[CHEATSHEET] Payslip law changes made easy

Richmal Price, Payroll Expert

September 30 2019

In 2019, the government overhauled payslip laws. But with a new report showing that one in ten UK workers still doesn’t get a payslip, thousands of businesses are at risk of prosecution.

Here’s how to meet the new rules and what to do if you’re accidentally breaking the law.

The basics: your legal requirements

Before April 2019, you only had to give itemised payslips to workers classed as employees.

Today, you need to give itemised payslips to all workers, including staff on casual, agency and zero hour contacts.

It can be difficult to tell the difference between employees and workers, and many UK businesses hire a mix of both. In short, employees have a “contract of employment” with you and workers don’t.

For now, the most important thing to remember is that all workers and employees need payslips and all payslips must be itemised. That means they must show: 

  • Gross and net pay.
  • Deductions from pay.
  • The number of hours worked where pay varies based on the amount of time worked (more on this shortly).
  • How you pay your workers’ wages if you use multiple payment methods (such as if you pay part in cash and part in BACS).

When to put hours worked on a payslip

It comes down to the types of contracts you have with your staff and what hours they work.

Employees usually work set hours for a fixed salary. You don’t need to put hours worked on their payslips unless they’ve worked certain hours for different rates of pay.

Casual or zero hour workers often work on an hourly basis. Because their pay varies based on their hours worked, you will need to include all of their hours on their payslips.

Making deductions from payslips

You also need to include any deductions made from workers’ pay on their payslips. This includes National Insurance, tax, and student loan payments, plus deductions for uniform or equipment costs.

For example, if your staff need to pay for their uniforms, then you must include the cost on their payslip.

And if you charge new starters for on-the-job training, you need to include this on their payslips, too.

The cost of not giving workers the right payslips

Workers now have a statutory right to itemised payslips. If you don’t give your workers the correct payslip, they may submit a claim to an employment tribunal. And that could result in a hefty penalty.

The tribunal will look at any ‘un-notified wage deductions’ made in the 13 weeks before the claim.

Any deductions not put on a payslip, such as uniform, equipment or training costs, could count as ‘un-notified’. The tribunal can order you to pay compensation to the workers involved.

What to do if you’ve broken the rules

Unfortunately, if you haven’t given workers itemised payslips since April 2019, then there’s a risk that a worker will lodge a claim against your business. The good news?

There are steps you can take to reduce this risk.

First identify which members of staff haven’t received itemised payslips since April 2019. Then calculate what deductions you made from their pay each month.

If you aren’t sure what to include on an itemised payslip or are worried about the deductions you’ve made from staff pay, call Peninsula for advice on 0800 028 2420.

Next, make sure your workers get itemised payslips from the next pay reference period. And, if you can, issue payslips for all periods since the 6th April 2019. It’s the best way to correct your mistake and may help your case at a tribunal.

Whatever you do, avoid the urge to carry on without giving staff payslips. This will only increase your risk in the long run.

Avoid legal shocks

It’s also important to stay up to date with legal changes, such as the huge employment law overhaul coming in April 2020.

Workers and employees will enjoy greater employment rights as part of the update. That includes the right to receive a written statement of main terms from day one of their employment.

And while we all agree that workers’ rights are a good thing, it’s true that big legal changes put pressure on businesses. Especially small businesses.

If you’re not giving staff the right payslips, or are worried about how new laws will impact your business, call a Peninsula expert today.

We give you honest, practical advice on how to meet UK laws and reduce your legal risk. Call today on 0800 028 2420.

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