Cedar Day 2018 - Avoid Top Payroll Errors
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The document discusses key payroll issues for employers, including the importance of payroll accuracy, compliance with national minimum wage laws, and the implications of underpayments. It highlights common mistakes to avoid, such as misreporting pay periods and incorrectly managing statutory payments like student loans and national insurance. Additionally, the document emphasizes the need for timely payroll submissions and accurate employee records to prevent penalties.
Cedar Day 2018 - Avoid Top Payroll Errors
- 1. How to Avoid the Top Payroll Errors Peoplesoft User Group May 2018 1
- 2. Agenda 1. NMW/NLW 2. Statutory Payments 3. Student Loans 4. National Insurance 5. Employer Supported Childcare Schemes 6. Real Time Information Peoplesoft User Group May 2018 2
- 3. How important is payroll accuracy? SD Worx survey 4,000 employees in companies with between 10 – 10,000 staff across Europe, found that 44% of respondents were paid late. • 48% paid late, were also paid incorrectly • 79% paid incorrectly, identified the issue themselves • 61% of UK respondents paid incorrectly, attributed it to poor management Peoplesoft User Group May 2018 3
- 5. National Minimum Wage/National Living Wage • BEIS are responsible for monitoring NMW/NLW • But HMRC have been appointed to oversee enforcement • Compliance budge tripled to £25 million in 2017/18 Peoplesoft User Group May 2018 5
- 6. Criminal Offence Gov.uk ‘It’s a criminal offence for employers to not pay someone the National Minimum Wage or National Living Wage, or to fake payments records’ 6
- 7. National Minimum Wage/ National Living Wage • The Government now name and shame those who fail to pay workers • Latest figures show 260 employers named for failing to pay 16,000 workers NMW/NLW 1. Primark Stores Ltd underpaid £231,973 to 9,735 workers 2. Sports Direct underpaid £167,036.24 to 383 workers 3. Motherwell F.C. underpaid £2755.34 to 12 workers Peoplesoft User Group May 2018 7
- 8. Peoplesoft User Group May 2018 8 NMW & NLW Rates 8 Age 1 April 2017 1 April 2018 Age 25 and over (NLW) £7.50 per hour £7.83 per hour Age 21 to 24 years old £7.05 per hour £7.38 per hour 18 to 20 years old £5.60 per hour £5.90 per hour 16 to 17 years old £4.05 per hour £4.20 per hour Apprentice rate for under 19 or over 19 in 1st year of apprenticeship £3.50 per hour £3.70 per hour Accommodation offset rate £6.40 per day £7 per day
- 9. Change of Rate ACAS: ‘The new pay rate will only affect someone's pay from the first full pay reference period after that date’. • The same rules apply an age change • ‘It’s not about when you work, it’s about the start of the pay reference period you pay’ 9
- 10. Avoiding the Common Traps! ACAS: ‘The new pay rate will only affect someone's pay from the first full pay reference period after that date’. • The same rules apply an age change • ‘It’s not about when you work, it’s about the start of the pay reference period you pay’ 10
- 11. Avoiding the Common Traps! • The Pay Reference Period (PRP) is when the money is earned • But the rate only increases from the first FULL PRP • Payments in arrears only count if paid by the next PRP 11
- 12. Avoiding the Common Traps! • Salary sacrifice – pay post sacrifice counts towards NMW/NLW • You cannot reduce a worker’s pay below NMW/NLW even if they agree! • Court Order Admin fee can reduce pay for NMW purposes 12
- 13. Every Minute Counts! • You must include every minute worked • For example the T&A system only pays on the quarter hour if a worker is late • Include time spent cashing up, replenishing stock, staff meetings • Include time spent searching staff 13
- 14. Underpayments 14 • If you discover you have underpaid a worker pay it as soon as you can • Ideally by the next pay period
- 15. Penalties 15 The penalty for non-payment is: • 200% of the amount owed unless the arrears are paid within 14 days • Maximum fine for non-payments is £20,000 per worker • Underpayments are calculated at the current hourly rates
- 16. The Living Wage Foundation Peoplesoft User Group May 2018 16 • Do not confuse “The Living Wage” with the National Living Wage • The Living Wage is a voluntary arrangement that employers may commit to • The Living Wage Foundation sets out the rules of operation and the conditions that must be met by the employer to claim they pay the Living Wage • There is a Living Wage and a London Living Wage rate www.livingwage.org.uk/
