MY CIPP
The CIPP's Advisory Service team provides answers to popular questions
Q: Is a company still obligated to pay employee and employer pension contributions for an employee in a salary sacrifice pension scheme during a period of six months’ unpaid leave? A: Employees have statutory rights in relation to child-related and family leave which state that their rights to non-cash benefits must continue throughout leave. Unfortunately, there are no similar employment protections in relation to a period of unpaid leave. Any arrangements regarding this period should be guided by either your pension scheme rules or the employee’s contract of employment. Q: An employee has incurred accounting fees and it has been agreed that these will be repaid to him. If we were to reimburse these fees to the employee as expenses, would there be any risk of a benefit in kind arising? A: Compensating an employee for private expenses that do not count as business expenses should be treated as remuneration and processed through the payroll. For reference, HM Revenue & Customs (HMRC) provides guidance regarding the rules for private expenses: https://bit.ly/3diebhl. Q: Are there any rules during the Covid-19 pandemic that allows an employer to reimburse an employee for their childcare costs due to school closures? A: Unfortunately, the rules have not changed in relation to childcare. If this is not a workplace nursery within the criteria of HMRC’s guidance or is not the provision of a childcare voucher, then the reimbursement cannot be given free of tax and National Insurance contributions (NICs). If the employee pays for the childcare
and the employer reimburses these you would need to add the amounts to the employee’s earnings and operate PAYE (pay as you earn) income tax and class 1 NICs through the payroll. For reference, HMRC provides guidance on what is exempt for childcare: https:// bit.ly/37lCzdZ. Q: When calculating the national minimum wage (NMW), should overtime paid above the base rate be part of the calculation? A: The Department for Business, Energy & Industrial Strategy (BEIS) has issued guidance in relation to the effects of overtime on the NMW (see https://bit. ly/3jV69Ml). This states that the premium element of pay, which is the higher pay rate that exceeds the worker’s basic rate, does not count towards minimum wage pay: “To calculate the premium element where the same basic rate applies to all the work done by a worker in a pay reference period: ● Assume that all the hours worked in the period have been paid for at only the basic rate. ● Multiply the number of hours worked by the basic rate. ● Subtract the resulting total from the total of pay received for the hours worked. The remainder does not count towards minimum wage pay.” Q: A non-domiciled employee has been on the UK payroll for four years. They have no National Insurance number, but we have always processed her NICs using table letter A. The employee is based in Italy and believes she is exempt and should not be paying UK NICs. Please can you advise? A: Social security is usually paid in the
country in which the work is being carried out. If a worker is based in another country and is not carrying out any work in the UK, then they would not pay UK NICs as they would be liable for Italian social security. The employee would not need a UK National Insurance number if carrying out all their work in Italy. You would need to refund the overpaid NICs via earlier year updates for the previous year’s contributions. The employee would also need to ensure that they have paid the social security due in Italy over this period. Q: Can a company refund childcare vouchers to employees which reduced the previous year’s earnings? A: HMRC’s guidance states that childcare vouchers can be refunded to employees (or ex-employees) but PAYE tax and class 1 NICs must be applied prior to making the refund. The refund would be made in the form of a lump sum payment which would be subject to tax and class 1 NICs at the time the refund is given. However, it would be unwise to refund cash for vouchers unless there is a good reason for doing so. The employee cannot ask the employer to refund the childcare vouchers unless they are affected by a life-changing event. There is also a duty to the company and other employees who are in the salary sacrifice arrangement to protect them from invalidating the exemption from tax and NICs. By refunding the childcare vouchers without a good reason, an employer could change the nature of all the vouchers provided, from being non-cash vouchers which are not exchangeable for cash, to vouchers that can be exchanged for cash, goods, or services. This will result in the exemption from tax and NICs being
| Professional in Payroll, Pensions and Reward | April 2021 | Issue 69 12
Made with FlippingBook - Online magazine maker