Payroll insight
1999. The calculation year runs from 1 April to 31 March. No payments are made in respect of the additional hours worked. Problems arise once the annual hours, in this case 1,950, have been exceeded during the calculation year. Having exceeded the annual hours, the employee is entitled to be paid the NMW for the hours worked over and above the contract. This applies to the PRP in which the annual hours are exceeded and any subsequent PRPs in the same calculation year. Not only is the employee entitled to the NMW for the hours worked above the annualised hours but also to the normal monthly salary payable under the contract of employment. The ‘good news’ is that the normal monthly salary can be taken into account when determining how much the employee must be paid. In our example, the employee is due additional pay in January, February and March in order to meet NMW requirements. Because the normal salary can be taken into account, so do the hours in calculating the NMW payment. Dealing with February and March first as these are ‘full’ PRPs after the contractual hours have been exceeded, the NMW calculation is as follows. Note
that the ‘additional hours’ is the sum of the monthly contracted hours and the extra hours worked. The normal contracted hours have to be included as additional hours because the annualised contracted hours have been exceeded. 162.5 (contracted hours) + 198 (additional hours) = 360.5 × £7.50 (NMW rate) = £2,703.75 Additional pay required to meet NLW requirements is £620.42 (i.e. £2,703.75 minus £2,083.33). This must be paid in February and March. Additional pay may also be due in January, when the annualised hours were first exceeded. This calculation is more complex involving identifying the day when the hours were exceeded and pro-rating the annualised hours. Assume the contracted hours were exceeded on 11 January and it is not a leap year. The days before and after the hours were exceeded are calculated as a percentage of the days in the year. This percentage is then applied to the annualised hours, as follows: 1,950 × 2.74% (i.e. 10 × 100/365) = 53.43 hours 1,950 × 5.75% (i.e. 21 × 100/365) = 112.13 hours
Hours worked from 11–31 January = 137 (so total of 302.56) The January payment must not be less than the sum of these hours multiplied by the NMW: 302.56 × £7.50 = £2,269.20. The normal monthly salary is less than this, so an additional payment of £185.87 is due. Similar complex calculations are required where the contract is amended e.g. change from full-time to part-time or vice versa. A check must also be made when a salaried hours worker leaves employment part way through the year to ensure that the prorated annualised hours have not been exceeded. Are you compliant? You thought you were NMW compliant? As the above demonstrates, it’s not as easy as you might think to ascertain whether this is the case. With any arrears calculated using the NMW/NLW rates current when the underpayment is discovered, and the penalty for underpayment of the NMW/ NLW set at 200% of the amount of the arrears (capped at £20,000 per worker), non-compliance can prove to be very expensive. n
General Data Protection Regulation
Half day
Remain up to date and educated to ensure you comply with the change in legislation and develop best practice.
This course covers: ● The Data Protection Act ● The General Data Protection Regulation ● Definition differences ● Lawful processing ● Implications for payroll and HR ● Preparing for the GDPR ● Plus much more
Book online at cipp.org.uk or email info@cipp.org.uk for more information.
cipp.org.uk CIPP_UK cip .org.uk @CI P_UK
23
| Professional in Payroll, Pensions and Reward |
Issue 38 | March 2018
Made with FlippingBook - Online magazine maker