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    Tag: Payroll compliance

    Employment Rights Bill roadmap: payroll changes from April 2026

    Posted on by Georgia Flatley

    The Department for Business and Trade (DBT) has recently published its Implementation Roadmap for the Employment Rights Bill, outlining a significant series of changes to workers’ rights over the next few years. While much of the reform is centred around employment law and HR policy, a number of these updates carry important consequences for payroll operations.

    With some of the earliest reforms taking effect from April 2026, employers need to ensure systems, budgets and procedures are in place to fully support the changes.

    Below, our payroll team highlights the key areas that will directly affect payroll and how businesses must be prepared.

    From April 2026: key payroll changes

    1. Statutory Sick Pay (SSP) reform

    One of the most immediate and wide‑reaching changes relates to Statutory Sick Pay (SSP). The reforms include:

    • Removal of the lower earnings limit (LEL)
      This means SSP will no longer depend on an employee earning above a specific weekly threshold. More workers—including those on lower pay, variable hours or zero‑hour contracts—will now qualify.
    • Abolition of the waiting period
      Under current rules, SSP is paid from day four of absence. From April 2026, it will be payable from the first day of illness, significantly increasing the number of SSP‑eligible days employers must process.

    What this means for payroll teams

    • System updates: Payroll software will need reconfiguring to reflect day‑one entitlement and expanded eligibility.
    • Policy alignment: Internal absence reporting procedures will need updating to ensure prompt notification and accurate recording of sick days.
    • Cost planning: Employers should anticipate higher SSP costs and more frequent payment processing, particularly for workforces with irregular hours.
    • Record‑keeping: More comprehensive absence tracking will be essential to remain compliant and avoid overpayments.
    1. ‘Day One’ rights for paternity and unpaid parental leave

    Employees will soon gain faster access to family‑related leave:

    • Paternity leave will become a day-one right, removing the current 26‑week service requirement.
    • Unpaid parental leave will also apply from the start of employment.

    These measures aim to support greater workplace flexibility and equal access to family-friendly policies.

    Payroll implications

    • Leave entitlement calculations: Payroll and HR systems must be updated to assign paternity leave and unpaid parental leave rights immediately upon employment, rather than after an eligibility period.
    • New starter processing: Induction workflows will need adjusting so that leave entitlements are triggered as soon as an employee joins.
    • Communication: Employers should ensure line managers and new recruits understand these entitlements to prevent payroll errors or disputes.
    • Interaction with statutory pay: Although paternity leave pay retains separate eligibility criteria, payroll processes must correctly distinguish between leave entitlement and pay entitlement.

    Preparing your business for the road ahead

    The changes taking effect from April 2026 are only the first phase of a much wider reform package. Early preparation will help avoid disruption and ensure compliance as the Employment Rights Bill continues to roll out.

    Recommended next steps for employers

    -Review payroll software capabilities and speak to your provider about upcoming updates.
    -Assess budget impacts, especially for SSP increases.
    -Update internal policies, including employee handbooks and onboarding documentation.
    -Train HR and payroll teams on the new rules well ahead of implementation.
    -Review employment contracts, particularly around absence reporting and leave entitlements.

    Get in touch

    If you would like support reviewing your payroll processes or preparing for these changes, please get in touch. Whether you’re looking for guidance on specific reforms or considering outsourcing your payroll to ensure compliance and efficiency, our expert payroll team is here to support you.

    Get in touch with Julie Mason today by clicking the button below.

    Be prepared: payroll and bank holiday guidance for the festive season

    Posted on by Rebecca Campbell

    With the festive season on the horizon, it’s the perfect time to start planning for the impact of bank holidays and ensure payroll processes remain accurate and compliant. Early preparation helps avoid disruption, supports employees and ensures smooth operations over the holiday period.

    Bank holidays

    • Christmas Day – Thursday, 25 December 2025
    • Boxing Day – Friday, 26 December 2025
    • New Year’s Day – Thursday, 1 January 2026

    As all three holidays fall on weekdays, no substitute days are required this year, making scheduling more straightforward for businesses.

