01 July 2021
To explore the unique language of payroll, the CIPP’s policy team have identified several familiar terms that may leave colleagues from other departments, frankly, baffled
When payroll professionals discuss their work, it is inevitable that conversation will be littered with jargon, acronyms, and reference to policies. Those not familiar with the industry would understandably be left bewildered.
The following outlines some niche payroll terms, but the list is obviously not exhaustive.
Alabaster – A form of mineral or rock frequently used for carving – that is, if you do not work in a payroll team.
In payroll, ‘Alabaster’ is in reference to a case referred by a UK court to the European Court of Justice for guidance and decisions regarding application of the Directive 92/885/EEC, commonly known as the ‘pregnant workers directive’. The case had implications on the way in which an employee’s average weekly earnings (AWE) for statutory maternity pay are calculated. Where the employee is awarded a pay rise within a specific period, that award should be reflected in the AWE calculations for her SMP. The label ‘Alabaster’ is simply the surname of the woman who brought the claim to court.
Dependants leave – Dependants leave is different to parental leave (see below) and often the source of much confusion. Individuals are entitled to unpaid time off to deal with an emergency that involves a dependant. A dependant could be a: spouse; partner; child; grandchild; parent; or anybody else who depends on an individual for care.
There is no prescribed amount of time off that someone is entitled to, but the advice is that a reasonable amount of time to deal with the emergency should be granted. Employers may opt to pay employees for time off spent looking after dependants, but this is not mandatory. Individuals should check their contracts of employment to clarify the stance within their company.
Where an individual is aware of the situation beforehand, this does not create an entitlement to take dependants leave. They could potentially request parental leave instead if they are classed as an ‘employee’.
Employer payment summary – An employer payment summary (EPS) must be sent to HM Revenue & Customs (HMRC) in order to reclaim amounts related to statutory maternity, paternity, adoption, shared parental and bereavement pay, and to claim the employment allowance.
In addition, the EPS enables construction industry scheme deductions to be reclaimed by limited companies, and apprenticeship levy amounts reported. Where no employees have been paid in a tax month, an EPS should be sent in place of a full payment submission.
An EPS should be submitted by 19th of the following tax month to apply any reduction on what is owed in the full payment submission.
Full payment submission – A full payment submission (FPS) is a statutory return which is to be sent to HMRC to report payments and deductions that have been made to an employee (or pension recipient). A FPS should be sent for everyone who has been paid.
The FPS needs to be sent on or before the pay date of the payee. The pay date in the FPS should be the payee’s usual pay date, even if they are paid earlier or later; for example, if their usual pay day falls on a bank holiday the usual pay date should be reported in the FPS.
Notional payments – Notional payments are those processed within an employee’s pay for the purpose of calculating income tax and/or National Insurance contributions (NICs) but which do not actually increase cash earnings. An example is the value of a non-qualifying childcare voucher the employer provides to an employee which is subject to class 1 NICs via the payroll.
Where employers opt to payroll the benefits of their employees the notional value of an annual benefit is taxed via the payroll according to the number of pay days that an employee has within a tax year. Where employees are paid monthly, for example, the annual taxable notional value of the benefit will be divided by twelve and included in each pay period.
Some extremely burdensome rules can apply to notional payments such as where the actual amount of pay available in a pay period is insufficient to cover the tax and primary class 1 NICs deductible from the employee’s earnings.
Parental leave – Commonly, statutory leave, such as statutory maternity leave, is referred to as a type of parental leave, but this is not technically correct. Parental leave refers to the entitlement of employees to take unpaid time off work to look after a child or to make arrangements for the welfare of a child, up until they reach age 18.
Some employers will pay employees for parental leave, but often they will not; so individuals are advised to check their contracts.
Parental leave should be taken in blocks of a week at a time, and a maximum of four weeks a year per child is allowed. If, however, the individual receives a disability living allowance or personal independence payment for their child, then they can take leave more flexibly, and so could potentially take leave for less than a week.
There are eligibility criteria that must be met. In addition to the child being under the age of 18, the employee: must have been in the employment for over a year; must be named on the child’s birth or adoption certificate or have, or expect to have, parental responsibility; cannot be self-employed or a ‘worker’; and cannot be a foster parent.
To explore the unique language of payroll, the CIPP’s policy team have identified several familiar terms that may leave colleagues from other departments, frankly, baffledPecuniary liability – This is a term that makes payroll professionals shudder. In short, pecuniary liability arises where an employer pays (whether directly or via reimbursement) an employee’s bill or debt such as where the employee has entered into an agreement with a third party (e.g. for provision of broadband service). The payment is of direct monetary value to the employee.
Depending on the circumstances, the payment is taxable and subject to class 1 NICs.
If there are any other terms you think should be covered, please contact the policy team, at [email protected].
Featured in the July/August 2021 issue of Professional in Payroll, Pensions and Reward. Correct at time of publication.