- 17. The Living Wage Peoplesoft User Group May 2018 17 Living wage increased from 1 Nov 2017 to: • £8.75 per hour and • £10.20 an hour in London More than 3,600 employers employing 150,000 workers belong to Living Wage Foundation • Including: • IKEA • Aviva • Nationwide
- 18. The Right to Work in the UK Peoplesoft User Group May 2018 18
- 19. Illegal Working Civil Penalties This report shows the number of illegal workers found and the value of the penalties issued between 1 July to 30 September 2017 PeoplesoftUserGroupMay2018 19 Regions Number of penalties Number of illegal workers found Value of penalties issued (£)* LSE ME NEYH NW SNI WSW 314 422 128 187 33 37 53 66 28 62 44 Key: LSE - London & South East England ME - Midlands & Eastern England NEYH - North East England, Yorkshire & Humberside NW - North West England SNI - Scotland & Northern Ireland WSW - Wales & South West England * This figure is the gross value of penalties issued. The recoverable value will be reduced due to adjustments made following objections and/or appeals. 52 £500,000£2,160,000£4,950,000 £770,000 £540,000 £758,125
- 20. Guidance for employers can be found at: https://www.gov.uk/government/public ations/right-to-work-checks-employers- guide There is a quick answer tool on Gov to help employers check they have the correct documentation: https://www.gov.uk/legal-right-work-uk The Right to Work in the UK Peoplesoft User Group May 2018 20
- 21. Student Loans Peoplesoft User Group May 2018 21
- 22. Peoplesoft User Group May 2018 22 Earnings in month £ Student Loan Deduction £ Earnings in month £ Student Loan Deduction £ Earnings in month £ Student Loan Deduction £ Earnings in month £ Student Loan Deduction £ 1 - 2094 0 3039 - 3049 86 3995 - 4005 172 4950 - 4961 258 2095 - 2105 1 3050 - 3061 87 4006 - 4016 173 4962 - 4972 259 2106 - 2116 2 3062 - 3072 88 4017 - 4027 174 4973 - 4983 260 2117 - 2127 3 3073 - 3083 89 4028 - 4038 175 4984 - 4994 261 2128 - 2138 4 3084 - 3094 90 4039 - 4049 176 4995 - 5005 262 New Student Loan Table format on Gov https://www.gov. uk/government/ publications/sl3- student-loan- deduction-tables
- 23. Peoplesoft User Group May 2018 23 1. If the employee ticks the Student Loan box in error you cannot give a refund unless instructed by HMRC 2. If they don’t know which Plan use Plan 1 3. From 6 April 2018 you must state Plan type on FPS
- 24. National Insurance Peoplesoft User Group May 2018 24
- 25. NIC Thresholds 2018/19 Peoplesoft User Group May 2018 25 LEL PT ST UEL/UST/AUST Weekly £116 £162 £162 £892 Monthly £503 £702 £702 £3,863 Annual £6,032 £8,424 £8,424 £46,350
- 26. National Insurance for under 21 years old Peoplesoft User Group May 2018 26 • Employee aged from 16 to under 21 • 0% Employer Class 1 NICs up to Upper Secondary Threshold (UST) • UST same as UEL for 2018/19 • UST could change in future tax years
- 27. National Insurance for Apprentices under age 25 Peoplesoft User Group May 2018 27 • 0% Employer NICs up to Apprentice Upper Secondary Threshold (AUST) • Applies to apprentices under the age of 25 • Legislative power to alter age
- 28. Statutory Maternity Pay Peoplesoft User Group May 2018 28
- 29. Peoplesoft User Group May 2018 29 SMP Tables improved format for 2017/18 & all statutory payment tables for 2018/19
- 30. SMP Calculator on Gov • A recent calculation of SMP using the calculator on Gov.UK was found to be incorrect by nearly £250! • HMRC are aware and agree with the findings • Gov have been notified • Employers should exercise caution Peoplesoft User Group May 2018 30
- 31. A Change to the SMP Rules Peoplesoft User Group May 2018 31
- 32. EMPLOYER 1 EMPLOYER 2 Employee working for Employer 1 and Employer 2 before the end of qualifying week I have satisfied all the relevant criteria and I’m entitled to SMP from this employer I don’t satisfy all the relevant criteria here so I’m not entitled to SMP from this employer BEFORE END OF QUALIFYING WEEK Employer 2 does not have to pay SMP but I can continue to work for him before and after confinement and employer 1 will still have to pay me SMP. This is because I was working for employer 2 before the qualifying week This employer must pay me SMP once my MPP begins and continue to pay me until I return to work. The MPP period will run in the background . Peoplesoft User Group May 2018 32
- 33. Employee works for another employer Peoplesoft User Group May 2018 33 Employer 1 & Employer 2 Joins Employer 2 11th week EWC Qualifying Week Paid SMP by Employer 1 May also qualify for SMP from Employer 2
- 34. Employee works for another employer Peoplesoft User Group May 2018 34 11th week Employer 1 Joins Employer 2 EWC QW Receiving SMP from Employer 1 8thweek Birth Leaves ER 2 SMP Employer 1 stops from birth SMP ER 1 RESTARTS
