National Minimum Wage – don’t fall foul of common errors

National Minimum Wage – don’t fall foul of common errors

National Minimum Wage – don’t fall foul of common errors

National Minimum Wage (NMW) regulations are complex and not intuitive.

Errors in the administration of the rules can be expensive. They can also cause damage to the reputation of your business as HMRC publicly names and shames businesses in default.

Particular Points to be aware of:

  • Not paying for all working hours – Travel time from work to a job is part of the business day, so must be counted when calculating the NMW, and travel from home to work is not counted. If the worker is required to be at work early to set up, or attend a meeting or training, then this is part of the working day.
  • Deduction or payment for rent – A worker can pay rent to the employer. If the rent is greater than the “accommodation allowance” the excess is included when the NMW calculation is made.
  • Deductions from wages – Employers can legally make deductions for items such as uniforms. However, the employee must still receive the NMW after the deduction has been made.
  • Deductions for Christmas Party – In more normal times, a deduction for the costs of the Christmas Party from the wages of the worker must not cause the income to reduce below the NMW
  • Don’t include tips – Tips do not count towards the calculation of the NMW.
  • Missing Birthdays – The NMW rates are based on the age of the worker. The employer must ensure that the correct hourly rate is paid to the worker.

To find the current National Minimum Wage and National Living Wage rates, head to: https://www.gov.uk/national-minimum-wage-rates 

If you have any questions about minimum wage rates and would like to discuss the subject further you can call us on 01243 782 423 or head to our contact page and they will be in touch!

Off-payroll working (IR35) from 6 April 2021 – It’s not going away!

Off-payroll working (IR35) from 6 April 2021 – It’s not going away!

Off-payroll working (IR35) from 6 April 2021 – It’s not going away!

Changes to off-payroll working (IR35) were due to be introduced in 2020, but were delayed by 12 months. It now looks as though it’s not going away, and will be implemented from 6 April 2021. It’s been successful in the public sector and so is now being implemented in the private sector.

The reform is designed to ensure individuals working like employees but through their own limited company (‘personal service company’ or ‘PSC’), or other intermediary, pay broadly the same Income Tax and National Insurance contributions (NICs) as individuals who are directly employed. This means that the way many contractors pay tax will change for services provided on or after 6 April 2021.

HMRC will focus on ensuring compliance with the new rules, rather than investigating past arrangements

If you contract for a medium or large-sized non-public sector organisation from 6 April 2021, your client will be responsible for deciding your employment status for tax for the services you provide them. They should provide you with a ‘Status Determination Statement’ if the rules apply, setting out and explaining their decision.

If your client determines that your contract is inside the off-payroll working rules and so you are a deemed employee for tax purposes, then your client or the agency who pays your fees, will also be responsible for deducting Income Tax and NICs before they pay you.

You will still need to submit a tax return, but relief is available on the tax already paid.

If you contract for a small non-public sector organisation, your limited company or other intermediary will remain responsible for determining whether your contract is inside the off-payroll working rules, and accounting for and paying the relevant Income Tax and NICs.

These changes do not affect whether you can work through your own limited company. This will still be possible after 6 April 2021, however the way the Income Tax and NICs are calculated and paid may change for some contractors, or some clients may change the way they wish to engage you and other contractors.

There are also cash flow implications to be considered, as Income Tax and NICs will be deducted where it previously hasn’t.

Many medium or large-sized non-public sector organisations are taking a precautionary approach, and have determined that all contractors are caught by IR35 and the new regulations, therefore requiring PAYE to be deducted from any future payments.

Further details are available on the GOV.UK website: https://www.gov.uk/topic/business-tax/ir35

If you have any questions or would like to speak to our team about your situation, then please get in touch! You can call on 01243 782 423 or head to our contact form!

We will also be holding a webinar on the subject in due course, which will be available on our YouTube Channel – Subscribe here: Lewis Brownlee YouTube channel

 

The Job Support Scheme – Starting from 1 November

The Job Support Scheme – Starting from 1 November

The Government’s new Job Support Scheme (JSS) comes in to effect from 1 November 2020 and will run for 6 months until 30 April 2021.  It has been adapted to provide different types of support to businesses, meaning they can get the assistance according to their situation.

