MEMBERSHIP INSIGHT
A: The standard weekly rate of SMP usually increases every year, on the first Sunday in April. In 2019/20, the rate of SMP increased on 7 April 2019. The increase applies to those still within their SMP payment period (‘maternity pay period’). As SMP is a weekly payment, it depends on when the SMP commenced as to when any increase in the SMP rate should apply. For example, if an employee commenced her SMP on a Thursday, her SMP-week runs from Thursday to Wednesday which would mean the increase would not operate until SMP-week commencing Thursday 11 April 2019. Q: We have taken on a new payroll client who has asked if we, as an agent, can set up payrolling of benefits through their payroll? A: Unfortunately, you cannot do this. Only an employer can set up payrolling of benefits. As an agent you do not have the authority to do this on their behalf. Q: I have recently received a letter from a firm of accountants regarding an employee who is based in Scotland. The letter states that the employee has a protected trust deed set up and that we, as the employer, must make deductions from the employee’s pay and send the amounts deducted directly to them. (Scotland) Act 2016 gives the trustee powers to apply to the employer for a deduction where a protective trust deed (PTD) is in place and where the employee has failed to pay the trustee on two consecutive occasions. A PTD is a formal voluntary agreement between an individual and their creditor/s where over a minimum of 48 months the debt is repaid. This is governed by the Protective Trust Deeds (Scotland) Regulations 2003. The individual is then required to make payments to a trustee. Under regulation 14, the trustee can apply to the employer using either a Form 4A or Form 4B to make deductions from the employee’s earnings and to send the amounts to the trustee. What you would need to ascertain is that the firm of accountants are in fact the trustee before you apply the order. It is also good practice to inform the employee that you are making the deduction. Is this allowable and correct? A: Section 174 of the Bankruptcy
Advisory Service is available 9a.m. to 5p.m. Mondays to Thursdays, and 9a.m. to 4.30p.m. on Fridays * . Call 0121 712 1099 , email advisory.service@cipp.org.uk or visit cipp.org.uk to live chat.
Advisory
*please see summary at cippmembership.org.uk for details.
Q: We run a payroll for a client, which consists of three workers. The client wants to employ his daughter, who is fourteen, for one day a week during the school holidays, such as Christmas and summer holiday periods. Is it necessary to put the daughter on the payroll during these periods? A: I can confirm that you do not have to put this young person on the payroll. This is because when employing and paying children/young people who are under sixteen, they are not entitled to national minimum wage (NMW) and their earnings are not liable to class 1 National Insurance contributions (NICs). Providing the individual is earning under the pay as you earn (PAYE) personal allowance threshold, you would not have to pay her through the normal payroll you run. Q: If an employee wanted to pay the whole of their monthly salary into a pension scheme via salary sacrifice would this be allowed? A: No, it would not be allowed. An employee cannot pay the whole of a monthly salary into a salary sacrifice pension scheme if he or she is entitled to be paid the national minimum wage (NMW). The salary sacrifice involves a change to the employee's rate of pay. However, subject to scheme rules, it may be open to the employee, employer and pension scheme to agree to one or more substantial pension deductions. If the scheme operates the ‘net pay’ arrangement, such substantial deductions would affect the tax due in the period (perhaps reducing it to nil or negative).
There would of course be no effect on class 1 NICs payable at all, so primary and secondary NICs would be due on the salary. Before agreeing to a substantial deduction, you should also investigate and consider the potential impact on other deductions (e.g. season ticket loan, charitable giving, etc) as the pension deduction might be defined to take precedence over them. Will, for example, arrears of deduction accrue, and entitlements be affected? But such considerations are relevant in any salary sacrifice situation, anyway. Q: As we have a leap year in 2020 can you explain how we should calculate payrolled benefits? Should we pro rata for 366 or 365 days? A: When working out the cash equivalent for a benefit, you would always use the days available in the tax year. During a leap year, these days are increased to 366; therefore, you would use 366 days for 2020 to calculate when the benefit is unavailable (where applicable). Once you have worked out the cash equivalent of the benefit, you divide that figure by the number of pay frequencies left in the tax year. Q: We have an employee who has received statutory maternity pay (SMP) during the two tax years 2018/19 and 2019/20. When preparing the SMP payment schedule, should the SMP payable in 2019/20 be paid at the new statutory rate of £148.68 and not the 2018/19 rate of £145.18?
6
| Professional in Payroll, Pensions and Reward | November 2019 | Issue 55
Made with FlippingBook - Online magazine maker