Payslip rules are changing: are you ready? From the 6th April 2019, new rules will change how you issue payslips. Here’s how to prepare now and avoid falling foul of the law…
Previously, only your staff classed as employees needed to get written itemised payslips. You didn’t need to itemise payslips for any staff classed as workers. And if you’re unsure what the difference is between employees and workers, don’t worry. We’ll explain it shortly.
Now the law has changed. As of April 2019, you’ll need to give itemised payslips to your employees and your workers. If you don’t, you’ll be breaking the law.
Itemised payslips will also make it much easier for HMRC to spot and prosecute businesses that pay below the national minimum wage…
Save yourself from a costly dispute and take the hassle out of updating your payroll processes. Read on to find out what you need to know to create an itemised payslip, and how to separate your workers from your employees.
The items needed on all payslips
From April, you’ll need to break down your workers and employees’ payslips according to pay and deductions. Payslips must include:
- Gross salary (i.e. the wages you pay before deductions).
- The amount deducted from pay, and why.
- The net amount that your worker takes home after deductions.
- The amount and method of any part-payment (i.e. if you pay a worker £1500 a month but they get £500 in cash and £1000 in BACS this will need to be detailed on the payslip).
- The number of hours where pay varies depending on the amount of time worked. So, if staff are paid based on the number of hours they work or they get different amounts for working certain hours, you need to include these hours on their payslips.
Workers and employees: what’s the difference?
The difference between employees and workers is something we get asked about a lot. That’s because the distinction it isn’t always clear.
An employee is someone who works for you under a contract of employment. They have full employment rights.
Workers are different. Like employees, they have a contract with you to do work and be paid for it. Unlike employees, there is usually no ‘mutuality of obligation’ between worker and employer. This means employers don’t have to offer workers work, and workers may turn down any work offered. Workers also have fewer rights than employees. For example, workers don’t have the right to protection against unfair dismissal or statutory notice periods.
The good news is when it comes to payslips the difference between a worker and an employee no longer matters. Because from April, everyone falls under the same rules. But you still need to look into your workers’ payslips carefully because…
Workers now have greater legal rights
“This instrument amends Part I of the Employment Rights Act 1996 (c. 18) (“the 1996 Act”), to confer the right to an itemised pay statement and associated enforcement provisions upon all workers”
A worker who doesn’t receive an itemised payslip can now take you to an employment tribunal. At a tribunal, you’ll need to prove that you gave the worker a payslip at the right time and that it contains the information required. If the tribunal finds this isn’t the case, it can declare that you have breached the worker’s rights. And if you took un-notified deductions from the worker’s pay in the 13 weeks before the tribunal claim was made, you can be forced to repay this to your worker.
Itemised payslips also make it easier to spot if employers pay below the national minimum wage, which is easy to do.
Charges for uniforms or equipment can tip pay below the minimum wage. 173 employers, including TGI Friday and Wagamama, made this mistake in 2018 and were forced to give £1.3 million to underpaid staff.
Here’s how to prepare your payroll for April
First, identify the workers in your business who don’t receive itemised payslips.
Determine their working hours and job functions, and how these relate to pay. You’ll then need to work out how much money you take from their paycheque, and why.
Deductions are complicated, but they’re important to get right. Check if an employee gets the same amount for different tasks, or if you pay overtime for different hours worked. Calculate how much you charge them for uniforms or equipment. Record any pay docked for absence or lateness. And make sure you include any salary sacrifice for a non-cash benefit, such as accommodation or transport.
Itemised payslips give greater transparency on pay for your staff, which is a good thing. But it also adds extra admin and risk to your business…
We take away your risk
We take the hassle out of adapting your payroll and help prevent the risk of you being taken to court.
Our HR experts identify your workers from your employees and advise on the easiest way to itemise pay. And if you’re at risk of paying below minimum wage, we give you instant advice on how to avoid prosecution.
If the worker/employee distinction is difficult, we sort that out too. We can create watertight contacts for your staff that give you the flexibility of a modern workforce, without the legal risk.
As part of your membership with the MIA you can speak to a Croner expert for help with any of the above issues and get free in-depth, tailored advice. Email firstname.lastname@example.org or call 01403 800500 for the exclusive Business Support Helpline scheme number.