of the allowances of defined contribution plans

Another announced change that will affect payroll in 2024 is a small rise in the allowances that are set for contribution plans 401(k), 403(b), and 457. For said plans, the annual maximum contribution will rise to USD 23,000, which is an increase of USD 500 compared to 2023. For several other contribution plans, the maximum contribution level will increase to USD 69,000.

Inflation adjustments to HSA and HRA contribution limits

Contribution limits for employee-owned Health Savings Accounts (HSAs) and employer-owned Health Reimbursement Arrangements (HRAs) will change in 2024. The new annual maximum contribution levels for HSAs are USD 4,150 for individual coverage and USD 8,300 for family coverage. For new HRA plans starting in 2024, the new maximum amount will be USD 2,100.

Electronic filing of information returns

Starting from 2024, organizations are required to file their tax information returns with the IRS electronically if they must submit at least 10 of the following forms:

• Forms W-2,

• Forms 1099,

• Affordable Care Act forms 1095, and

• Others.

New pay transparency regulations

There are roughly 30 states that have some form of pay transparency legislation in place. While the focus of many of these laws is currently on preventing pay discrimination and strengthening employee rights with regard to openly discussing salary and pay during the application process, there are new developments on the horizon for 2024. 

The number of states with specific laws for promoting salary disclosure and increasing the transparency of pay reporting is growing. For instance, the expanded version of Colorado’s Equal Pay for Equal Work Act and Hawaii’s Senate Bill 1057 which obligates employers with 50 or more employees to include hourly rates or at least salary ranges in job listings are effective since January 1.

Lano Blog

Pay transparency: what employers should know

Read more

Proposed changes to FLSA exemptions for white-collar employees

The FLSA mandates employers in the United States to pay their employees at least the federal minimum wage and compensate overtime at a rate of not less than 150% of the employee’s usual wages for all work exceeding 40 hours per week.

However, there is an exemption from both minimum wage and overtime pay entitlements for employees that are classified as executive, administrative, professional and outside sales employees. One of the requirements linked to the exemption is a minimum salary level of USD 684 per week or USD 35,568 per year.

The government has proposed raising the salary requirement to USD 1,059 per week or USD 55,068 per year. If the changes come into effect, employers will either have to reclassify their employees as non-exempt or offer them a pay rise to match the new minimum salary basis.

Other legal changes affecting payroll on state level

In addition to federal payroll changes, employers also need to be aware of new laws that are passed on state level. In 2024, we will see different legal changes that have a direct impact on the payroll function. These include:

• Colorado: Under the new Paid Family and Medical Leave Act, employees are entitled to up to 12 weeks of leave (starting January 1, 2024).

• Illinois: Under the Paid Leave for All Workers Act, employees are now entitled to at least 40 hours of paid leave per year (contributions starting in January for benefits to become available in March).

• Maryland: In October 2024, the Paid Family and Medical Leave program will enter into force, with contributions to the program being set at 0.9% of an employee’s wages—capped at the social security taxable wage base.

Payroll Guide

How to manage payroll in the United States

Learn more

Minimum wage increases in many states

As the National Employment Law Project reports, 2024 will see a near-record number of states and localities increase their minimum wages. A total of 65 cities, counties and states will raise their minimum compensation requirements in January 2024, with another 25 jurisdictions poised to follow suit later this year. In most cases, the increases will see the minimum pay rate rise above USD 15 per hour—at least for some employees.

Lano Blog

Minimum wages by country in 2024: the complete guide

Read more

Increase of the national minimum wage

The government has announced an increase of the national minimum wage. Starting on 1st April 2024, the minimum wage rates will be set as follows:

• Apprentice rate: GBP 6.40 per hour

• Employees aged 16 or 17: GBP 6.40 per hour

• Employees aged 18 to 20: GBP 8.60 per hour

• Employees aged 20 and older: GBP 11.44 per hour

New family leave entitlements

With the Carer’s Leave Act 2023, the government has introduced a new type of family leave which will enter into effect on 6th April 2024. The new legislation provides for one week of unpaid leave for employees who are caring for a dependant.

A second new law that will have an impact on employers is the Neonatal Care Act 2023. The act will introduce a paid statutory leave entitlement for parents whose baby needs to go into neonatal care. The leave entitlement will be set at 12 weeks and will be granted in addition to other parental leave entitlements. However, the new legislation is only expected to take effect in April 2025.

Another new leave entitlement that could see the light of day in 2024 is the introduction of a 3-day paid leave in cases of miscarriage before 24 weeks.

Lano Blog

Countries with the most generous parental leave policies

Read more

Rolled-up holiday pay

Rolled-up holiday pay is when employers pay their employees an increased hourly rate to replace the holiday pay that the worker would have earned while taking the time off work. The additional pay the employee receives hence replaces his or her holiday pay.

The practice of issuing rolled-up holiday pay was rendered unlawful by a ruling of the European Court of Justice in 2006. However, the government has announced the introduction of a new law that will legitimise the use of rolled-up holiday pay for part-year workers and those with irregular working schedules.

