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Gain a detailed overviewof National MinimumWage (NMW) &National LivingWage (NLW) including the current rates payable. Learn to identify who is eligible, the calculation steps needed, record-keeping and compliance activities required. National MinimumWage and other worker entitlements
hour when the clocks go back then they must be paid for this. To refuse to pay for the extra worked hour could potentially be a breach of contract and the National Minimum Wage Regulations 2015. When the clocks go forward the employee works an hour less and therefore might be paid an hour less subject to the terms and conditions of employment. Q: If an employee leaves before 6 April 2021, what tax code should be used if a payment is going through for them at the end of April? A: The guidance in HMRC’s P9X notice (https://bit.ly/3dUvPHK) states that an employee who leaves before 6 April 2021, regardless of whether a payment is being received in April or not, should not have their tax code uplifted. You should not uplift these tax codes but instead leave them as they were at the end of the previous tax year for the payment in April. Q. When calculating the average weekly earnings (AWE) for SMP, should the value of shares received by the employee during the relevant period be included in the calculation? In accordance with professional advice we put the value of the benefit through the payroll as a notional payment to ensure the correct PAYE tax and NICs are calculated. A: Payments in kind (‘benefits in kind’, according to income tax terminology) may be liable to class 1 NICs. Such payments might fall to be treated as ‘readily convertible assets’. Section 171(4) of Part XII (Statutory maternity pay) of the Social Security Contributions and Benefits Act 1992, provides that “…a woman’s normal weekly earnings shall…be taken to be the average weekly earnings which in the relevant period have been paid to her or paid for her benefit under the contract of service with the employer in question”. Regulation 20 (Meaning of ‘earnings’) of the Statutory Maternity Pay (General) Regulations 1986, provides that “For the purposes of section 171(4) of the Contributions and Benefits Act, the expression ‘earnings’ refers to gross earnings and includes any remuneration or profit derived from a woman’s employment except any payment or amount which is excluded or disregarded in the calculation
of a person’s earnings under regulation 25, 27 or 123 of, or Schedule 3 to, the Social Security (Contributions) Regulations 2001 (payments to be disregarded…)”. Part II of Schedule 3 (https://bit. ly/3nqZN9B) refers to payments in kind that can be disregarded but specifies that (amongst other things) “the conferment of any beneficial interest in any asset mentioned in Part III or Part IV” is not to be disregarded. Part III lists payments by way of readily convertible assets; and Part IV lists payments by way of specific assets. Part IX (Incentives by way of securities), provides that “Payments by way of securities, restricted securities and restricted interests in securities, and gains arising from them, are disregarded in the calculation of an employed earner’s earnings to the extent mentioned in this Part”. As you have been advised that the value of the shares are ‘earnings’ the amount is subject to class 1 NICs. Accordingly, you have correctly made a notional payment through the payroll thereby increasing the individual’s NICable earnings and the amount of class 1 NICs due. So, when calculating average weekly earnings the amount should be included. Q: Where there are connected companies, do you have to add the total NICs paid amongst the group to calculate whether a company is eligible for small employer’s relief or is each company treated separately? A: HMRC guidance (https://bit.ly/3ns5vIk) states: “You can reclaim 103% if your business qualifies for small employers’ relief. You get this if you paid £45,000 or less in class 1 National Insurance (ignoring any reductions like Employment Allowance)”. Potentially, this could mean that if the companies are connected for items such as the employment allowance SMP funding for the smaller company would not be allowed. However, regulation 2 of the Statutory Maternity Pay (Compensation of Employers) and Miscellaneous Amendment Regulations 1994 (https://bit.ly/3aIXoBQ), makes no reference to connected companies for this purpose. Our understanding is that this is solely based on the information sent in the employer payment summary for the PAYE reference, and not upon the total sum of the connected companies’ NICs. n
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| Professional in Payroll, Pensions and Reward |
Issue 71 | June 2021
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