By now, you should be aware of new government legislation that means all employers to provide an itemised payslip. This took effect from 6 April 2019.
What does the legislation require, and when does it apply?
What is an itemised payslip?
Essentially, an itemised payslip provides a breakdown of the worker’s pay, detailing and explaining any deductions that have been made.
Why the need for new legislation?
An overhaul of the information workers receive on their payslip follows recommendations made in the Taylor review of modern working practices.
The new legislation was also prompted by a report from the Low Pay Commission which called for employers to make payslips clearer so that it is obvious to staff which hours they are being paid for.
Ultimately, itemising payslips is intended to improve transparency around pay – it should make it easier for workers to understand the figure they have been paid, ensure they have been paid correctly, and be able to challenge their employers if they feel they have been underpaid.
What do employers need to know about UK Payslip Law 2018/2019?
In essence, following the introduction of this legislation, you will required by law to:
A) Provide itemised payslips to all workers – including permanent, casual and zero hours staff
At present, the statutory right to receive an itemised payslip only applies to employees, a subcategory of workers. However, from 6 April 2019, this right will extend to all workers and can be provided in either physical or electronic format.
B) Include hours on payslips (in cases where the worker’s pay varies by the amount of time they have worked)
From April 2019, workers whose pay varies depending on the number of hours they have worked will have the right to receive additional information on their payslip detailing the number of hours they have been paid for and how their pay has been calculated.
For workers who receive a fixed salary each month, payslips will not need to display the worker’s hours as their pay does not vary based on the amount of time they have worked.
Employers will also not need to include an hourly figure to reflect unpaid leave or statutory sick pay. However, if they work occasional overtime paid at an hourly rate, this would need to be shown.
Hours can be shown as the total number of hours worked – making clear what period they were worked in – or broken down further into different types of work or different rates of pay. Don’t forget, if you need advice, Ellis Whittam’s HR Specialists will be able to keep you compliant.
If you’re unsure whether or not you need to include a worker’s hours on their payslip, the key question is whether their pay varies based on the amount of time they have worked.
If the answer is yes, you will need to show the hours they have worked on their payslip.
For example, you will need to provide itemised pay statements for workers who are:
This refers to those who are occasionally required to stay later or work Saturdays in busy periods, for which they are paid additional hourly overtime.
In this case… for pay periods in which the worker has done overtime, their payslip does not need to show the basic hours for which they are paid a salary – as this does not vary based on the hours worked – but does need to include any additional (variable) hours.
You will not need to provide itemised pay statements for workers who are:
This refers to those who are contracted to work a set number of hours a week and only work these hours.
In this case… as the worker’s pay doesn’t vary by the number of hours worked, you would not be required to outline the hours worked on their payslip.
What are the consequences for Employers who don’t comply?
It is important not to be complacent about the new legislation or leave it too late to make changes, especially if you have a lot of workers on your books.
If you fail to amend your payslip format once the new legislation comes into force, and a worker believes they haven’t received a payslip, or that the payslip they have received doesn’t contain the required information, they may bring a claim before an Employment Tribunal. If this happens, you could be ordered to repay any undisclosed deductions made in the 13 weeks prior to the claim being brought, even if you were entitled to make such deductions.
In other words, time spent updating payroll processes now could save a lot of time and money later down the line.
With just over two months left to review your existing wage procedures, now is the time for employers to ensure that their HR teams fully understand the changes and how to implement them.
If you need additional support throughout this period, call 0345 226 8393 to speak to one of our dedicated Employment Law Advisers.