The government will review the terms of the scheme in January. Employers will be able to claim in arrears from 8 December 2020, with payments made after the claim has been approved. Neither the employer nor the employee needs to have benefitted from the Coronavirus Job Retention Scheme to be eligible for the Job Support Scheme.

From 8 December, employers will be able to claim salary for pay periods ending and paid in November. Subsequent months will follow a similar pattern, with the final claims for April being made from early May.

Further guidance on the steps that employers need to take to calculate and make a claim to the Job Support Scheme will be published by the end of October

How will the JSS scheme work and who is eligible?

An employer can claim the JSS Open and JSS Closed grant at the same time for different employees, however, an employer cannot claim for a single employee under both schemes at the same time.

Employers will be able to access the Job Support Scheme if they have enrolled for PAYE online and they have a UK, Channel Island or Isle of Man bank account.

Additional eligibility criteria will apply depending on whether the employer is claiming a JSS Open grant or JSS Closed grant. Eligible employers will be able to claim the Job Support Scheme grant for employees who were on their PAYE payroll between 6 April 2019 and 23 September 2020.

The scheme has been divided into two categories:

  • JSS open – Businesses that are open but facing decreased demand
  • JSS closed – Businesses that are legally required to close their premises as a result of coronavirus restrictions set by one or more of the four governments of the UK

Employers facing decreased demand (JSS Open)

For businesses facing reduced demand the JSS Open scheme will give employers the option of keeping their employees in a job on shorter hours rather than making them redundant.

The government has announced that it will increase the scale of support available to employers through JSS Open above what was initially announced, in order to protect more jobs.

The employee will need to work a minimum of 20% of their usual hours and the employer will continue to pay them as normal for the hours worked. Alongside this, the employee will receive 66.67% of their normal pay for the hours not worked – this will be made up of contributions from the employer and from the government. The employer will pay 5% of reference salary for the hours not worked, up to a maximum of £125 per month, with the discretion to pay more than this if they wish. The government will pay the remainder of 61.67%, of reference salary for the hours not worked, up to a maximum of £1,541.75 per month. This will ensure employees continue to receive at least 73% of their normal wages, where they earn £3,125 a month or less.

Employers who are legally required to close their premises (JSS Closed)

Employers who have been legally required to close their premises as a direct result of coronavirus restrictions set by one or more of the four governments of the UK are eligible for JSS Closed.

This includes premises restricted to delivery or collection only services from their premises and those restricted to provision of food and/or drink outdoors.

Businesses premises required to close by local public health authorities as a result of specific workplace outbreaks are not eligible for this scheme.

Employers are only eligible to claim for periods during which the relevant coronavirus restrictions are in place. Employers will not be able to claim JSS Closed to cover periods after restrictions have lifted and the business premises are legally allowed to reopen. They may then be able to claim JSS Open if they are eligible.

Each employee who cannot work due to these restrictions will receive two thirds of their normal pay, paid by their employer and fully funded by the government, to a maximum of £2,083.33 per month, although their employer has discretion to pay more than this if they wish.

Eligible employers will be able to claim the JSS Closed grant for employees:

  • whose primary workplace is at the premises that have been legally required to close as a direct result of coronavirus restrictions set by one or more of the four governments of the UK
  • that the employer has instructed to and who cease work for a minimum period of at least 7 consecutive calendar days

See: https://www.gov.uk/government/publications/the-job-support-scheme?utm_source=5fc2e41c-06b0-471e-bd4f-f80d60940299&utm_medium=email&utm_campaign=govuk-notifications&utm_content=immediate

If you have any questions, or would just like to speak to one of our team you can call us on 01243 782 423 or head to our contact page and they will be in touch!

National Living Wage – Have you got it right?

National Living Wage – Have you got it right?

National Living Wage – Have you got it right?

The minimum hourly rate is published annually by the government and takes effect from 1 April each year.  The amount an individual is paid is determined by both their age and their type of employment. For most people, that is as far as the thought process goes.

As of 1 April 2020, the hourly pay scales are shown below:

To be clear from the outset, the above pay scales are the minimum hourly wage payable to all employees and workers, including part-time, flexible, agency workers and those on zero hours contracts. The government does, however, now refer to the minimum wage for those twenty-five and over as the ‘National Living Wage’. For the other bands, the term ‘Minimum Wage’ still applies.

