16 October 2017
Employer representatives sitting on the Statutory Payments Consultation Group have been pleading with the various government agencies involved in Statutory
Payments to make clearer what employers have to do to comply with Maternity Rights, especially in light of the extension of rights to non-cash benefits.
On 20th May 2008 Her Majesty’s Revenue & Customs (HMRC) published a comprehensive guide to “Statutory Maternity Pay – Salary Sacrifice and non-cash
benefit" on their website. Now archived, you can locate the contents here. It was a joint effort between HMRC, the Department for Business Enterprise and Regulatory Reform (BERR) and the Department
for Works and Pensions (DWP), along with the assistance from the employer and software representatives of the Statutory Payments Consultation Group.
Following a joint survey undertaken by Payroll Alliance and the Institute of Payroll Professionals on the impacts of the new maternity rights extending benefit in kind entitlement to 52 weeks, it was obvious to the employer representatives and the government that a wide and varied application of salary sacrifice interpretations was being undertaken and there was a misunderstanding regarding non-cash benefit provision (whether salary sacrifice or just plain employee benefits).
Although not described specifically in legislation, salary sacrifice is a legally binding change in the contractual arrangements between employee and employer.
Generally, the employment contract is amended to reduce the employee’s entitlement to cash pay on the basis that the employee receives an alternate
non-cash benefit instead. If no contractual change has actually been made, then the salary sacrifice fails and the benefit in kind is treated as cash
pay. Equally, if the employee (or employer) can opt in and out of the arrangement at will, then this fails under a precedent set in the Heaton v Bell
case where a benefit could be given up at any time to receive increased pay – as a consequence it was declared that the benefit was a chargeable emolument
and therefore subject to PAYE and NICs.
The reduction in cash pay through a successful salary sacrifice results in reduced PAYE and NICs. Then the employee and employer are left with the tax and NICs position on the giving of a free non-cash benefit in kind. Often, the benefit may be free of both tax and NICs, and many others are free of NICs.
Although salary sacrifice may be represented in any way, shape or form on the payslip, it is the contractual arrangement between the employee and employer that positions the tax and NIC implications.
Q: Are employer pensions cash benefits or non-cash benefits?
A: HMRC, DWP and BERR concur that employer contributions are not non-cash benefits in kind.
Q: If employer pension contributions are treated as cash, does that mean they are not required to continue during maternity leave?
A: No, pensions fall under alternate legislation, so employees are entitled to continued pension rights. They must be continued for 26 weeks in all cases
(under Maternity and Parental Leave Regulations) and extended for any additional weeks where the employee is in receipt of any maternity pay (Social
Security Act 1989). They are employer pension contributions!
Q: If an employer normally contributed 5% and the employee 3% into a money purchase pension scheme and the employer promotes a salary sacrifice arrangement to reduce NICs liabilities where the 3% employee contributions are converted to an additional 3% employer contribution (making 8% in total), what employer percentage must be applied during maternity leave?
A: As a salary sacrifice arrangement is a legally binding contractual change, the employer is required to continue to contribute 8% as if the employee were in receipt of full pay.
Q: Can the employer revert back to a 5% contribution and the employee only contributing 3% of their maternity pay?
A: No, this would breach discrimination law. The employer must continue paying 8% (as they would if the employee were not on maternity leave). As the amount cannot now be recovered from the employee, who funds this additional contribution amount? The answer is simple, the employer must fund the contractual employer pension contribution (because that is what it is).
Q: If an employer withdraws a benefit due to no non-maternity pay being available to operate the sacrifice reduction during maternity leave, does this make the prior salary sacrifice ineffective?
A: I would suggest no, but the employer that withdraws such benefits is breaching discrimination law and the employee entitled to make a legal claim which could prove extremely expensive for the employer.
The guidance is essential reading and I would suggest 100% accurate. Does it outline all elements of non-cash benefits? No, but then its not intended to
– but it does lay out the employers legal obligations.
Employers need not continue to make employers’ occupational pension contributions during unpaid Additional Maternity Leave (AML), or to count unpaid AML as reckonable service for the purposes of occupational pension contributions. (However, the law already requires employers to continue to provide occupational pension contributions during any period of paid maternity absence and this requirement is unaffected by the changes described here. The law also requires that employers continue pension contributions during Ordinary Maternity Leave (OML), regardless of whether the employee is in receipt of maternity pay.
