Changes to maternity leave legislation came into effect last month for women whose expected week of childbirth is on or after 5th October 2008. This means that employers must continue to provide contractual benefits for up to 52 weeks, and could result in a significant cost increase for some employers.
Under new regulations employers will be obliged to continue all contractual benefits, with the exception of any benefits treated as cash, such as retail vouchers, for the full period of statutory maternity leave. This includes any benefits selected under a flexible benefit plan or other salary sacrifice arrangement that is contractual - Usually meaning any benefit that is provided through a gross pay adjustment.
Wrapped up with this extension to the maternity rights was the HMRC’s clarification of the existing salary sacrifice arrangements. Employers have effectively been treating salary sacrifice arrangements incorrectly during periods of maternity leave; they have generally deducted salary sacrifice amounts from the higher level of SMP (90% of average weekly earnings) and then stopped the benefits when the SMP drops to the lower level or when pay ceases. HMRC has confirmed these practices are not permitted.
The majority of focus on this has been on childcare vouchers. Employers must therefore continue to provide the level of childcare vouchers that the employee had enjoyed prior to maternity leave. If the employer only provides Statutory Maternity Pay (SMP) then there will be no scope to recover the costs from the employee through a salary sacrifice arrangement. In effect the whole cost of childcare vouchers must be borne by the employer. If enhanced company maternity pay is provided, then this can be used for salary sacrifice arrangements so long as pay is not reduced to below SMP.So, if an employee has a salary sacrifice arrangement for the maximum £243 per month in childcare vouchers and then commences maternity leave based on SMP only, her employer will have to fund the full cost of the vouchers (an annual cost of £2,916).
It appears as though pension benefits need only be continued while the employee is in receipt of any pay – which for most employees will mean 39 weeks. However there is some debate over whether EU law actually this also to extend to 52 weeks. Most employers are complying with the 39 week rule and are awaiting further clarification.
The first action to take is to work out the likely cost exposure based on current maternity leavers. If the potential costs are unacceptably high then the ultimate sanction is to withdraw benefits such as childcare vouchers. However, this would be a blow to many employees as they would lose the valuable tax break on their childcare costs. Alternatively the employer can help to control their costs exposure, for example by:
• Limiting the ability of employees to increase these benefits at the point of going on maternity leave,
• Introducing a maximum cap on the amount of salary that can be sacrificed,
• Reviewing maternity pay definition to ensure that any enhanced maternity pay is on earnings after any salary sacrifice adjustments,
• Changing the structure of flexible benefit plans so that certain benefits with only modest tax advantages, such as dental insurance and others taxed as benefits in kind are treated as net pay deductions rather than gross. This has an effect of making the benefits non-contractual and therefore outside the scope of regulations.
For the time being most employers are ensuring they are compliant and adopting a ‘wait and see’ approach to see what the true financial impact will be.
Tuesday, 11 November 2008
Wednesday, 5 November 2008
Be Aware of the New P45 Regulations
Employers (or rather, PAYE schemes) will shortly be receiving a letter from HM Revenue & Customs reminding them of their obligations to e-file for both tax year end submissions of P14’s & P35’s, and new obligations for those with 50 or more employees to in-year e-file their P45’s, or else be subject to penalties and fines on the scale starting at £100 through to £3,000 per quarter based on staff numbers.
As part of the change, one of the most visible is the public view of the P45
‘Details of employee leaving work’. Although minor tweaks have been made to the P45 over the years, its format has generally remained recognisable, A document that is passed from one employer to the next.
The main reason for change is additional information required by revised regulations, and the HMRC quest for better citizen identification. HMRC records have not been overly accurate in the past for many reasons.
With onset e-filing mandation, this all changes. The central HMRC guidance on form completion of the P45 & P46 must be applied correctly by employers, and regulations have been passed into law to ensure more accurate data is provided. Employers must additionally obtain the employee’s birth date, gender and the detail that some employers are not aware of is the requirement to report the employee’s address, not the employers address or ‘not known’. Some of these regulation changes are already in force, although many HR and payroll departments may not be aware.
