Pay statements
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December 2019
This article was featured in the December 2019 - January 2020 issue of the magazine.
Danny Done, managing director at Portfolio Payroll, provided guidance on what to do if you haven’t been complying with statutory new requirements on payslips since 6 April
Previously only employees were entitled to receive payslips, but a change to the law in April 2019 extended the scope to ‘workers’, including zero-hours and agency workers. Since these individuals now have a statutory right to receive a payslip (called ‘pay statement’ in law), failing to provide this will leave your business open to legal proceedings.
It is also worth noting that since April 2019 employers have been required to include additional information on payslips for everyone whose pay varies depending on the number of hours they have worked. Where this applies, the number of hours paid must be clearly shown. This will apply where an individual has a fixed salary each month and works variable overtime with additional pay at an hourly rate. In these situations, only the hours of overtime need to be shown.
With this in mind, workers may now submit a claim for a failure to be provided with a fully itemised pay statement, which could result in significant financial repercussions. If a claim is lodged, an employment tribunal (ET) has the authority to order the employer to pay compensation to the workers involved. When determining the amount of compensation due the ET will refer to any unnotified wage deductions made in the thirteen weeks prior to the date of application. The amount of compensation cannot exceed the amount of unnotified deductions during this period. However, when you consider the amount of potential deductions made during this time, this could be a costly sum.
Given the potential issues, you will want to resolve the situation as soon as possible. Whilst it is clear that you need to provide workers with payslips going forwards to meet your legal obligations, you will have a decision to make on how to proceed.
...identify all those with worker status and ensure their payments are accurately reflected in payslips going forwards
On one hand, you could simply begin to provide workers with an itemised payslip from the next pay reference period and hope not to draw any attention to the fact they have had a right to receive these since 6 April. Alternatively, providing you have the correct facilities in place, it may be more favourable to issue multiple payslips incorporating any pay reference periods since 6 April. This will generally be considered a best-practice approach and may benefit you in any tribunal proceedings.
Unfortunately, there will always remain a risk that this sudden change in procedure will alert suspicions amongst workers and encourage them to lodge a claim against your business. However, you must avoid the temptation to carry on without issuing payslips, as this will only make the situation worse in the long-run. Instead, to prevent this from occurring again in the future, make sure you identify all those with worker status and ensure their payments are accurately reflected in payslips going forwards.
It is also important to keep up to date with all future legislative developments, such as the government’s Good Work Plan that is set to come into force in April 2020. Both workers and employees will benefit from additional employment rights as part of the plan, including the right to receive a written statement of main terms from day one of their employment.
The reference period used to calculate holiday pay for those who work variable hours will also change, increasing from 12 weeks to 52 weeks from April 2020. This amendment is designed to ensure individuals receive holiday pay that is a more-accurate reflection of their normal working hours throughout the year and is likely to have a significant impact on businesses that benefit from zero-hours workers.
You should encourage your human resources department to work proactively, making sure the correct provisions are in place ahead of time, thereby reducing the risk of any additional tribunal proceedings. It will also be vital to have a clear system in place for retaining your own copies of staff payslips, as this will be important should you ever be subjected to an investigation from HM Revenue & Customs.