Provided you’ve done the right research, implementing a new payroll solution will streamline your business and help you save the long run. But put the wrong payroll solution in place, or implement it in the wrong way, and you could end up having a bumpy road as you learn new systems which seem to delay your payroll rather than make it more efficient.18 April 2017
Year on year, Payroll accounts for an ever-increasing contribution to the UK economy through Tax and National Insurance. This week, in partnership with CIPP, we're celebrating the impact of payroll on business.
So, in celebration of National Payroll week, we spoke with Lisa Brew, nominee for CIPP’s Payroll Professional of the Year 2017, to gain insight as to what a day in the life of a Payroll Manager entails.
1 September 2017
The year 2016 has been a fairly strange one; the UK voted to leave the European Union, David Cameron resigned, we had our second female prime minister, many ministerial heads shuffled, the pound crashed, stock markets went up at their highest and Lynn Homer of HMRC retired! There is much to do to progress Britain into prosperity for the future...5 January 2017
Minimum pay is governed by employment law, and breach is criminal; HM Revenue & Customs are charged with policing its application based on a number of significant factors and structures. In this blog, our Director of Payment, Benefits & Compliance Strategies, Simon Parsons, discusses critical touch points for compliance and recent payroll error examples regarding this legal requirment.3 July 2017
During Christmas and the associated holiday season, payroll managers experience some annual adjustments and events. Simon Parsons takes us through some of the festive benefits – and the associated tax implications.18 December 2017
600 people attended the Ceridian Conference 2016; find out their biggest challenges in new HR and Payroll legislation.18 April 2016
Misconceptions around payroll outsourcing could be holding back your business. Our clients find that taking the step to outsource pays them back dividends, driving productivity and giving payroll teams the opportunity to focus on strategic rather than tactical initiatives. We understand that payroll outsourcing can be a daunting topic, so we have debunked some of the most common myths to help you make informed choices about your payroll strategy.2 September 2019
Financial wellness is a hot topic across all worker types and generations. Employees are demanding more control, greater flexibility and better access to their finances. How can employers better support their employees in this regard?10 July 2018
Since the introduction of workplace pension via Pension reform automatic enrolments (AE) since October 2012, there has been a slow introduction of legal requirements placed on UK PLC to provide workplace pension meeting legal minimum requirement. The early staging date employers have even hit triennial re-enrolment points to re-capture those who have previously opted out.24 October 2017
2016 has been an eventful year, with lots of social and political change occurring around the world. Change, of course, can be a great thing – it can bring new perspective and a fresh outlook, something which also holds true in the context of business and HR. And with the New Year fast approaching, now is an opportune time to start planning.12 December 2016
Payroll is a standard pillar that all businesses need to get right in order to avoid inefficiency and increased costs. Despite this, many organisations are still working with outdated and ineffective payroll systems that eat into valuable HR time, and business profit. So if you’re a payroll or HR professional with a plan to streamline costs and processes in 2017 but don’t know where to begin, here are four key things to help you get the New Year off to a good start...28 November 2016
Part two of our blog, our Commercial Director John Cusack and Business Development Manager Steve Knapman, built upon the information outlined by Mercer in part 1 – and discuss how SD Worx’s analysis tools can provide you with in-depth statistics on the gender pay gap. Read more on some of the useful points that we took away from the webinar...10 July 2017
The gender pay gap has been a hot topic for years, dominating discussion in the media and in boardrooms. Seemingly refusing to close, the gap stood at 9.4% in 2016, down from 17.4% in 1997. While the UK is getting nearer and nearer to gender parity in pay, figures suggest it still has a long way to go...19 June 2017
Globalisation is a word synonymous with the rise of industry. However, recently we may have heard it thrown around a boardroom alongside the other generic buzzwords, and as such something about it becomes disjointed and bereft of purpose. In reality, globalisation is a powerful force – something that should be cultivated and respected in the corporate world.18 December 2017
In this article, Simon Parsons offers updated advice for employers on how to ensure that the New Starter Checklist (formerly P46 form) is submitted correctly.28 August 2017
There have been many publications about the Good Work Plan over the past 18 months and it can be confusing to work through complex, legislative documentation to understand how you stay compliant. While the good work plan covers many topics, this blog aims to take you through one aspect of this, Holiday Pay, and asks the simple question – are you ready for the changes?29 October 2019
This article is intended to give a balanced view of payroll software versus payroll services. In the UK, the markets for payroll software and service co-exist and will continue to do so for the foreseeable future.8 January 2018
Increasingly within global organisations we see that individuals have increasing international activity throughout a business’ empire with differing national fiscal obligations. Impact on employees and compliance with a variety of national fiscal government obligations brings into play significant complexities. Some will be available within Payroll Software or service, whereas others, a little more obscure, may require special handling. For UK Payroll, there are a variety of variants (to the normal) Pay As You Earn (PAYE) obligations.6 November 2017
This week, in partnership with CIPP, we’re celebrating National Payroll Week where we recognise the impact of payroll on business and the contribution it makes to the UK economy - £418 million annually!