As an aside, the actual ‘Living Wage’ is something completely different to the government’s coined term ‘National Living Wage’. The living wage is calculated independently and is used as a benchmark to determine what the hourly rate would need to be to improve living standards. It is currently £9.30, so the national living wage has some way to go – somewhat confusing really. 

Now that we have established the hourly rate payable and to whom it applies, we can now address some areas which may cause confusion and possible compliance failures.

 

How you determine minimum wage 

In assessing whether an employee has been paid at least minimum wage, it is the gross money payments that are considered against the hours worked. Benefits in-kind should be stripped out as a noncash payment, even for salary sacrifice arrangements. Therefore, if an employee chooses to receive a benefit in-lieu of cash, this cannot reduce the revised hourly rate below that stated hourly minimum, discussed above.

 

Travelling Time

Time spent in connection with travelling to and from your place of work is usually unpaid time as it is unlikely to form part of your contractual working hours. Time spent travelling in the course of your employment is working time (‘time work’) and therefore the minimum rates of pay apply. If, for example, you are required to travel to different sites to perform work duties, time spent travelling between sites is payable (no reduced rates or alike should apply). Travel time can become a grey area though, and time spent on ordinary commuting does not have to be taken into account.

The national minimum wage regulations 2015 (Reg. 34) states: hours treated as hours when the worker would “otherwise be working” include— hours when the worker is travelling for the purpose of carrying out assignments to be carried out at different places between which the worker is obliged to travel, and which are not places occupied by the employer. Again, the key here is what the contract states as to when the employee is deemed to start work and the place to be attended.

If you are not paying employees for travel time (or at a reduced rate), professional advice should be sought to confirm everything is in order.

 

Employee deductions

There will be occasions whereby the employer will levy deductions against the employee’s pay. In making such deductions there will be the potential of reducing the employee’s pay below the national minimum wage when reviewing the average hourly rate. Where deductions are mandated by the employer for the proper performance of work (say safety clothing and equipment) this will reduce national minimum wage pay. Where a deduction is applied to an employee’s wage for misconduct,  repayment of wage advances and overpayments, these do not reduce national minimum wage pay.

The key to ensuring the correct treatment of the above-mentioned payments is to understand the nature of the transaction and to differentiate between payments a worker makes to the employer and deductions an employer makes from the worker.

 

Casual Workers

A casual worker is someone not part of the business’ permanent workforce,  but one who provides their services on an irregular basis to meet the business’ needs. This type of worker will, on occasion, be seen as young, inexperienced or in transient situation. It may also be the case that the business may offer work on a piece work basis (i.e. a fixed amount agreed upfront for a certain job/task to be completed). If the working relationship is casual in nature and there is no formal written contract, the minimum wage rules still apply. As to whether the worker is an employee or self-employed person is a matter for another article – but worth consideration nonetheless.

 

Closing thoughts

The reason for raising attention to this subject matter is we are seeing more PAYE compliance checks that are specifically focusing on this area. Employers who are found to be underpaying staff can be subjected to some fairly onerous penalties, and HMRC compliance officers may carry out inspections of the employer at any time and without warning. For this reason we would urge you to make sure you have got it right and are not unknowingly underpaying anyone. 

If you have any further questions on the subject you can call us on 01243 782 423 or complete our contact form and we’ll be in touch!

Government delays implementation of IR35 off-payroll rules for private sector businesses

Government delays implementation of IR35 off-payroll rules for private sector businesses

Government delays implementation of IR35 off-payroll rules for private sector businesses

There was good news for the contractor industry yesterday when the government announced they would delay the controversial implementation of the private sector IR35 off-payroll tax by 12 months.

What became apparent in recent weeks was that a lot of companies were deciding to take a precautionary approach and determined all contractors were caught by IR35 and the new regulations would therefore require PAYE to be deducted from any future payments.

This blanket precautionary approach would have tipped the balance too far in the opposite direction, leading to NIC being charged when there was no need and in all probability would have caused chaos to the industry irrespective of Covid-19.

Many also discovered certain shortcomings with HMRC’s employment status tool. The options for answers to questions were somewhat limited, and as such if you had not to date had to supply and pay for an alternative worker, or fund expenditure or correct errors at your own cost, then HMRC’s tool was unlikely to find in your favour.

The 12 month deferment gives contractors a chance to learn from the experience, to review working arrangements and potentially seek viable solutions that could help to avoid an inside IR35 status determination in 12 months time.

