27 Feb 2019
From the 6th April 2019, a new law will completely change how you issue payslips. If you don’t update your payroll in time, you’ll be breaking the law.
But don’t worry. This Q&A breaks down everything you need to know to get your business ready in time and avoid falling foul of the law…
1: What’s the new law?
Answer: The Employment Rights Act 1996 (Itemised Pay Statement) (Amendment) (No. 2) Order 2018.
2: Can you explain what that means in English?
Answer: It means you need to give all of your workers an itemised payslip.
3: Is this a big change?
Answer: It’s pretty big. Previously, only staff classed as employees had the right to get itemised payslips. Now all UK workers have this right.
In many cases, you’ll also have to put the number of hours worked on a payslip. This may apply to your employees too.
P.S. if you’re unsure what the difference is between employees and workers, don’t worry. You’re not the only one. We’ll get to this shortly, so keep reading to find out (or jump to Q10 if you can’t wait).
4: What items do I need to put on an itemised payslip?
Answer: You need to include the following items on your payslips:
- Gross salary (i.e. the wages you pay before deductions).
- The amount deducted from pay, and why.
- The net amount (i.e. the pay that your worker takes home after deductions).
- The amount and method of any part-payment (e.g. if you pay a worker £1,500 a month but they get £500 in cash and £1,000 in BACS you need put this on the payslip).
- The number of hours where pay varies depending on the amount of time worked (this will apply to your employees’ payslips too). If you pay your staff 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.
5: That last one is confusing. When do I need to include the number of hours worked on a payslip?
Answer: This is a brand new change to the law which will apply to all workers, including employees. From April, you’ll have to include the number of hours worked on a payslip if:
- You only pay your worker for the hours they work, such as someone on a zero-hour contract. In this case, you need to include the total number of hours they worked.
- Your worker’s pay varies depending on working certain hours. For example, a salary-paid worker who gets an hourly rate if they do overtime. In this case, you only need to include the number of hours of overtime worked on the payslip.
6: What if I pay differently on bank holidays?
Answer: There are four bank holidays over April and May this year. You may choose to pay staff extra for working these days or give them paid annual leave—although you don’t have to do either.
Many businesses use agency or temporary workers to cover shifts on bank holidays. If you do, and these workers get paid by the hour, then you must make sure they receive an itemised pay slip that includes all of the hours they work.
But you don’t need to link rates of pay to specific hours worked. So it doesn’t matter if you pay time-and-a-half for working bank holidays, you only need to put the total number of hours worked on the payslip.
It’s a good idea to break down hours and pay if you can. It gives your worker greater transparency and helps to prevent arguments or disputes over pay.
7: What impact will the change to payslips have on me and my business?
Answer: You’ll need to change your payroll processes to give workers itemised payslips in time for the 6th April deadline.
Why? Because workers now have the right to take you to an employment tribunal if you don’t provide an itemised payslip.
An itemised payslip also makes it very easy for HMRC to spot if employers pay below the National Minimum Wage, which goes up in April. Read our recent article here to find out more…
8: What deductions can I make to workers’ pay?
Deductions include charges for uniforms or equipment, or if you dock pay for absence or lateness. You might also make deductions for a non-cash benefit, such as a salary sacrifice for accommodation or transport. You’ll need to think carefully about how you pay your workers and what deductions you make. For more advice on this, call a Croner HR expert on 0808 145 3377.
Answer: No. You still have to provide either a physical or a printable electronic payslip.
10: Employees and workers: what’s the difference?
Answer: A lot of people skip ahead to this question…
All employees are workers, but not all workers are employees. It may help to think of employees as a type of worker with extra employment rights bolted on.
For example, all workers have the right to receive at least the minimum wage, paid holiday and rest breaks. But only employees have rights to redundancy pay, protection against unfair dismissal and statutory notice periods.
In practice, the main difference is that employees and employers have a ‘mutuality of obligation’. This means the employer needs to give the employee work (and pay for it) and the employee needs to do the work he or she is given. But employers don’t have to offer work to workers. And when an employer does offer work, the worker can turn it down.
11: What about staff who are self-employed?
Answer: The law doesn’t affect the self-employed. So you don’t need to start giving payslips to your contractors or freelancers.
12: So, what should I do next?
Answer: Call Croner for FREE, no obligation advice to help you change your payslips in time.
We also provide a suite of HR software that makes it easy for you to keep track of your staff’s working hours, holidays, sick leave and contracts.
It lets you quickly see who’s working, how many hours a week they’ve worked, whether they’re classed as workers or employees, and what deductions their contracts say you can make from their pay cheques. And you can do it for your entire workforce—from full-time employees and part-time staff to seasonal and agency workers.
Let Croner take the hassle out of adapting your payroll and help you avoid the risk being taken to court. Speak to an expert today. Call 0808 145 3377.
Do you have any questions?
Get a free callback from one of our regional experts today