    Holiday pay – what employers and employees should know

    Under the Working Time Regulations, employers are not legally required to provide paid leave specifically for bank holidays. However, these days may be included within the statutory 5.6 weeks (up to 28 days) of annual leave.

    For irregular hours workers, holiday pay depends on the system used:

    • Accrual-based: Holiday entitlement is based on hours worked. Taking time off over Christmas uses accrued leave.
    • Rolled-up holiday pay: Holiday pay is included in regular wages, so no additional payment is due for bank holidays.

    Some employers offer enhanced contractual terms, such as extra pay for working on Christmas Day or New Year’s Day. Employees should check their contracts and clarify arrangements with their employer well in advance.

    Early payroll? RTI reporting is crucial

    If your business plans to pay staff earlier in December due to festive closures, it’s essential to follow HMRC’s Real Time Information (RTI) guidance:

    • Always report the contractual payment date, not the early payment date, on your Full Payment Submission (FPS). Example: If you pay on 20 December but the usual payday is 31 December, report 31 December as the payment date.

    This is especially important for employees receiving Universal Credit, as benefit assessments are based on reported earnings. Incorrect reporting can lead to reduced or missed payments, causing financial hardship.

    Key actions for employers – get ahead now

    • Review payroll schedules and confirm payment dates.
    • Communicate holiday pay policies clearly, especially for irregular hours workers.
    • Ensure RTI submissions reflect the correct contractual payment dates.
    • Consult HMRC guidance to stay compliant and avoid penalties.

    Get in touch

    Planning ahead ensures a smooth and stress-free festive period for everyone involved. If you wish to discuss any of the above in further detail, please get in touch with Julie Mason, director of payroll at PM+M using the button below.

    National Minimum Wage compliance: avoid the top mistakes

    Posted on by Rebecca Campbell

    The introduction of the National Minimum Wage (NMW) was a huge step forward in protecting workers’ rights and ensuring fair pay. However, many employers unintentionally fail to comply due to common and often avoidable mistakes.

    Our expert payroll team discuss NMW in more detail and highlight some of the top mistakes they see to help you avoid potential fines and reputational damage.

    What is NMW?

    The NMW is the lowest hourly rate that nearly all workers are legally entitled to receive. The National Living Wage (NLW) is different, it applies to all workers aged 21 and over.

    These are the current NMW rates (per hour):

    Apprentices: £7.55

    Under 18s: £7.55

    18-20: £10.00

    NLW 21 and over: £12.21

    The above rates came into effect from 1 April 2025. For employers and businesses, knowing and applying the correct rates is essential to ensure compliance and avoid costly mistakes or penalties.

    Mistake 1 – incorrect pay calculations

    Failing to increase workers’ pay in line with annual NMW/NLW rate changes can be a crucial mistake. It is important to note any milestones such as significant birthdays within a system, to ensure pay is updated in advance and you are in line with regulations. Another frequent error is miscalculating average hours, particularly for salaried workers with irregular or fluctuating hours. To avoid this, having a system in place to track hours worked will help with calculating take home pay each month.

    Mistake 2 – salary exchange calculations

    Salary exchange is a tax-efficient arrangement where employees agree to sacrifice part of their salary in exchange for an increased employer pension contribution. When calculating take home pay, it is important that only the reduced cash salary is counted, not the value of the benefit received, as the total amount must not fall below NMW.

    Mistake 3 – not understanding payrolling benefits in kind

    Payrolling benefits in kind (PBIKs) is a process where employers include the value of certain benefits provided to employees in their payroll. This means that the tax due on these benefits is collected in real-time through the PAYE (Pay As You Earn) system, rather than being reported separately on a P11D form at the end of the tax year. Employers can avoid mistakes with Payrolling Benefits in Kind by clearly identifying qualifying benefits, keeping accurate records, ensuring payroll systems are updated, and regularly reviewing tax deductions.

    For more information on the upcoming changes to payrolling benefits in kind read our blog here.

    Mistake 4 – ignoring overtime and breaks

    Another area that is often mistaken is overtime and breaks, with employers failing to properly account for them in wages. It is important that all overtime, breaks, and any other time worked is accurately recorded. To do this, employers should have clear systems in place to track hours worked, ensure payroll teams fully understand NMW rules, and regularly review timesheets against pay records to identify any mistakes in advance.

