New itemised payslip legislation: A guide for employers

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Article by Ellis Whittam

By now, you should be aware of new government legislation that will require all employers to provide an itemised payslip from 6 April 2019.

Employers now have just over two months to prepare for the changes – but 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:

  1. 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.

  1. 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.

Confused?

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 salaried but work occasional overtime

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.

  • Are paid by the hour

This refers to those who are paid weekly, depending on how many hours they have worked that week.

In this case… the number of hours worked must be shown on their payslip as their pay will vary on this basis.

  • Are paid by the hour with additional pay for unsociable hours

This applies to those who are required to work bank holidays, for which they are paid at 1.5 times their usual hourly rate.

In this case… all hours worked must be shown on the worker’s payslip as their pay will vary on this basis. For transparency, you may wish to show the hours worked during a bank holiday separately to their regular hours to reflect the different rate of pay, but a single aggregate figure would suffice.

  • Are paid a daily rate

This refers to those who are paid the same amount for each day they work, regardless of how many hours they work in that day.

In this case… as this worker’s pay varies depending on the amount of time worked (even though this depends on the number of days rather than number of hours), their payslip will need to detail the number of hours they have worked.

  • Are paid by the hour and receiving statutory sick pay

This refers to those who are paid monthly but have been unable to work for two weeks (or 10 working days) due to illness, receiving statutory sick pay for this period which is lower than their usual hourly rate.

In this case… regardless of their time off, as the worker is paid according to hours worked, the hours they did work that month will need to be included on their payslip.

On the other hand, you will not need to provide itemised pay statements for workers who:

  • Are salaried but do not work overtime

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.

  • Are term-time workers

This includes teachers who are not required to work during school holidays and are paid in monthly in equal instalments, whether it is term time or not.

In this case… as this worker is paid in equal instalments, and their pay does not vary depending on the amount of time worked, their payslip does not need to include the number of hours they have worked.

  • Are salaried workers and take unpaid leave

This refers to those who are paid an annual salary in equal monthly instalments who choose to take unpaid leave.

In this case… there is no requirement for the employer to show hours worked on the person’s payslip as their pay does not vary depending on the amount of time worked, but rather because of a departure from their normal working and pay arrangements.

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 Ellis Whittam to speak to one of their dedicated Employment Law Advisers.

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