Payroll and Pensions Update for Employers

This article concentrates on several changes that have occurred over recent months that all Employers should be aware of and should have already implemented together with common issues we come across within the payroll department.

1. From April 2018, increase in the pension contribution percentages for both Employers and Employees under Auto Enrolment. The current percentages are 2% for the Employer and 3% for the Employee. Please note that with effect April 2019 these percentages increase further to 3% Employer and 5% Employee. It is important that Employers notify their employees of any increases and ensure that they regularly review the pension scheme reports, as it is believed that many employees are likely to opt out as the percentage increases. Businesses also need to ensure that they have a strategy for dealing with the increase in terms of the effect on profits and cashflow. An employee that currently earns £20,000 will from next year cost an Employer approximately £438 (2.2%) per year compared to £146 three years ago when pensions first introduced.

2. At the end of May 2018 we have seen the introduction of GDPR and every Employer should have taken steps to ensure that they comply. As a minimum you should have issued your staff with new Privacy and Data Policies (which should have been signed for by the member of staff) and reviewed how your data is stored and transmitted relating to Employees. If you are recruiting staff, you should also have a recruitment policy which is given to potential candidates and/or recruitment agencies acting on your behalf. The best source of information relating to GDPR is the Information Commissioners Office (ICO) website which has some very good guidance. There are a significant number of businesses that should also be registered under the Data Protection Act and this may be an opportunity to ensure that you fully comply with this requirement as well: https://ico.org.uk/for-organisations/guide-to-the-general-data-protection-regulation-gdpr/

3. National Minimum Wage (NMW) Whilst many businesses are now paying NMW correctly as most software deals with the updates as required, there are a couple of areas where Employers may fall foul of the legislation due to the “small print”. One area relates to termination payments and the deduction of costs and expenses. Whilst you may have a contract of employment in place with an employee stating that various costs can be deducted on termination, this is still subject to their payment post deduction complying with the amount needed under NMW. The other area relates to “stay in’s or sleepovers”, there has recently been a case where it has stated that the time spent in respect of sleepovers may not be subject to NMW. This may look like good news however I feel that businesses involved in these type of sectors which are mainly surrounding the care industry will find it difficult to get quality employees if they are not remunerated correctly. If you feel either of these areas affect you please contact us.

Finally, this is just a reminder that the HMRC website does contain very good calculators in respect of statutory deductions such as SSP, SPP and SMP as well as a very good holiday calculator. Holiday for starters and leavers still appears to be the number one area that Employers do not fully understand. We often see confusion surrounding the impact of bank holidays and part-time employees, many not accounting for the bank holiday elements correctly. I would therefore always recommend using the holiday pay calculator on HMRC to work out the holiday allowable: https://www.gov.uk/calculate-your-holiday-entitlement

For any advice surrounding the operation of Payroll please don’t hesitate to contact our Payroll Bureau.

Posted by Lisa Greenwood