If you’re a growing business, you’ll have registered for PAYE and be handing out payslips each month. With more and more people working in the gig economy and working under non-standard contracts, there is a spotlight on this particular area.
Gig economy workers: self-employed, independent contract workers. Instead of a regular wage, workers get paid for the "gigs" they do.
Payslips are a vitally important piece of documentation for your staff. If staff are looking to borrow money such as mortgages, a statement of their gross earnings is proof of income. It is very easy, however, for payslips to be overlooked by employers. But, as employees have a statutory entitlement to an itemised pay slip, it’s crucial that you routinely provide one.
Getting Your Payslips Right
Generally, employers will hand payslips to their staff on or before the day wages are paid. Payslips contain a wealth of information for employees to track. For example:
How much the company is paying them over a set time period
What deductions have been made to their pay (i.e. how much tax was paid)
Payslips can be given to staff as either a paper document, email attachment or via an online system such as a HR portal.
Why are Payslips Important?
Pay has been part of a fairly robust shake-up in legislative terms. It’s gone through changes via the National Minimum Wage and National Living Wage. Many employers have been caught out trying to circumnavigate UK employment law and denying their staff the right to minimum pay. Much has been made of the negative impact of zero or low-hour contracts. Companies have required individuals to be available for work, without meeting their obligations regarding deductions and employee rights.
Who Should Get a Payslip?
In the United Kingdom, payslip law is covered by two separate pieces of legislation, the Payment of Wages Act 1991 and Employment Rights Act 1996. Employers are required to give every employee, whether full or part-time, a document to show their pay. This is referred to in the Employment Rights Act 1996. It doesn't matter whether or not a staff member has joined the company one day prior to payroll being processed, their first payslip may be a part payment but it is still obligatory.
It is imperative that anyone working on behalf of your company is given a payslip in the contractually agreed payroll period. This may be weekly, monthly, quarterly, or even annually in some cases. It applies to workers with:
Zero-Hours Contracts
Full-Time Employees
Part-Time Employees
Casual Staff
Temporary Staff
Seasonal Workers
And many more…
Agency workers get their payslips from their agency.
There are certain people within the workforce who do not require payslips, including self-employed workers or contractors, because they organise their own tax payments and deductions.
What Must be Included on a Payslip?
A payslip needs to include the following:
Gross Pay: the total amount paid to the employee before fixed deductions.
Net Pay: the total amount paid to the employee after variable / fixed deductions
Variable Deductions: the amounts which may vary depending on the amount of money paid to the person. For example, National Insurance, Income Tax, Student Loan Repayments and Pension Schemes.
Wage Breakdown: a breakdown of how the wages will be paid to the worker and whether this is via more than one method (i.e. bank transfer and cash payment).
The payslip commonly includes the time period the pay covers, a national insurance number and the tax code of the employee or worker.
What Happens if a Mistake is Made on a Payslip?
All employers are human, and mistakes may be made. The issue with mistakes on a payslip, however, is that they can have a huge impact on the employee. Make sure you are processing pay with enough time to get payslips to staff before payday so that any errors can be dealt with in time. If your staff believe there is an error on their payslip, they should speak to you as soon as possible. It is important this is dealt with swiftly to avoid grievance issues.
What Happens if Someone Works Different Hours in a Pay Period?
If staff are employed on a shift basis or perhaps their working hours are flexible in line with business needs, hours may vary from one pay period to another. These hours are called variable hours and must appear on a payslip if:
The member of staff worked overtime
The number of hours change in each pay period
The payment rate the employee receives is different for certain working hours (i.e. during Bank Holidays).
There is no right or wrong way to present this information, it can either be shown as a single total or can be itemised. As an employer you can simply choose the best method for you to be able to understand the information.
Payslip Rule Changes
In 2019, changes were made to payslip law to make things clearer for both employers and employees. A payslip must now include:
Time worked
Demonstrate that all pay is appropriate
Show that pay is in accordance with legally set minimum requirements
According to UK law, employers must provide employees with a payslip on or before payday. Paydays will vary from business to business and the actual date your staff receive their salary will vary depending on accounting processes.
As an employer, you can choose whether a payslip is paper or electronic. In line with increased emphasis on corporate social responsibility, some companies are using electronic/online payslips to save on paper and ink. You are not obligated to provide an employee with a paper version of their payslips. It makes sense, however, to accommodate staff where possible. The important information may reference expenses, earnings, bonuses, overtime, and fixed deductions which may need to be passed to stakeholders who do not operate digitally or struggle with digital accessibility.
From time to time it may be possible, as an employer, to make deductions from an employee’s wage. Such instances include:
PAYE tax (according to the employee’s tax code), student loan repayments and National Insurance
Deductions that have been accounted for in the contract of employment or job description
Overpayment of Wages, such as wages that have been overpaid in error.
Repayments deemed a requisite of a court order resulting from damages and breakages where employers have suffered a loss.
If you need assistance understanding what is required when it comes to payslips, Croner can help. Our award-winning service is used by over 11,000 UK businesses.
Expert support
If you need support with employee productivity or conduct, speak to a Croner expert today on 0844 5618133 and quote code CHC22 along with quote number 911059.
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