- 35. Employee works for another employer Peoplesoft User Group May 2018 35 11th week Employer 1 Joins Employer 2 EWC QW Receiving SMP from Employer 1 Birth Leaves Employer 2 SMP Employer 1 STOPS SMP ER 1 DOES NOT RESTART
- 36. Statutory Sick Pay Peoplesoft User Group May 2018 36
- 37. SSP Linking Tables 2018 on Gov are wrong! 6 April does not link to 9 February it links to 8 February Peoplesoft User Group May 2018 37
- 38. Employer Supported Childcare Changes www.childcarechoices.gov.uk Peoplesoft User Group May 2018 38
- 39. Employer Supported Childcare Changes “On 13 March the Government announced that the employer supported childcare schemes, namely childcare vouchers and directly contracted childcare would remain open to new entrants for an additional 6 months, until 4 October 2018. We recognise that this decision may have created some practical difficulties for some employers. As an employer, you can continue to allow your employees to join your childcare voucher or directly contracted childcare schemes up until 4 October 2018 (as long as they have joined a scheme and received their first voucher by that date). This means that you and your employees can keep taking advantage of the income tax and National Insurance reliefs.” Peoplesoft User Group May 2018 39
- 40. Employer Supported Childcare Changes “However, we understand that some employers may have closed their scheme to new entrants on 5 April 2018, (the date originally stated), and it may be challenging to re-open it for the 6 month extension. Any scheme which has tax and National Insurance contributions advantages, must normally be open to all employees. As a temporary measure, we will use our collection and management powers to allow the tax and National Insurance contributions advantages to continue for employees enrolled in a childcare voucher - or directly contracted childcare scheme - on or before 5 April 2018; even where employers choose not to re-open their schemes.” Peoplesoft User Group May 2018 40
- 41. Peoplesoft User Group May 2018 41 Real Time Information
- 42. Real Time Information “The RTI payroll data you submit plays a critical role in keeping your employee’s tax records up to date. Filing accurate information helps HMRC match your payroll submissions to the correct record. You can help by taking the following steps • Submit your payroll on or before your employees’ payday- HMRC have found some employers incorrectly use the date they process their payroll. • Record all employees on your payroll submission, including those who earn less than the lower earnings limit (LEL) • Submit accurate and up to date employee information. This includes full name, date of birth, National Insurance number and address. Do not use any pseudo/default information.” Peoplesoft User Group May 2018 42
- 43. Real Time Information Issues Problem has come to light regarding leavers where Payroll was notified after the payroll had been run • The employer included the leaving date on the FPS the following month • No further pay was due and a P45 had not yet been issued • Employer used late reporting reason H • They were awarded a £400 penalty Peoplesoft User Group May 2018 43
- 44. Reasons for late submission A – Notional payment B – Notional payment C – Notional payment D – Payment subject to Class 1 NI but P11D for tax F – No requirement to maintain P11 for work done on the day G – Reasonable excuse H – Correction to earlier submission Peoplesoft User Group May 2018 44
- 45. Real Time Information Issues Example Payroll informed employee left at the end of January FPS for January has already been submitted Employer includes the leaving date on the February FPS stating the last time the employee was paid was 31 January No further payment is due to the employee Employer uses the late payment code H Peoplesoft User Group May 2018 45
- 46. Real Time Information Issues Example • Payment date 31/01/18 with leaving date 31/01/18 • FPS submitted 25/02/18 - so the submission is classed as ‘late’ even where there is no actual payment made. Peoplesoft User Group May 2018 46
- 47. Real Time Information Issues To prevent a potential penalty, the FPS with the leaving date must include a payment date that is on or later than the submission date (So in the example above the payment date should have shown 25/02/18 or later) Peoplesoft User Group May 2018 47
- 48. Peoplesoft User Group May 2018 48
- 49. Any Questions? Peoplesoft User Group May 2018 49 Please follow me on LinkedIn: Linda Pullan