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    Payrolling of benefits in kind set to become mandatory

    HMRC has announced a tax simplification update confirming the payrolling of benefits in kind will become mandatory from 6 April 2026. At present, the payrolling of benefits in kind is voluntary and many choose to submit annual P11Ds.

    As it stands, all benefits can be payrolled except for employer-provided living accommodation and interest-free or beneficial loans. There has been no guidance released yet regarding what will happen with these under the new rules.

    The Government is making the changes as a measure to simplify and modernise the tax system. HMRC has confirmed they will consult stakeholders on the details of mandatory payrolling, and that draft legislation will be published later this year.

    We advise employers to carefully review the proposals once they become available and consider now how the changes may impact your systems and processes to prepare in advance for any changes you may need to consider implementing.

    For further information or advice, contact Julie Walsh by clicking the button below.

    Celebrating National Payroll Week at PM+M

    As National Payroll Week draws to a close, we take a look at some of the exciting activities our payroll team has been involved in to celebrate all things payroll.

    We began the week by holding a payroll drop-in session where we invited people to come into the office to meet our payroll team and ask any payroll related questions they may have, including the potential implications and possible penalties that could come with getting it wrong. Thank you to those who joined us, we hope you enjoyed meeting some of the team and found the discussions beneficial.

    Our team also celebrated with a change of scenery for their team meeting, at the lovely Loom Loft Furniture & Interiors, where they were treated to a delicious breakfast.

    On Wednesday, we hosted a lunch and learn round table event in conjunction with Forbes Solicitors where a host of employment related topics were discussed, including holiday pay, National Living and National Minimum Wage, and pensions compliance.

    Our team put together some informative blogs which can be read here:
    Don’t get caught out by National Minimum Wage
    Could potential changes to workplace pensions impact your payroll?

    Finally, we launched a brand-new service, our Employment Tax Health Check service can highlight ways to improve your approach to the payments of benefits and expenses to your employees. Think you could benefit from an Employment Tax Health Check? Find out more by clicking here.

    Thank you for taking the time to find out a little more about our payroll team this National Payroll Week, if you would like further information or advice on any payroll related issues or would like to discuss how we could help you with your payroll, please contact our payroll director, Julie Mason below.

    Don’t get caught out by National Minimum Wage

    Following the recent news where over 200 employers were named by the government for failing to pay their lowest paid staff the legal minimum wage, we take the opportunity to remind you of some of the common pitfalls you need to avoid to prevent being caught out in a similar way.

    The employers on the list were recorded as having underpaid their workers in the following ways:

    • 39% of employers deducted pay from workers’ wages
    • 39% of employers failed to pay workers correctly for their working time
    • 21% of employers paid the incorrect apprenticeship rate

    It was accepted that not all minimum wage underpayments are intentional, however it highlights the importance of making sure you are carefully adhering to the legislation as the government takes the stance that there is no excuse for underpaying workers and the fines for doing so can be substantial.

    Common pitfalls

    The first and most obvious one is to ensure you are using the correct National Minimum Wage (NMW) rates, which as of April 2023 are:

    National Living Wage (NLW) 23+            £10.42
    Aged 21-22 rate                                    £10.18
    Aged 18-20 rate                                    £7.49
    Aged under 18                                      £5.28
    Apprentice rate                                     £5.28

    The most common error in terms of rates happen around apprenticeships and also when employees have a birthday which moves them between the minimum pay bands.

    Other important pitfalls to be aware of include:

    • Employees must not enter a salary sacrifice arrangement which would bring their hourly rate below the NMW, including cycle-to-work schemes, salary sacrifice pension schemes and childcare voucher schemes entered into prior to 4 October 2018.
    • The optional £1 administration deduction that can be taken from employees when operating attachment of earnings orders can lead to an underpayment of the NMW.
    • Where employees are required to purchase a specific uniform as a condition of their employment, this can breach NMW regulations as it is expenditure incurred in connection with their employment. This applies regardless of whether the cost of the uniform is deducted directly from the employee or if the employee purchases the uniform from a third-party themselves.
    • Beneficial net deductions from employees’ wages, such as for lottery syndicates and savings schemes, can also breach NMW regulations. This is regardless of whether the individuals have explicitly opted into such schemes.

    Summary

    As you can see from the above, failing to comply with the NMW regulations is not always intentional and there are many ways you could accidently get caught out without even realising, but it’s vital to be on top of your payroll as the penalties for breaches can be extremely costly, intentional or not!

    Get in touch

    If you would like advice or assistance with your payroll to ensure you are complying with all the necessary regulations and don’t unintentionally get caught out, please get in touch with Julie Mason, director of payroll at PM+M using the button below to discuss further.

