Whilst the concept of the weekly pay packet has evolved to include electronic payslips or online portals and payments transferred directly to employees’ bank accounts the basic information provided by employers on an employees’ payslip has remained fairly static for years.
From April 6th changes to the information that must be included within the payslip come into effect. These changes are aimed at providing greater clarity on pay rates to those whose pay fluctuates with the number of hours they work, to identify where pay is not taking into account all hours worked or where minimum pay levels are not being met. Simon Palmer, Sales and Marketing Director at Qtac Payroll explains the changes and the impact they will have.
The position pre-change
The current law requires that ‘employees’, with some exceptions, must receive a written, itemised payslip each time they are paid.
And whilst the format of payslips can vary considerably the Employment Rights Act 1996 governs the minimum information that must be provided, which includes Gross Salary, a breakdown of all fixed deductions taken such as Tax and National Insurance as well as the final Net Salary being paid.
There is currently no legal obligation to provide a payslip to those categorised as ‘workers’, a term used to describe individuals on zero hrs contracts, casual workers or agency workers. Modern working practices mean that a growing number of the workforce are not therefore receiving any formal notification of their pay and how it relates to the hours they are working.
This has resulted in situations where, either deliberately or inadvertently, workers are being paid for less hours than actually worked, or at levels below legal minimums.
An example situation would be, a care worker on a xero or fluctuating hours contract completes a 12 hr shift but is paid using a day rate based on an 8 hr day. In this scenario the worker is not only not being paid for all of the hours worked but when broken down, the actual pay rate is below minimum wage.
New requirements and their impact
From 6th April the legal requirement to receive an itemised payslip on or before being paid will be extended to both ‘employees’ and ‘workers’. In addition, for those whose pay fluctuates based on how many hours they work, a total number of hours worked within the pay period must also be included on the payslip.
These changes will enable workers on flexible hour contracts better clarity on the hours they are being paid for and at what rate, thereby identifying if their employer is failing to meet legal minimum pay levels.
Impact on Employers
For those employers predominantly utilising flexible hour contacts that have to date not issued payslips to their workers these changes will need to be prepared for. Their pay data and payroll processes will need to be reviewed and they may have to revisit their GDPR processes to consider the implications of sharing pay data with workers whether through printed or electronic payslips.
None of these changes are insurmountable and with the support of their accountant or through outsourcing their payroll or utilising appropriate payroll software the operational impact should be easily managed.
Perhaps the wider implication is what issues this greater transparency on pay rates and hours for their workers will have, particularly for those who have been using the current ambiguity to hide the detail.