    Mistake 5 – wage deductions

    A common mistake in payroll is when businesses deduct job-related expenses directly from wages. Costs such as travel or uniforms are considered work-related and can only be deducted if this is clearly set out in writing, for example in the employee’s contract. Employers should also ensure that any deductions do not reduce pay below the NMW and that employees are fully informed of the reason for the deduction.

    Mistake 6 – not understanding trial periods in employment

    Trial periods can be a useful way to assess whether a worker is suitable for a role, but employers must remember that time spent on a trial shift counts as working time. This means workers are entitled to receive at least the NMW for the hours worked, regardless of whether they are offered the job.

    What happens if you fail to comply?

    Failing to comply with the rules and regulations could lead to serious consequences for your business and cause damage to your company’s reputation. Employers found to be underpaying staff must repay the arrears in full and can face financial penalties of up to 200% of the total underpayment, which is capped at £20,000 per worker.

    Get in touch

    If you wish to discuss any of the above matters in further detail or explore the possibility of outsourcing your payroll to avoid any potential compliance errors, please get in touch with Julie Mason, director of payroll at PM+M using the button below.

    Employment Rights Bill: key payroll impacts and what you need to prepare for

    Posted on by Rebecca Campbell

    The Department for Business and Trade (DBT) has published the Implementation Roadmap for the Employment Rights Bill, setting out a timeline for major changes to workers’ rights. While many of these reforms focus on employment law and HR policy, several have direct implications for payroll operations which employers need to prepare for.

    From April 2026: Immediate payroll adjustments

    • Statutory Sick Pay (SSP) reform
      The removal of the lower earnings limit and waiting period means more employees will qualify for SSP from day one of illness. Payroll systems will need to be updated to reflect these changes, and employers should prepare for increased SSP costs and more frequent processing.
    • ‘Day one’ paternity and unpaid parental leave
      These entitlements will now apply from the first day of employment. Payroll teams must ensure leave tracking and pay calculations are adjusted accordingly, especially for new starters.
    • Trade union measures
      While primarily HR-related, changes such as electronic balloting and simplified recognition may affect payroll deductions for union subscriptions and reporting requirements.

    October 2026: Compliance and cost considerations

    • Ending fire and rehire practices
      Although this is a legal reform, payroll may be involved in calculating redundancy pay and transitional pay arrangements if contracts are renegotiated.
    • Fair pay agreement for adult social care
      Employers in the care sector should prepare for standardised pay structures, which may require payroll system reconfiguration and budget adjustments.
    • Tipping Law Reform
      Employers in hospitality must ensure fair tip allocation is reflected accurately in payroll, with consultation processes documented and auditable.
    • Sexual harassment protections
      While not directly payroll-related, any changes to compensation or settlements may require payroll involvement.

    From 2027: Planning for long-term payroll impacts

    • Bereavement leave
      Payroll teams will need to track and process this new leave entitlement, ensuring compliance with statutory or contractual pay obligations.
    • Zero hours contracts reform
      Employers will need to offer stable hours and predictable income, which will affect payroll forecasting, budgeting, and contract setup.
    • ‘Day One’ protection from unfair dismissal
      This may lead to changes in probationary pay structures and termination pay processing.
    • Flexible working enhancements
      Payroll may need to accommodate more varied working patterns, affecting pay calculations, holiday accruals, and pension contributions.
    • Gender pay gap and menopause action plans
      While voluntary at first, these may influence payroll reporting and data analysis requirements.

    What payroll teams should do now

    To stay ahead of these changes, we recommend:

    • Reviewing payroll software capabilities to ensure it can handle new entitlements and pay structures.
    • Updating internal policies and procedures to align with SSP and leave reforms.
    • Training payroll staff on upcoming changes and how they affect calculations and compliance.
    • Collaborating with HR and finance teams to ensure a joined-up approach to implementation.

    Summary

    As these changes approach, we understand that navigating new payroll requirements can be challenging. Whether you’re looking for guidance on specific reforms or considering outsourcing your payroll to ensure compliance and efficiency, our expert payroll team is here to support you.

    Get in touch today by clicking the button below.