Payslip Changes Deadline – As the law currently stands (and aside from a few very specific exceptions) UK employers have to provide a payslip to every employee every time they’re paid. But they don’t need to issue them to other groups who fall within the ‘worker’ definition like contractors, freelancers and other types of ‘non-employee’ workers. And in terms of what goes onto the payslip, the legal requirements are pretty basic.
That’s all about to change – and for good reason.
What’s the story behind these payslip changes?
Pay transparency’s a topic that’s come increasingly under the spotlight during the past few years. That’s was partly due to the Low Pay Commission’s report in 2016 and the 2017 Taylor Review, both of which highlighted some really fundamental problems. Amongst the issues raised was the fact that some workers were continually struggling to reconcile time worked with actual pay received. That had all kinds of consequences. It was very difficult to establish whether underpayments were happening. It was unclear if minimum wage legislation requirements were being met. Workers wouldn’t know if they should be raising cases against employers about whether they were being correctly paid or not.
It’s no surprise then that employer obligations in terms of payslips were reviewed, and a few payslip changes are coming. As a consequence, the Government introduced the Employment Rights Act 1996 (Itemised Pay Statement) (Amendment) Order 2018, which sets out the requirement for employers to provide a breakdown of pay. The Act has also been amended to require employers to provide all workers with written itemised payslips, so becoming The Employment Rights Act 1996 (Itemised Pay Statement) (Amendment) (No. 2) Order 2018.
It comes into force from 6 April 2019.
What exactly do these payslip changes mean?
- The scope of who should receive a payslip has widened
The first difference relates to who needs to be given a payslip. As well as employees, anyone who falls under the category of ‘worker’ must get one. The GOV.UK website explains a person is generally classed as a ‘worker’ if:
- They’ve a contract or other arrangement to do work or services personally for a reward (note that the contract doesn’t have to be written).
- The reward is for money or a benefit in kind: for example, the promise of a contract or future work.
- They only have a limited right to send someone else to do the work (subcontract it out).
- They must turn up for work even if they don’t want to.
- Their employer has to have work for them to do as long as the contract or arrangement lasts.
- They aren’t doing the work as part of their own limited company in an arrangement where the ‘employer’ is actually a customer or client.
- The level of detail required on the payslip
The second difference is in the detail that’s needed on the payslip.
At the moment, as a minimum, payslips need to set out the employee’s gross salary/wage, amounts for deductions that can change each period (such as tax and national insurance) and the net salary/wage amount that’s received. Employers must also explain any fixed amount deductions. That can be done on the payslip, or in a separate written statement which must be sent out before the first payslip and updated annually.
The new legislation requires additional information to be shown for workers whose pay varies depending on the number of hours worked. Payslips must be itemised to include information about the number of paid hours worked. They will have to show either the combined number of hours worked for which payment is being made, or itemise the figures for different types of work carried out and/or different pay rates.
Time’s running out… what must you do now?
If you haven’t started getting ready for this change, you need to make it a priority for your business.
Scrutinise your payroll infrastructure and processes. Review what’s already included on payslips. Think about how best to adjust your current format to incorporate the new information required. How will you collate it? What kind of cohesion do you have between key departments who will need to supply the details? Do you need to do any training to ensure everyone understands what’s required and are clear on new processes that are being implemented?