Keep following our website and Social Media updates for any further information or if you have any questions get in touch and a member of the team will be able to help you!

 

Maternity Pay and Paternity Pay

Maternity Pay and Paternity Pay

Maternity Pay and Paternity Pay

Statutory Maternity Pay

When you wish to take time off to have a baby and are employed, you should get either Maternity Leave or/and Maternity Pay.  Please tell your Employer at least 15 weeks before your baby is due.

While you are on Maternity Leave, your employment rights are protected. You will, therefore, receive your full holiday allowance for the holiday year while you are off and receive any pay rises during the period.

Statutory Maternity Leave lasts up to 52 weeks and consists of two types:

  • OML – Ordinary Maternity Leave is the first 26 weeks
  • AML – Additional Maternity Leave is the last 26 weeks

You can take as much/little time as you like but you must take the first two weeks after the birth (4 weeks if you work in a factory).  The earliest you can begin your Maternity Leave is 11 weeks before the expected week the baby is due.

If your baby is born early your Maternity Leave will start straight away. If you are off sick with a pregnancy-related illness four weeks before the baby is due your Maternity Leave will also start.  This is the same for Maternity Pay.

To receive Statutory Maternity Pay you must qualify for the following:

  • Earnings of at least £118 per week
  • Have received a form MATB1 from your GP/Midwife as proof of pregnancy
  • You need to have been employed by your employer for at least 26 weeks before the 15th week before the baby is due. (the 15th week is known as the qualifying week)

Statutory Maternity Pay is paid to any eligible employee for up to 39 weeks:

  • For the first six weeks of your Maternity Leave, you will receive 90% of your average weekly earnings (gross pay).
  • For the remaining 33 weeks, you will receive (2019-20) £148.68 per week, or 90% of your average weekly earnings, whichever is lower.  It will be paid whenever you receive your normal salary i.e. weekly or monthly and will have tax and national insurance deducted if applicable.
  • If your baby is born early, or dies after being born, or is stillborn after the start of the 24th pregnancy week you can still receive Statutory Maternity Leave and Pay.

If you are unsure if you are entitled to Statutory Maternity Leave or Statutory Maternity Pay, HMRC has a calculator which may help.  Please go to the link: – https://www.gov.uk/pay-leave-for-parents. Some companies have a Maternity Scheme where they offer more than the statutory amount of leave and pay.

Employees can work up to 10 days during their maternity/adoption/additional paternity leave. These days are known as KIT days (keeping in touch days).  These are optional and should be agreed with the Employer.  Your leave isn’t affected if you have KIT days.

If you want to return to work earlier than your original date agreed with your Employer, you must give the Employer at least eight weeks’ notice.

Statutory Paternity Pay

When your partner has a baby, or you are adopting a baby and are employed, you may get Paternity Pay and/or Paternity Leave. This is 1 or 2 weeks Paternity Leave, Paternity Pay and possibly Shared Parental Leave and Pay.

Same rules apply as for Statutory Maternity with regards to Employment Rights. You are entitled to time off for two antenatal appointments and if adopting, two adoption appointments after being matched with a child.

Your Paternity Leave should be taken in one go and cannot start until the baby is born.  It must be taken within 56 days of the baby’s birth, but you do not need a precise date. It could be for example the birth date. A week is classed as your ‘usual’ working days.

The statutory rate of Paternity Pay is £148.68 (2019/20) or 90% of your average weekly earnings (whichever is the lowest).  This is paid with your ‘usual’ salary.

The same Eligibility rules apply to Paternity Leave as with Maternity Leave: –

  • You must be an employee and have worked for at least 26 weeks before the ‘qualifying week’
  • As with Maternity Pay, you must be employed up to the birth date, earn £118 per week (gross)
  • You can still claim Paternity Leave/Pay if your baby is born early or is stillborn from 24 weeks of the pregnancy.

If you are unsure if you are entitled to Statutory Paternity Leave or Statutory Paternity Pay, HMRC has a calculator which may help.  Please go to the link:- https://www.gov.uk/paternity-pay-leave/how-to-claim

Your Employer should ask you to complete the following form for Paternity Pay/Leave: https://www.gov.uk/government/publications/ordinary-statutory-paternity-pay-and-leave-becoming-a-birth-parent-sc3

 The rules and forms are slightly different for adoption: https://www.gov.uk/paternity-pay-leave/adoption