Payslips under the spotlight

18 March 2019

So often we see a simple concept become a difficult to deliver policy – and the latest adjustment to the Employment Rights Act 1996 appears to be no exemption.


2016 is but a dim memory now but it saw the publication of the Low Pay Commission (LPC) spring report which included a recommendation that Government should consider introducing a requirement that the payslips of hourly paid staff should clearly state the hours that they are being paid for.

LPC believed at the time that this requirement should ‘impose little new burden’.  

How much new burden?

Following a year of informal consultation carried out by BEIS (Department for Business, Energy & Industrial Strategy) officials, during which the CIPP policy team published a quick poll which asked ‘If you have hourly-paid workers, do you include the number of hours for which they are being paid on their payslip?’ Quick Polls are popular because they are just that – quick – but for this question we received an extremely high number of responses 933 in total. Of which 88% of respondents said yes they do include the number of hours, with the remaining 12% saying they don’t.

Concerned about how ‘little new burden’ could be maintained for this 12% BEIS worked with the CIPP to produce a survey, that ran throughout April 2017, in order to understand whether this proposal would indeed bring additional financial and administrative burdens. As you might expect the results were wide ranging. We know that there is no ‘one size fits all’ when considering pay and reward.

What was clear was the need for BEIS to produce clear and concise guidance – that covered a wide range of scenarios and that was published in good time to enable software developers make adjustments to their programmes – where needed.

Guidance was published on 13 December 2018 and runs to seven pages and contains 8 examples.

Employment Rights Act (ERA) 1996

Section 8 of the Employment Rights Act 1996 currently requires employees to receive a payslip which is to be provided on or before pay day and to display the following:

  • the gross amount of the wages or salary,
  • the amounts of any variable, and any fixed, deductions from that gross amount and the purposes for which they are made,
  • the net amount of wages or salary payable, and
  • where different parts of the net amount are paid in different ways, the amount and method of payment for each part-payment.

Where there is a standing deduction being made this can be detailed in a separate document but must be in writing and provided on or before pay day.

The changes to come in to effect from 6 April 2019 are to be found in The Employment Rights Act 1996 (Itemised Pay Statement) (Amendment) Order 2018 (ERA) which amends section 8 of the ERA to add to the particulars required within a payslip to also contain information regarding the number of hours worked by the employee for which they are being paid, but only in situations where the employee’s pay varies as a consequence of the time worked.

A simple idea made complicated

The recommendation made by the LPC focussed on hours worked and the amendment indeed mirrors that and then expands to talk of ‘time worked’- I am sure we can all agree that a measure of time can extend beyond an hour.

One of the most common queries that we are receiving at the moment relates to payments made for day rates, regardless of the hours worked and if we turn to BEIS Payslips guidance we are told:

Example 6: Day rate workers Sally is a day rate worker. This means she is paid the same amount for each day she works regardless of how many hours she works in the day.  As her pay varies by how many days she works, i.e. by the amount of time she works, her hours worked need to be included on her payslip even though her pay varies by the day not by the hour.

We know that many employers and their service providers are considering whether a change to terms and conditions to pay employees by the hour rather than the day in these situations may provide greater transparency than this example suggests.

What is clear, for employers who face this situation, is they will need to ensure that their processes are adapted, to ensure that the varying hours worked are passed through to payroll teams or input via self-serve, to ensure that they can be displayed, as required, on the payslip.

Whether this will result in greater transparency for the employee remains to be seen however employers need to ensure that their pay processes are clearly communicated, including essential payroll cut off dates, which quite often are a cause of confusion, to make clear the information that is being displayed on the payslip from 6 April.

Not solely a minimum wage issue

Whilst this change came about as a result of recommendations made by the LPC, it is not a requirement solely for employees who are paid at minimum wage levels. It impacts all employees regardless of their pay rate.

Enforcement will be led by the employee through an employment tribunal and not by HMRC as part of their NMW enforcement work.

At this point I would highlight that in the first instance the employee should contact their payroll contact to seek clarification where they don’t understand their payslip.

All employees are workers but not all workers are employees

At the time of writing this article we await the government response to the Employment Status consultation that made clear the distinction and conflict that currently exists between employment status – for employment rights and employment status for tax purposes.

As from 6 April, workers rights are to be extended to include the right to receive a payslip, alongside all employers. Which has been brought about through The Employment Rights Act 1996 (Itemised Pay Statement) (Amendment) (No.2) Order 2018.

It is important to ensure that employer engagement processes ensures that all workers can be identified as they may not automatically have payments processed through payroll processes, particularly not if they are considered to be self-employment for tax purposes – in this instance it is entirely possible that their invoice will be paid through finance processes and not through the payroll.

We can’t mention this scenario without thinking about off-payroll working policy developments but let us hold off discussing the preparations we need to be making for April 2020 until next time.


As with any new policy delivery, only time will reveal if transparency and fairness is achieved with these latest changes, meanwhile I look forward to catching up with you next time.


This article was originally written for Accounting Web