To kick off our celebration, we sat down for a payroll-themed Q&A session with Simon Parsons, one of the most influential names in the industry and our Director of Payments, Benefits & Compliance Strategies.
1 September 2017
UK payroll managers have a new year window of 3 months to prepare for the much older UK (and Isle of Man) new tax year start. With the setting of new year resolutions, it is a good time for payroll professionals in the UK to review their preparations on items which are not purely system change, but challenge process and rules within employment.11 December 2017
This article focuses on the P45(1) Leaver, practices currently undertaken by many payroll offices, the potential challenge of in-year filing requirements and also compliance with the relevant regulations.9 October 2017
Effective from 1st January 2019, The Irish Revenue Commissioners (or Revenue) are set to introduce the biggest change to PAYE reporting since 1944, in the form of PAYE Modernisation / Real Time Reporting (RTR).6 November 2017
Paying the living wage isn’t optional for survival, but neither should it be a problem. Lidl were the first supermarket to recognise the benefits of paying the living wage. Their stores may be no frills but their operation is efficient. Lidl’s customers, many deserting the likes of Waitrose and Sainsbury’s for all or some of their purchases, have clearly embraced the shopping experience...19 October 2015
A recent ‘Workplace of the Future’ survey of 250 industry professionals revealed that 88% of CFOs and CHROs expect an increase in payroll technology investment by 2025. Why? The world of work is changing rapidly and to prepare for the workforce of the future, businesses must start adapting, quickly.3 May 2019
In some tax years, the way pay dates fall for weekly based payrolls means that an employer ends up making one more payment than usual to employees at the end of the tax year.
For weekly payroll this is known as a Week 53, for a 27th fortnightly payroll a Week 54, and for a 14th Lunar a Week 56 payment.18 September 2017
The law requires that a payslip is provided to all employees each time they are paid. The exception to this legal requirement means that for the following there is no obligation to provide a payslip, non-employees: contractors, freelancers and workers. There are additional categories where a payslip is not required: police service; merchant seaman; master and crew of share fishing vessel.15 March 2018
We thought 2013 was busy with the introduction of Real Time Information, but looking back it now seems a doddle! 2016 is proving to be one of the most substantial change years ever for payroll, software and service providers and especially payroll managers. Never before have I seen such a wide, heavy plethora of change. Now seems a good time to start the preparations in earnest and put the brain in gear...25 January 2016
As the business world becomes ever more disparate and global, it comes as no surprise that managing payroll across multiple markets is presenting more challenges than ever before. To delve into the issues at hand, our SD Worx Global solution and services team recently conducted pan-European research to gauge a better understanding of the key payroll challenges impacting modern multinationals, as well as the changes that industry professionals want to see in the New Year.9 January 2017
With the result of the UK referendum to leave the European Union and indication by Scotland's first minister to run a further Devolution referendum, Simon Parsons considers the potential implications for the next few years for Scotland and Payroll services...8 August 2016
On 6th February at Hilton Park Lane in London, we joined HR and payroll professionals from across the globe for the SD Worx European Conference 2018. With the "Future of Collaboration: HR leading the way" theme, this one-of-a-kind event played host to industry-leading experts, practitioners and organisations.16 March 2018
News of poor payroll can spread like wildfire. The sign of a good payroll function is often that it takes place quietly in the background. If it goes wrong however, it can have a catastrophic impact on both employees and the business as a whole.26 March 2019
In the 2015 Queens speech, the Government set out to create 3 million new apprenticeships by 2020. As part of the Enterprise Bill, apprenticeships would gain the same legal treatment of degrees. ‘The Richard Review’ brings new standards being developed by ‘trailblazers’ and new funding trialled giving employers greater control over spend on training delivery.11 April 2016
The topic of a managing global payroll systems has been voiced by many thoughts leaders in the industry. In our previous blog, Doug Sawers, Managing Director of SD Worx UK & Ireland went into detail on the matter. This week, we sat down with David Munn, Director of Global Payroll Services, where he shares his views.30 October 2017
With the ever-increasing benefit costs for company cars for both the employee and the employer, and the new rules for Optional Remuneration Arrangements (OpRA), is a company car as cost-effective as it once was?20 December 2017
The gig economy has disrupted the status quo of work with its capability to affect economies around the world and has transformed industries by instant disruption through digital innovation.