The National insurance number (NINO) is highly desirable for individuals who have one, but therein lies the problem: not everyone has a NINO, for various reasons, or they have not been issued one yet. The NINO is not proof of entitlement to work in the UK; official documents outlined by the Home Office and in regulations detail what information employers need to see and record to prove an employee’s entitlement to work in the UK. A minority of workers who claim to have a valid NINO actually don’t and have some form of identification that either detail someone else’s number or is completely made up.
A change that may fox some is the introduction of the new format in a laser print online version. The standard pre-printed form from HMRC will have coloured shading, but these new online formats do not. They are allowed to be used by employers that e-file the leaver P45 with HMRC, either via the internet or by Electronic Data Interchange as an option.
The new format forms were available for use from October 2008, so employers may increasingly see the new format forms as they come into use over the next few months. The old format forms will officially be withdrawn from 6th
April 2009, when all employers should be using new format forms. Employers may receive an old format form after, but they should certainly accept all genuine-looking
P45s. Some will be from prior tax years, when the form was absolutely correct to use; some may be from new employers that for some reason are using an old supply of forms and may not have caught up the new requirements.
Qtac's payroll software will support the new format of P45.
As part of the change, one of the most visible is the public view of the P45
‘Details of employee leaving work’. Although minor tweaks have been made to the P45 over the years, its format has generally remained recognisable, A document that is passed from one employer to the next.
The main reason for change is additional information required by revised regulations, and the HMRC quest for better citizen identification. HMRC records have not been overly accurate in the past for many reasons.
With onset e-filing mandation, this all changes. The central HMRC guidance on form completion of the P45 & P46 must be applied correctly by employers, and regulations have been passed into law to ensure more accurate data is provided. Employers must additionally obtain the employee’s birth date, gender and the detail that some employers are not aware of is the requirement to report the employee’s address, not the employers address or ‘not known’. Some of these regulation changes are already in force, although many HR and payroll departments may not be aware.
The National insurance number (NINO) is highly desirable for individuals who have one, but therein lies the problem: not everyone has a NINO, for various reasons, or they have not been issued one yet. The NINO is not proof of entitlement to work in the UK; official documents outlined by the Home Office and in regulations detail what information employers need to see and record to prove an employee’s entitlement to work in the UK. A minority of workers who claim to have a valid NINO actually don’t and have some form of identification that either detail someone else’s number or is completely made up.
A change that may fox some is the introduction of the new format in a laser print online version. The standard pre-printed form from HMRC will have coloured shading, but these new online formats do not. They are allowed to be used by employers that e-file the leaver P45 with HMRC, either via the internet or by Electronic Data Interchange as an option.
The new format forms were available for use from October 2008, so employers may increasingly see the new format forms as they come into use over the next few months. The old format forms will officially be withdrawn from 6th
April 2009, when all employers should be using new format forms. Employers may receive an old format form after, but they should certainly accept all genuine-looking
P45s. Some will be from prior tax years, when the form was absolutely correct to use; some may be from new employers that for some reason are using an old supply of forms and may not have caught up the new requirements.
Qtac's payroll software will support the new format of P45.
Tuesday, 4 November 2008
The National Minimum Wage - Tips, Gratuities and Service Charges
The National Minimum Wage was first introduced on April 1st, 1999 and almost everyone who works in the UK is legally entitled to be paid it, even if an employer asks a worker to sign an employment contract at a lower rate of pay.
From October 1st of this year the minimum wage for workers aged 22 and over rose by 3.8% from £5.52 to £5.73. For 18-21 year olds the rate rose to £4.77 whilst 16-17 year olds increased to £3.53 up from £3.40. But worryingly a study by Bibby Financial Services found that approximately 31% of UK small business owners and managers were ‘not fully aware’ of the October changes, while 44% of smaller businesses, those with four or fewer employees, were ‘completely unaware’ of the increase.
