We consider recent changes and developments in payroll practice and employment law.
Real Time Information and the end of the ‘relaxation’ for micro employers
Under RTI employers, or their agents, are required to make regular payroll submissions for each pay period during the year detailing payments and deductions made from employees each time they are paid. The Full Payment Submission (FPS) must be sent to HMRC on or before the date employees are paid. A relaxation currently applies to micro employers, those with fewer than 10 employees, who pay employees weekly, or more frequently, but only process their payroll monthly and who made use of this relaxation in 2013/14.
The relaxation has allowed micro employers to send information to HMRC by the date of their regular payroll run but no later than the end of the tax month. The relaxation comes to an end on 5 April 2016 and will align the treatment for existing micro-employers with all other employers.
HMRC have the right to penalise employers who fail to meet their RTI obligations with monthly penalties ranging from
£100 to £400 depending on the number of employees. It is therefore important to ensure that your RTI returns and payments are on time, every time.
Under pensions auto enrolment employers have to enrol eligible jobholders in a qualifying pension scheme and make pension contributions on their behalf. Workers are eligible jobholders if they are between 22 and the State pension age and earn the equivalent of £10,000 per annum. Although the employer must enrol eligible jobholders, and has obligations for other employees, individual employees may opt out of auto enrolment if they wish.
Employers have to comply with their obligation from their staging date, which is determined by the Pensions Regulator (TPR).
Employers frequently opt to push back their initial staging date by using postponement. Postponement can be used to:
- delay the staging date of all or some employees by up to three months, delaying most but not all of the implementation of auto enrolment
- give employers more time to deal with new starters
- deal with employees who become eligible during a later pay period (due to them meeting the pay or age criteria)
- deal with the issue of temporary staff
- mitigate the issues of part period contributions which can be difficult for some pension providers and payroll software to cope with.
During postponement individual employees have the right to opt in to auto enrolment so employers need to be ready to deal with this. Employers have to let TPR know that they have complied with their obligations by completing the declaration of compliance within five months of the original staging date.
National Insurance and apprentices
From 6 April 2016 employer NICs are abolished for apprentices under 25 who earn less than the upper secondary threshold (UST) which is £827 per week (£43,000 per annum). This exemption will not apply to earnings above the UST and employers are liable to 13.8% NIC on pay above this limit. Employee NICs are payable as normal.
An apprentice needs to:
- be working towards a government recognised apprenticeship in the UK which follows a government approved framework/standard
- have a written agreement, giving the government recognised apprentice framework or standard, with a start and expected completion date.
Employers need to identify relevant apprentices and generally assign them NIC category letter H to ensure the correct NICs are collected.