On 16 May 2015, HMRC’s Software Developer Support Team wrote to developers about two employment law legislative changes that impact the payroll department...

It concerns the information displayed on payslips, both are effective 06 April 2019 and apply to payments made for periods of work commencing on or after this date.

I do wonder, though, if this is not more of an issue for employers rather than software developers.

The Employment Rights Act 1996 (Itemised Pay Statement) Order 2018

This Order amends the Employment Rights Act 1996 in a move to ‘increase transparency’ for the employee, enabling them to see if they have been paid correctly.  This is in relation to monies due under the contract of employment and, particularly, the National Minimum and Living Wage.

In the situations where an employee’s pay varies according to the hours worked, the employer will be required to show the hours on the payslips that represents the variable payment. This can be shown as a single figure or separate figures where there are different rates of pay for different types of work.

The legislation is part of the UK Government’s response to the Low Pay Commission’s 2016 report recommending ‘payslips of hourly paid staff clearly state the hours they are being paid for’ and the response to Taylor’s Good Work review which said that there would be legislation for the payslips of ‘time-paid workers’.

However, the legislation as it is worded extends these recommendations and requires hours on the payslips for any employee who has pay that varies according to the hours that they have worked.  A salaried individual that is paid overtime would fall within the scope of this legislation.

Is this an issue for software developers?

I cannot see it is, as long as pay codes exist that enable entry in hours or, at least, the display of hours on the payslip.

Is this an issue for employers?

Possibly:

  • In the first instance, the legislation only updates the Employment Rights Act 1996 which applies in Great Britain.  There is no corresponding legislation applying in Northern Ireland
  • In the second, there are many employers that calculate values using hours and hourly rates but convert them to cash values on the payslip. This will have to change and lump sums will have to be broken down from 2019/20
  • Thirdly, although the UK Government and HMRC have referred to hourly paid and time-paid workers, that is not the way the legislation is written.  Any worker whose pay varies according to the hours worked in a pay reference period must have hours on payslips for the variable portion

The Employment Rights Act (Itemised Pay Statement) (Amendment) (No 2) Order 2018

This is a separate piece of legislation from the above, also amending the Employment Rights Act 1996.  From 2019/20, employers will have to provide itemised payslips to all workers, not just employees.

Is this an issue for software developers?

I cannot see it is.  If payroll software can produce a payslip for an employee they should be able to produce one for a worker – if the worker is actually on the payroll in the first place and the right pay codes exist.

Is this an issue for employers?

Probably:

  • Again, the legislation only updates the Employment Rights Act 1996 which applies in Great Britain.  There is no corresponding legislation applying in Northern Ireland
  • There is also the same consideration with regards lump sum payments that will now have to be broken down into hours and a value
  • Perhaps the greatest consideration is whether all workers are on the payroll in the first place.  The UK Government estimates 290,000 workers do not receive a payslip, suggesting that employers pay them money but not via the payroll system.  The Amendment No 2 legislation corrects that, supporting the July 2017 Taylor Reviewrecommendation of ‘increasing transparency for workers’
  • Of course, if the worker is not on the payroll, will putting them on there give them the employment and workplace pension rights that are theirs anyway?

HMRC’s communication says that the Department for Business, Energy and Industrial Strategy (BEIS) ‘will publish guidance soon on implementing this policy’.  There is time to prepare so the profession looks forward to this guidance so we can ensure procedures are updated (and payroll software capabilities looked at) in time to implement the two pieces of legislation from the start of the next tax year.

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