What you need to know about the new payslip policy

As of 2019, new legislation (2) will require all employers to:

  • Provide payslips to all workers (with the exception of members of the armed forces and merchant seamen and women)
  • Show hours on payslips where the pay varies by the amount of time worked (1).

The latter is a response to the number of employers failing to count and document all worked paid time, and following on from that, the ability for the worker to assess if lump sum amounts actually equate to national minimum wage once the hours are transparently displayed.

So, in an attempt to provide more transparency, from April 2019 additional information must be shown on a payslip for workers whose pay varies depending on the number of hours they have worked (1). Where this applies, the number of hours paid on this basis (ie on the amount of time worked) must be shown. Any other hours do not need to be shown (although of course they can be shown if it would be helpful to do so) (1).

Guidance (1) from BEIS that was published pre-Christmas indicates that ‘if a worker’s pay does not vary by time worked (for example because they are paid a fixed salary each month) there is no need to include an hourly figure to account for variations in pay caused by taking unpaid leave or being on statutory sick pay’(1). In these instances, BEIS say pay varies ‘as a result of a departure from the normal working and pay arrangements’ although it’s hard to see how the regulations (2) can be interpreted this way as they simply refer ‘where the amount of wages or salary varies by reference to time worked’. Taken at face value the regulations include all sorts of situations even for salaried workers where pay varies, such as:

  • Mid-month starters and leavers
  • Holiday pay adjustments as a result of commission or overtime having been worked
  • Acting-up payments

I’ve asked BEIS for their comments on some of these additional areas that don’t appear to have been to have been thought through.

Things to remember

Avoid getting caught out:

  • ‘where a worker has a fixed salary each month, and works variable overtime with additional pay at an hourly rate, only the hours of overtime need to be shown’ (1).
  • Total hours for the pay period can either be recorded, or separate figures can be highlighted for different work or rates of pay (1)
  • Total hours also only need to be recorded on payslips for ‘pay periods on or after 6th April 2019’ (1)
  • Hours shown are separate from the number of hours worked for National Minimum Wage purposes (1)
  • ‘If a worker is paid according to the amount of time worked (ie not salaried) and takes unpaid leave or receives statutory sick pay any hours they did work will still need to be included on their payslip’ (1)

Things to think about it before April

  • If you’re a payroll agent, make sure your clients understand what information you’re going to need that is different to how they have supplied payroll data previously
  • If you are an in-house team, go back over the last few months of payroll input and identify where you were asked to make lump sum payments to any employees and identify which ones now need to have hours shown alongside them
  • Once you quantify the hours, are there any payments that need a policy change that must be in place by April, either to meet national minimum wage or simply for you to remain competitive now you have increased transparency?
  • Do you have any issues within your payroll software in showing hours on payslips for any affected employees?
  • Do you have workers who are paid gross who now will need a payslip not just a remittance advice?

 Sources

(1) For more information and worked examples, see Payslips Guidance

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