A new cohort of students will soon arrive in the workplace, bringing energy and fresh skills to embolden your team.
However, many graduate employees also come burdened student-loan obligations and you will need to ensure that these are adequately addressed through payroll.
While it might be tempting to assume that the graduate and the Student Loans Company will have everything figured out, you should still be aware of what is happening with your employee’s wages so that you can better support your team.
Why do graduates need special payroll attention?
Most graduates face student-loan repayments that kick in once their earnings pass a set threshold.
For undergraduate plans, the common repayment rate is nine per cent of earnings above the plan threshold.
Postgraduate Loan repayments are charged at six per cent of their income above the threshold.
Currently, the income thresholds for each plan type are as follows:
| Plan type | Yearly income threshold | Monthly income threshold | Weekly income threshold |
| Plan 1 | £26,065 | £2,172 | £501 |
| Plan 2 | £28,470 | £2,372 | £547 |
| Plan 4 | £32,745 | £2,728 | £629 |
| Plan 5 | £25,000 | £2,083 | £480 |
| Postgraduate Loan | £21,000 | £1,750 | £403 |
Interest rates differ too, with undergraduate plans carrying the lower rate of 3.2 per cent interest rate compared to the 6.2 per cent of the Postgraduate Loan.
Why should businesses be concerned about payrolling graduate employees?
It is easy for new employees to feel overwhelmed during the onboarding process, and if this is their first time being employed at a graduate salary, they may not know to look out for student loan repayments.
To help guide them in their new career path, you should take the time to ask new graduate hires whether they have an undergraduate or postgraduate loan and which plan they are on.
This will then allow you to monitor their payroll records to determine that the correct amount is being paid each month and raise an issue if this does not happen.
You would not want your employee to face large back payments that threaten their economic stability, as this could further impact their ability to work for you.
Rising wages and minimum-wage increases mean that roles that historically fell below repayment thresholds can now breach them.
A full-time employee on the National Living Wage could, depending on hours and the plan, find themselves liable for repayments.
That reality makes accurate payroll set-up and regular reviews more important than ever as even small pay increases or bonus payments can tip a graduate into repayment territory mid-year.
Granted, nine per cent of £396, the amount a person with a Plan 5 loan on the National Living Wage would repay annually, is not a sizeable amount, but it is above the threshold and so does need to be addressed.
Graduate employees are a vital part of many teams and the payroll obligations are manageable once understood.
We can help you to look after your team and remain fully compliant with any regulations that may impact your business.
Keep your graduate and non-graduate employees content with fully compliant payroll by speaking to our team today!
