16 April 2019
It has been suggested that for many businesses the payroll function is the most complex process routinely undertaken. Legislation is copious and ever-changing, while fines or expensive claims by employees are a constant threat. But businesses cannot operate without their people, so here is a selection of the issues that employers need to be aware of as we start a new tax year.
National Minimum Wage
The headline rate – for employees over 25 – is £8.21 with effect from 1 April. The previous rate was £7.83, so this represents an increase of 4.85%, and may have a knock-on effect on any other employees who are earning at a rate slightly above NMW. Rates applicable to apprentices and younger workers are available here.
Care is needed to ensure that any deductions made from wages, however legitimate they may appear, do not have the effect of reducing the rate of pay to less than the statutory threshold.
Employers (mostly in the social care sector) who were obliged by a court ruling last year to pay at least the NMW to their ‘sleep-in’ workers, should be aware that, following an Appeal Court ruling last July, the NMW now only applies to those hours when a worker is carrying out their duties.
A closely related issue is the requirement to state on the employee’s payslip the number of hours worked, which comes in to effect from 6 April 2019, but only in situations where the employee’s pay varies pro-rata with the time worked.
Workplace pensions or Auto-enrolment
From 6 April 2019 the minimum employer contribution is 3%, and the employee contribution is 5%. This is compulsory for all workers who earn £10,000 or more p.a. and also applies to eligible workers who have opted in. The above percentages are applied to annual earnings above the threshold of £6,136.
Some employers will be reaching the third anniversary of the introduction of their workplace pension scheme and will therefore be required to carry out a review and go through the auto-enrolment process for any employees who previously opted out.
Student Loan Deductions
With effect from 6 April 2019, the earnings thresholds for making Student Loan deductions are:
Plan 1 – £18,935 annually (£1,577.92 monthly)
Plan 2 – £25,725 annually (£2,143.75 monthly)
Gender Pay Gap Reporting
This only applies to organisations with 250 employees or more. The figures must be calculated using a specific reference date – this is called the ‘snapshot date’. The snapshot date each year is 5 April for businesses and charities, and the data must be published within a year. So 4 April 2019 is the latest date for publication of the April 2018 data, and the 2019 data needs to be captured on 5 April this year.
Looking ahead: off payroll working
Employers need to be aware of developments in the pipeline. Currently public bodies who engage individuals ‘off payroll’ (usually those who supply their services through their own limited company or a managed service company) need to determine whether such individuals are in reality employees, and, if so, are required to deduct income tax and employee NICs and pay employer NICs through their payroll. These rules are currently subject to a consultation with a view to extending them to the private sector although it is proposed that the smallest organisations (those who satisfy two of the three following requirements – annual turnover of not more than £10.2 million, balance sheet total not more than £5.1 million and more than 50 employees). These new rules are likely to apply from 2020.
Finally, if you would like us to carry out a compliance review on your payroll, or if you have any questions on the above information, please do not hesitate to contact me or complete our contact form.