    National Payroll week drop-in session

    As part of National Payroll Week taking place 4-8 September, we are offering a free payroll drop-in session on TUESDAY 5 SEPTEMBER at our Blackburn office.

    Do you have a payroll question? Would you like to understand more about the complexities of getting your payroll wrong? Pop along for a brew and a chat on all thing’s payroll, anytime between 9am – 4pm.

    Details for our Blackburn office can be found by clicking here.

    Could potential changes to workplace pensions impact your payroll?

    Could potential changes to workplace pensions impact your payroll?

    The Pensions (Extension of Automatic Enrolment) (No.2) Bill has now passed the second reading in the House of Lords, if passed it could mean some important changes for workplace pensions.

    Since automatic enrolment was brought into force in 2012, we have seen a dramatic transformation to pension savings, with over 10.8 million employees being automatically enrolled into a workplace pension as of January 2023. However, there are still some gaps in coverage which has prompted the proposed changes.

    Currently missing out are those aged 18 – 21 and part-time workers who are earning less than the current earnings threshold. Also, when considering the savings adequacy measure used by the Pensions Commission, there are still estimated to be around 12.5 million individuals under-saving for their retirement, who make up 38% of the working age population.

    Plans put forward in the Bill are to lower the enrolment age to 18 (currently 22) and to remove the lower qualifying earnings band (currently £520.00 per month), meaning pensions will be calculated from £1.00 of earnings for anyone over the age of 18.

    The aim of the proposed changes is to bring in a further 0.5 million individuals into saving £1 billion per year. Although it is not yet known when the policy changes being reviewed would be implemented, it is important to consider the additional costs which could be faced by both employers and employees, and plan accordingly.

    Get in touch

    If you think the proposed changes could impact your payroll and would like discuss further the measures you may need to put in place, get in touch with a member of our payroll team by emailing payroll@pmm.co.uk or call 01254 679131.

    Full details of the Bill can be found here.

    A comment to note that the article does not constitute personalised advice and that advice should be sought before taking any action.

    National minimum wage rates are changing on 1 April 2023 – are you prepared?

    Did you know that National Minimum Wage rates are due to change on 1 April 2023? In our latest blog, Julie Mason, payroll director at PM+M outlines everything you need to know…

    What are the current and upcoming rates?

    A comparison between the current and future rates for each band are outlined in the table below:

    Rate from April 2022Rate from April 2023% increase
    National Living Wage (NLW)£9.50£10.429.7%
    Aged 21-22 rate£9.18£10.1810.9%
    Aged 18-20 rate£6.83£7.499.7%
    Aged 16-17 rate£4.81£5.289.7%
    Apprentice rate£4.81£5.289.7%
    Daily accommodation offset rate£8.70£9.104.6%

     

    As a reflection of the ongoing economic uncertainty, the National Living Wage is set to rise by up to 10.9% going into the new tax year. The increases intend to support the living standards of lower paid workers in light of the cost-of-living crisis.

    Things for employers to keep in mind…

    As we approach the new tax year, here are some reminders of the most common National Minimum Wage pitfalls that even the largest employers can fall into:

    • Employees must not enter a salary sacrifice arrangement which would bring their hourly rate below the National Minimum Wage. Common examples include cycle-to-work schemes, salary sacrifice pension schemes and childcare voucher schemes entered into prior to 4 October 2018.
    • The optional £1 administration deduction that can be taken from employees when operating attachment of earnings orders can lead to an underpayment of the National Minimum Wage.
    • Where employees are required to purchase a specific uniform as a condition of their employment, this can breach National Minimum Wage regulations as it is expenditure incurred in connection with their employment. This applies regardless of whether the cost of the uniform is deducted directly from the employee or if the employee purchases the uniform from a third-party themselves.
    • Beneficial net deductions from employees’ wages, such as for lottery syndicates and savings schemes, can also breach National Minimum Wage regulations. This is regardless of whether the individuals have explicitly opted into such schemes.

    Penalties for National Minimum Wage breaches can be costly and could also result in being publicly named and shamed by HMRC, so it certainly pays to be mindful of any potential oversights.

    If PM+M provide you with outsourced payroll services, we will assist in the process by uplifting any National Minimum Wage rates automatically in the relevant period, unless we are instructed by you differently (for example, to increase employees to a higher rate).

    For further information on our payroll services, please get in touch with Julie Mason, director of payroll at PM+M, using the button below.

    Are you calculating holiday pay correctly for your employees?

    The current rules

    Current legislation states that almost all workers are legally entitled to 5.6 week of paid annual leave per year. This includes agency workers, workers with irregular hours and those on zero-hours contracts.

