Payslips should contain hours worked for easier calculation of pay entitlement

17 January 2017

The Low Pay Commission recommended in their Spring 2016 report that the government review the current obligations on employers regarding provision of payslips and considers introducing a requirement that payslips of hourly-paid staff clearly state the hours they are being paid for.

Part of the National Minimum Wage Low Pay Commission Report Spring 2016 discussed ‘Enabling Enforcement and Improving Awareness – Better Hours Information’.

The report said that a cross‑cutting problem impeding workers bringing National Minimum Wage (NMW) cases, and HMRC enforcing the minimum wage, is uncertainty regarding the hours for which they are being paid. This issue was raised in written and oral evidence and during the LPC visits around the UK in 2016. According to previous research under-recording of hours is a particular issue in NMW compliance for apprentices (in relation to recording training hours) and in social care (in relation to travel time).

At oral evidence, UNISON argued for clearer pay statements, so that workers could be assured they had been paid at least the NMW/NLW. This statement would set out information on how pay had been calculated – especially the critical area of hours – and demonstrate how it was NMW compliant. Both UNISON and the GMB highlighted Section 12 of the NMW Act and urged the government to use its provisions.

UNISON called on the government to make regulations as provided for under that section requiring employers to provide their workers with a statement demonstrating compliance with the NMW. The GMB said employers should provide workers with a written National Minimum Wage statement in order to assist the worker to determine whether they have been remunerated at a rate equal to or above the NMW. However, the GMB’s experience was that payslips are not always clear, and so it thought they should show an hourly rate.

Also at oral evidence the ALP suggested the NLW might lead to higher non‑compliance through various malpractices, including paying well below the minimum wage through falsely under‑recording worker hours, or sometimes in collusion with workers establishing false records to claim benefits.

Incorrect recording of hours worked, and therefore subsequent underpayment, is likely an important driver of non‑compliance (both measured and unmeasured), and it is a problem which wider structural changes in the labour market are set to keep centre stage, with more use of variable hours and other kinds of flexible contracts where hours change day to day.

The LPC is therefore attracted to the kind of solution proposed by some stakeholders, and think it is worth investigating seriously. So they

“…recommend that the government reviews the current obligations on employers regarding provision of payslips and considers introducing a requirement that payslips of hourly-paid staff clearly state the hours they are being paid for.”

The report goes on to say that in implementing this requirement the government should take into account the implications for different pay arrangements, such as for those workers on term‑time only contracts receiving a standard level of pay for each pay period, but working nil hours outside term‑time.

In order to arrive at a level of pay for workers, businesses already need to know how many hours individuals have worked. So this is about sharing the assumptions made more explicitly than at present, thus increasing transparency, rather than imposing new burdens on firms. As well as providing a key piece of information for the worker to help reconcile hours and pay this step would also help in cases where HMRC is seeking to enforce the NMW. It would also have relevance in sectors such as care and for particular groups of workers, such as apprentices.

According to the LPC’s National Minimum Wage Low Pay Commission Report Autumn 2016 Report the government is still considering this option (and not for the first time) so we await further news but the LPC do continue to urge the government to act on this recommendation.

Hourly payslips poll results

In light of this recommendation the Policy team ran a poll in November 2016 to get a gauge on what current practice is. Our poll asked, ‘If you have hourly-paid workers, do you include the number of hours for which they are being paid on their payslip?’

We received a high number of responses to this poll, 933 in total. 88% of respondents said yes they do include the number of hours, with the remaining 12% saying they do not.

This is of course a one question poll with no facility to elaborate so if you do have views or experience with providing payslips/itemised pay statements that you would wish to feed in to any future consultation on this subject, please email Samantha Mann at [email protected].

Why not take a moment to give your opinion in our latest poll which is situated to the right of this news item, and to the right of all of our news items.