Some commentators argue it is a terrifying future; others have a more positive outlook suggesting this disruption unlocks opportunities that must be embraced so society can evolve and improve.12 October 2017
GDPR is set to see the biggest shake-up in the way we handle data since the Data Protection Act of 1998. Over the last few years, the processing and control of data has seen many systematic changes. Updated legal obligations set out in the Regulation such as the ‘lawful basis’ of the processing of data is sure to see more changes to data handling.27 November 2017
Retention of the personal data is ‘lawful basis’ where it is necessary, for compliance with a legal obligation, for the exercise or defence of legal claims. For Payroll and HR reasons, employers must hold and retain personal information about their employees and former employees to meet these legal requirements.4 December 2017
Payroll managers still receive instruction from HR departments and solicitors that a termination payment must be taxed at Basic Rate. Why these continue to be demanded since the rules changed on payment after leaving we do not know.25 September 2017
Senior professionals predict major changes to the workforce by 2025. According to our research The Workforce of the Future, working part-time, freelance or being able to choose hours/days will be favoured over traditional working styles. Employees will expect more support and advice on financial matters, and Payroll and HR will align more closely to provide this. Payroll will become much more influential in attracting and retaining employees. As a result, 78% of professionals say that payroll needs to evolve and innovate, and technology will be key.2 September 2019
With Christmas upon us, payroll managers will be experiencing some annual adjustment planning with the holiday season. In this blog I explore some of the most common scenarios in December's pay cycle.7 December 2015
Technology is the wheel that never stops turning. If Moore’s Law is to be believed, the sheer power of processing units will have doubled within two years – and that means plenty of new pieces of tech that could shake up HR and payroll processes. With that in mind, here are three technological trends that could significantly alter your industry.10 January 2018
A few years ago, what was then Ernst and Young (now EY) reported in its paper Global Payroll: Myth or Reality? that 55% of multinational firms believed that single provider global payroll vendors didn’t exist.2 October 2017
In today's world, "human capital management" seems to be the hot topic of choice. A complete HCM solution covers all the people related processes and data in an organisation, and by its very nature can get pretty full on and complicated to implement, with greater upheaval and cost involved. For that reason, it is not always appropriate for an organisation to consider changing all aspects of their HCM in one fell swoop.6 June 2016
As an employee, sometimes it’s not clear what everything actually means on your payslip. To help educate the nation, we’ve created a list of some of the most common terms that can appear on your payslip, along with an associated description.14 August 2017
Until recently, payroll has not been given high strategic importance and so has never needed to be particularly innovative. The modern, fast-evolving workforce is now driving significant changes to this status quo however, with both managers and employees looking to embrace disruptive technology that helps the business to innovate and transform.1 October 2019
Step back in time five years and you would struggle to move for articles and white papers on big data and analytics. These were the hottest topics in technology and the excitement surrounding them was at its peak. Last year, analyst Gartner dropped its hype cycle for Big Data, confirming in an article, entitled: The Demise of Big Data, Its Lessons and the State of Things to Come” that “we did it to move the big data discussion past hype and into practice”. Certainly when it comes to the HR arena, big data and the analytics tools that can be built on top of it are now in a maturing phase.14 November 2016
‘Disruptive’ technology is technology that replaces old ways of doing things. For example, the smartphone has revolutionised the way we interact with friends,
family, institutions & media. When SD Worx launched online payslips in 1999 this was met with concern around security & access. Fast-forward
to 2018, and no credible provider is without a mobile payslip. In short the smartphone has disrupted the market and most people have moved on from
8 November 2018