From 6 April 2019, new government legislation will require employers to provide payslips to all workers, as well as provide itemised payslips to those whose pay varies depending on the number of hours worked.
To help you implement these changes, it’s important to understand what the legislation requires and the cases in which it applies.
What is an itemised payslip?
Essentially, an itemised payslip provides a breakdown of the worker’s pay, detailing and explaining any deductions that have been made.
Why the need for new legislation?
An overhaul of the information workers receive on their payslip follows recommendations made in the Taylor review of modern working practices. The new legislation was also prompted by a report from the Low Pay Commission, which called for employers to make payslips clearer so that it is obvious to staff which hours they are being paid for.
Ultimately, itemising payslips is intended to improve transparency around pay – it should make it easier for workers to understand the figure they have been paid, ensure they have been paid correctly, and be able to challenge their employers if they feel they have been underpaid.
In essence, following the introduction of this legislation, you will be required by law to:
A) Provide itemised payslips to all workers – including permanent, casual and zero-hours staff.
At present, the statutory right to receive an itemised payslip only applies to employees. However, from 6 April 2019, this right will extend to all workers and can be provided in either written, printed or electronic format.
B) Include hours on payslips (in cases where the worker’s pay varies by the amount of time they have worked).
From April 2019, workers whose pay varies depending on the number of hours they have worked will have the right to receive additional information on their payslip detailing the number of hours they have been paid for and how their pay has been calculated.
For workers who receive a fixed salary each month, payslips will not need to display the worker’s hours as their pay does not vary based on the amount of time they have worked.
Employers will also not need to include an hourly figure to reflect unpaid leave or statutory sick pay. However, if they work occasional overtime paid at an hourly rate, this would need to be shown.
Hours can be shown as the total number of hours worked – making clear what period they were worked in – or broken down further into different types of work or different rates of pay.
If you’re unsure whether or not you need to include a worker’s hours on their payslip, the key question is whether their pay varies based on the amount of time they have worked.
If the answer is yes, you will need to show the hours they have worked on their payslip.
For example, you will need to provide itemised pay statements for workers who:
• Are salaried but work occasional overtime
• Are paid by the hour
• Are paid by the hour with additional pay for unsociable hours
• Are paid by the hour and receiving statutory sick pay
• Are paid a daily rate
However, you will not need to provide itemised pay statements for workers who:
• Are salaried but do not work overtime
• Are term-time workers
• Are salaried workers and take unpaid leave
What are the consequences for employers who don’t comply?
It is important not to be complacent about the new legislation or leave it too late to make changes, especially if you have a lot of workers on your books. If you fail to amend your payslip format once the new legislation comes into force, and a worker believes they haven’t received a payslip, or that the payslip they have received doesn’t contain the required information, they will have the ability to enforce this right at an Employment Tribunal. If this happens, you could be ordered to repay any undisclosed deductions made in the 13 weeks prior to the claim being brought, even if you were entitled to make such deductions.
In other words, time spent updating payroll processes now could save a lot of time and money later down the line.