Following the new rules, rolled-up holiday pay should be calculated at a rate of 12.07% of the employee’s hours worked. The new rules will be valid for employers whose holiday year starts after 1st April 2024. The entitlement is capped at 28 days per year.

Fair allocation of tips and service charges

Starting from May 2024, employers could be legally obligated to ensure that tips, service charges and other gratuities are distributed fairly between all their employees. That’s the intent of a new law that is expected to enter into effect in May next year.

The new legislation would require employers to put in place a detailed tip allocation policy and keep records of what payments have been made in this regard. Under the new legal framework, workers would have up to 12 months to bring up any claims related to missed payouts and unfair tip allocation practices.

New advance rate for individual income tax (Scotland)

The Scottish Budget 2024 to 2025 will see a revision of the individual income tax rates and bands and the introduction of a new advanced income tax rate. The new tax rates and bands will be set as follows:

• GBP 12,571 to GBP 14,876: 19%

• GBP 14,877 to GBP 26,561: 20%

• GBP 26,562 to GBP 43,662: 21%

• GBP 43,663 to GBP 75,000: 42%

• GBP 75,001 to GBP 125,140: 45% (new advanced rate)

• Over GBP 125,140: 48%

National insurance and personal taxation changes (UK general)

There will be several changes to the national insurance system in 2024. Here are the major changes employers should be aware of:

• Reduction of the main class 1 NIC rate for employees from 12% to 10% (starting from 6 January 2024)

• Reduction of the main class 4 NIC rate from 9% to 8% (starting from 6 April 2024) 

• Abolition of NIC class 2

Another change affecting personal taxation in 2024 is an increase in the married couple’s and civil partners’ allowance from GBP 10,375 to GBP 11,080 (maximum allowance).

General holiday pay entitlement changes

The law clearly specifies what is considered ‘normal pay’ when calculating an employee’s holiday pay. Under the old rules, additional payments such as commissions, bonuses, and overtime pay were not included in an employee’s holiday entitlement. This has now changed.

Additional payments that fall under the new regulations include:

• Commission payments for performance-based tasks that are part of a worker’s contractual duties

• Pay increases linked to length of service, additional professional qualifications or seniority

• Overtime payments recorded in the 52 weeks before the date holiday pay is calculated

Payroll Guide

How to manage payroll in the United Kingdom

Read more

Increase of the statutory minimum wage

The German minimum wage is set to increase to EUR 12.41 per hour in 2024, with a second rise scheduled for 2025 which will take the minimum wage up to EUR 12.82. The new minimum wage rate is effective from January 1.

This means that the income threshold for so-called minijobs will increase from EUR 520 to EUR 538. Employees working in minijobs are hence allowed to earn a tax-free income of EUR 6,456 per year.

Introduction of paid paternity leave

Germany currently has no statutory paternity leave. Instead, it’s up to employers to decide whether they provide paid leave for new fathers or not. However, this is set to change in 2024.

The government plans to introduce a 10-day paid paternity leave that new fathers can use when their child is born. It should be noted that this new leave entitlement will not affect the father’s right to go on parental leave.

Increase of the tax-free allowance threshold

Germany has a basic tax-free allowance, which means that income below a certain threshold is exempt from income tax. In 2024, the threshold for tax-free earnings will increase to EUR 11,604 for individuals.

For couples, the tax-free allowance will rise to EUR 23,208. The increase of the tax-free allowance will also lead to an adjustment of the individual income tax brackets (for more information see below).

Another increase that will take place affects the tax-free child allowance. The allowance defines how much income parents can earn before they need to pay income tax. This year, the tax-free income threshold for parents will rise to EUR 6,384.

New income tax brackets

The German tax system operates with progressive tax rates. The income tax rates will remain unchanged in 2024. What will change, however, are the tax brackets based on which income tax is calculated. Here is an overview of the new tax brackets that are valid from January 1, 2024:

• Up to EUR 11,604: 0%

• EUR 11,604 to EUR 66,760: 12% to 42%

• EUR 66,760 to EUR 277,825: 42%

• Over EUR 277,825: 45%

New income thresholds for health and pension insurance

2024 will see changes in the minimum income requirement that determines whether an employee can change to private health insurance or not. Previously, individuals had to earn at least EUR 66,000 per year to opt for private health insurance. In 2024, the threshold will rise to EUR 69,300 before tax.

The income cap for calculating health insurance contributions is also set to increase. In 2024, the maximum earnings limit until which employees are required to pay health insurance contributions will rise to EUR 62,100.

Similar changes will apply to pension contributions. The new monthly income cap for determining an employee’s pension contributions will be EUR 7,450 in Eastern Germany and EUR 7,550 in Western Germany.

Higher tax-free allowance for per-employee spendings on company events

Company events to which employees are invited are regarded as employee benefits and are therefore subject to special tax rules and considerations. But 2024 holds some good news for employers.

This year, the tax-free allowance employers can use when organizing company events for their staff will increase to EUR 150 per employee—before, it was limited to EUR 110. This means that employers don’t have to pay taxes on company events spendings as long as the incurred costs don’t exceed EUR 150 per employee.

Payroll Guide

How to manage payroll in Germany

Learn more