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New Holiday Pay Ruling

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Hitting the headlines this month is the result of 3 Employment Appeals Tribunals (EAT) regarding the calculation of holiday pay. The workers won and the employers lost and the ruling means that where you require staff to work overtime, you must now include the overtime pay in the holiday pay calculation for the first 4 weeks of annual holiday pay. Where the overtime pay varies, the holiday pay calculation must be based on the average of their last 12 weeks pay.

A major concern for employers is that the EAT also rules that employees can claim that the employer has made an unlawful deduction of wages under The Employment Rights Act if their holiday pay does not include overtime and other payments considered part of ‘normal remuneration’ such as commission and travel allowance, which in theory could go back as far as 1998, when the original Working Time Regulations were implemented in the UK. However, the EAT ruled that a claim for an unlawful deduction can only made if the claim is made within three months of the incorrect holiday pay amount being paid. So really, an employee has to bring a claim before an Employment Tribunal within 3 months of the unlawful deduction being made from wages.

If you have staff who you know will now be entitled to increased holiday pay, please be aware of possible backdated claims and ensure that your payroll provider or internal staff are aware of this issue to avoid underpayments being made going forward.

HMRC error affects 5 Million UK taxpayers

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The Daily Telegraph has reported that HMRC have made miscalculations in millions of taxpayers’ pay and tax calculations for the 2013-14 tax year. We have already been contacted by many of our clients whose employees have received form P800 which they believe to be incorrect as the forms show they have earned more than they actually have and therefore owe more tax than they actually do. There is a commitment to resolve the issue fully within the next 6-8 weeks, but in the meantime, if they believe the HMRC calculation is wrong, employees should not pay any monies that are shown as an underpayment and not cash any cheques that have been sent where a repayment has been calculated. HMRC also advise that any employees’ tax codes that have been altered in error will be corrected at a later date, however, they have as yet not made a statement confirming or denying any errors. Read The Telegraph’s article for more details.

HMRC delays RTI late filing penalties

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From 6th October 2014, HMRC introduce automated penalties for late in-year filing of RTI submissions. However, there is now a respite for small employers as HMRC have delayed these new penalties for employers with fewer than 50 employees until 6th March 2015. HMRC have sent electronic messages to all employers telling them when the penalties will apply to them, based on the number of employees shown on the Revenue’s records.

In the run up to March 2015, in addition to financial penalties, HMRC have said it will examine other ways to encourage employers to comply, although it has given no indication as to what these could be. The size of the penalties depend on the number of employees in the PAYE scheme: 1 to 9 will attract £100, 10 to 49 £200, 50 to 249 £300 and 250 or nore £400. HMRC has issued a downloadable helpsheet on penalties for late filing of PAYE in RTI.

If you do submit a late RTI submission, you must now include a late reason, which your payroll software should offer you.

New National Minimum Wage Rates

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From 1st October 2014 the National Minimum Wage rates are increasing. Please ensure you review and amend the rates for your employees from this date.

The hourly rate for employees under 18 years of age increases from £3.72 to £3.79 per hour

The hourly rate for employees between 18 to 20 years of age increases from £5.03 to £5.13 per hour

The hourly rate for those employees aged 21 and over increases from £6.31 to £6.50 per hour

The hourly rate for apprentices increases from £2.68 to £2.73 per hour
The apprentice rate is for those aged 16 to 18 and those aged 19 or over who are in their first year.

Automatic Enrolment Costs

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A recent survey of employers being asked if they have encountered additional costs in respect of the new automatic enrolment responsibilities has revealed that the potential financial burden incurred could prove to be sizeable. More than 43% said they had faced additional costs with almost a quarter saying they needed additional resources. The expenses incurred by several employers was significant, with upgraded payroll software being the biggest cause of additional expenditure.

Interestingly, all the individual middleware costs identified were all higher than any of the individual payroll software costs. What the survey was unable to show was whether the payroll costs were ‘one off’ to purchase upgraded modules to the payroll software, and how these compare to annual charges by the middleware companies. It is important to note that most middleware systems still require data from a payroll system. However, additional resource costs, especially to prepare for the introduction of auto enrolment, were also significant with one employer reporting that they spent £50,000 on additional resource.

It will be interesting in a year’s time to see the comparison between the one-off costs of upgrading payroll software against the on-going cost of middleware as the survey results this time show much lower costs for payroll software compared to middleware.