    As an example, for most employees who work 5 days per week, 5.6 weeks of holiday translates to a minimum of 28 days’ paid annual leave by law. Employers can choose to provide more leave than the legal minimum and if they do, they don’t have to apply the same rules that apply to the statutory leave to the extra holidays (for example, the company may have a policy that means a worker may need to be employed for a certain amount of time before they become entitled to the extra leave).

    Part-time workers are also entitled to a least 5.6 weeks of paid holiday each year, however this will amount to fewer than 28 days, and will be pro-rated based on their contracted working pattern. For instance, if an employee works 3 days per week, they must receive at least 16.8 days of annual leave each year (3 x 5.6).

    An employer can choose to include bank holidays as part of an employees’ statutory annual leave, but that being said, bank holidays do not have to be given as paid leave by law.

    Varied Pay

    It can be common for companies to employ workers with irregular hours and / or varied pay, e.g. those who work irregular shift patterns or overtime. This can make it harder to work out their holiday entitlement.

    These employees are still entitled to the statutory minimum paid leave, however their holiday pay should be calculated as the average number of weekly fixed hours they have worked in the previous 52 weeks at their hourly rate.

    If they are on zero-hours contracts, then holiday pay should be based upon their average pay from the previous 52 weeks, only including the weeks they were paid.

    If you are in a situation where your employee was not paid at all in any of the 52 weeks, you should count back to the weeks they were paid, up to a maximum of 104 weeks from the date they want to start their holiday. You should base your average on a total of 52 weeks in which the employee received payment (these 52 weeks do not need to be consecutive).

    Other Considerations

    If your employees earn regular commission or bonuses, you should include these in your calculations for holiday pay, as it should also take into consideration any additional payments that they receive on a regular basis. This is also the case for overtime, whether compulsory or voluntary, you should factor in any additional hours when calculating your employees’ average rate if the overtime is worked on a regular basis. You do not need to include voluntary overtime that is only worked very occasionally.

    Get in touch

    As it is important that employers calculate their employees’ holiday entitlement and pay correctly for each individual, the process can often be complex and time consuming. Our payroll team are here to support you with any queries you may have, please get in touch via payroll@pmm.co.uk or call 01254 679131.

    Are you prepared for payroll year end?

    Payroll year end is fast approaching – have you put plans in place to ensure your payroll team are prepared? One of the key things to remember is that you must report to HMRC on the previous tax year by 19 April.

    You will then need to ensure that that you are prepared for the new tax year. In our latest blog, we highlight the key dates to prepare for, as well as the steps you need to take to stay on top of payroll year end.

    1. Employees must receive their P60 by 31 May

    All employees who are employed by you on the final day of the tax year (5 April), must receive a P60 by 31 May (on paper or electronically). A P60 details the tax an employee has paid on their salary in the previous tax year (2021/22).

    1. Check your payroll year end

    Double check when your payroll year end is – does it end on week 52 or is there a week 53?

    Week 53 could occur if your employees are paid on a weekly, fortnightly or four weekly basis and the pay date falls on 5 April 2021. If this is the case, you will need to complete your payroll for 5 April as normal before processing your year end.

    If your employees are paid monthly, you will not have a week 53, so your payroll can be processed as normal.

    1. Have you processed any leavers or new starters?

    Have any employees who have left the business, and any new starters, been processed? If not, ensure this has been done before submitting your Full Payment Submission (FPS) and Employer Payment Summary (EPS).

    1. Send your final Full Payment Submission (FPS) of the year

    Once you have completed the steps detailed above, you can submit your final FPS and, if required, your EPS. To prepare for this, you need to process your final pay period and submit your last FPS – but only for your final pay period.

    There is no difference to your FPS and EPS in the final pay period – other than some software’s will give you the option of FPS and Final FPS and you can then proceed with the payroll year end process.

    1. Process your payroll year end

    Once final FPS has been submitted and the last period has been closed you can then produce your P60s and roll the tax year forward. P60s need to be with your employees by 31 May.

    Dates for your diary

    5 April

    • 2021/22 tax year ends on this date

    6 April

    • 2022/23 tax year begins

    From 6 April

    • Update your employee payroll records
    • Update your payroll software

    19 April

    • Deadline for final submission of the 2021/22 tax year

    By 31 May

    • Employees must receive their P60s by this date

    By 6 July

    • Report on employee expenses and benefits (if they aren’t being processed by payroll)

    19 July

    • Payment of class 1A National Insurance contributions must be paid to HMRC by this date

    Get in touch

    Payroll year end can be stressful and time-consuming for many businesses – PM+M’s payroll team are here to support any clients who have queries. Please get in touch at payroll@pmm.co.uk if we can assist in any way.