It is a surprising statistic that there is still so much uncertainty among small businesses about national minimum wage legislation, particularly when the government is enforcing tougher penalties for non-compliance. Last year, a children’s nursery owner became the first person to be prosecuted by HM Revenue & Customs for breaking minimum wage laws. Under the new legislation firms can be fined up to £5000 or face criminal prosecution.
Business Secretary John Hutton said: "The national minimum wage remains one of the most important rights introduced by the government in the last decade. Before it was introduced, some workers could expect to be paid as little as 35p an hour, our legislation has ensured that can no longer happen.”
The National Minimum Wage Act 1998 and the National Minimum Wage Regulations 1999 (‘the Regulations’) state that ‘all money paid by the employer to the worker’ should be counted towards the NMW and that excluded from this is ‘any money payment made by the employer to the worker representing amounts paid by customers by way of a service charge, tip, gratuity or cover charge that is not paid through payroll’. Employers should be able to produce single sheet documents proving they are compliant with NMW legislation.
John Hutton also revealed proposals for making tipping practices fairer and emphasised the importance of improving awareness. He called on employers to clarify how tips were distributed so that customers knew where their money was going.
Waiters and waitresses across the country have been hungry for the tips loophole to be closed and the changes will end the practice of employers using gratuities and service charges processed through payroll to top up staff wages to meet the NMW.
A Fair Tips logo will be introduced into bars and restaurants across the UK – showing that all staff receives at least the NMW and all tips.
A consultation on implementing the government's recommendations to prevent tips counting towards the NMW will be launched this autumn and will be followed by guidance for both workers and employers to ensure a smooth transition when the regulations are changed, which is anticipated to be 2009.
Employers can call the Minimum Wage helpline on 0845 6000 678 for further assistance concerning national minimum wage legislation.
From October 1st of this year the minimum wage for workers aged 22 and over rose by 3.8% from £5.52 to £5.73. For 18-21 year olds the rate rose to £4.77 whilst 16-17 year olds increased to £3.53 up from £3.40. But worryingly a study by Bibby Financial Services found that approximately 31% of UK small business owners and managers were ‘not fully aware’ of the October changes, while 44% of smaller businesses, those with four or fewer employees, were ‘completely unaware’ of the increase.
It is a surprising statistic that there is still so much uncertainty among small businesses about national minimum wage legislation, particularly when the government is enforcing tougher penalties for non-compliance. Last year, a children’s nursery owner became the first person to be prosecuted by HM Revenue & Customs for breaking minimum wage laws. Under the new legislation firms can be fined up to £5000 or face criminal prosecution.
Business Secretary John Hutton said: "The national minimum wage remains one of the most important rights introduced by the government in the last decade. Before it was introduced, some workers could expect to be paid as little as 35p an hour, our legislation has ensured that can no longer happen.”
The National Minimum Wage Act 1998 and the National Minimum Wage Regulations 1999 (‘the Regulations’) state that ‘all money paid by the employer to the worker’ should be counted towards the NMW and that excluded from this is ‘any money payment made by the employer to the worker representing amounts paid by customers by way of a service charge, tip, gratuity or cover charge that is not paid through payroll’. Employers should be able to produce single sheet documents proving they are compliant with NMW legislation.
John Hutton also revealed proposals for making tipping practices fairer and emphasised the importance of improving awareness. He called on employers to clarify how tips were distributed so that customers knew where their money was going.
Waiters and waitresses across the country have been hungry for the tips loophole to be closed and the changes will end the practice of employers using gratuities and service charges processed through payroll to top up staff wages to meet the NMW.
A Fair Tips logo will be introduced into bars and restaurants across the UK – showing that all staff receives at least the NMW and all tips.
A consultation on implementing the government's recommendations to prevent tips counting towards the NMW will be launched this autumn and will be followed by guidance for both workers and employers to ensure a smooth transition when the regulations are changed, which is anticipated to be 2009.
Employers can call the Minimum Wage helpline on 0845 6000 678 for further assistance concerning national minimum wage legislation.
Subscribe to:
Posts (Atom)
