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Payslip processes set to change

View profile for Ewan Carr
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New payslip requirements requiring itemised calculations for variable rates of pay and hours worked are to be introduced in April 2019. 

The two amendments to the 1996 Employment Rights Act will come into force from April, requiring that employees and workers, including those on casual or zero hours contracts, must receive correctly detailed payslips in written, printed or electronic form. 

The written statement of wages should include:

  • the amount of gross wages or salary
  • for any part that varies according to time worked, the total number of hours worked and the rate of pay, either as a single aggregate figure or separately for each type of work or rate of pay
  • the amounts of any deductions and what they relate to 
  • the net amount of wages or salary payable
  • if paid in parts, the amount and payment method for each part 

The new measures are designed to promote greater transparency and help employees understand their payslip so that they check it for accuracy. It’s hoped that it will make it easier to identify if employers are meeting their obligations under the National Minimum Wage and National Living Wage and that holiday entitlements are correctly applied.

But while the change itself is straightforward, new payroll procedures and alternative software may be needed to satisfy the new requirements.

For many companies, the biggest challenge connected with the change is how individuals in their workforce are defined - as employees, workers or self-employed contractors. 

Some individuals, although they may not be classed as employees, may be categorised as ‘workers’ and therefore are still entitled to certain rights such as the national living wage, paid holiday and sick leave. Equally, an employee may also be defined as a ‘worker’, but with extra employment rights and responsibilities. However, if organisations do not recognise this, which often happens, problems can occur.

The distinction between a worker and someone who is self-employed is increasingly difficult to identify and it may not be clear cut for some organisations. In high-profile cases involving Uber and other gig economy companies, individuals have won the right to be treated as workers, rather than self-employed contractors. There are many factors to consider in determining the employment status of an individual and it is always important to consider how the relationship works in practice, as opposed to what may be written on paper in a contract.

Some employers are failing to meet legal minimum requirements, perhaps because they do not understand their obligations when it comes to workers as opposed to employees. It is hoped that the new payslip process will increase understanding.

It is always important for employers to keep up to date with what’s going on in employment law and any changes ahead. By doing so, it makes it easier to keep ahead of deadlines and face up to issues that may otherwise pose difficulties later. In the case of the changes to payslips, employers should consider what action they need to take in order to ensure compliance with the new legislation.

For more information about how to implement the new requirements for payslips, and for advice on other employment law matters, please contact a member of the team on 0115 947 4500.