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because the fee is seen as a benefit to the employer albeit it is meant to compensate the employer for operating the AEO on behalf of the courts, Child Support Agency and local authorities. As this is a grey area for employers, we contacted HMRC and BIS to request that they consider the following: ● clarifying the guidance as to the correct tax and national insurance (NI) treatment for the £1 administration fee ● revoking the regulation preventing employers from deducting the £1 administration fee when the employee earns the NMW. HMRC’s initial response was that a deduction for an AEO administration fee is a charge which is retained for the employer’s own use and benefit and accordingly reduces the NMW under regulation 32(1)(b) of the NMW regulations 1999 (now regulations 32(1) (b), 34(1)(c) and 35(e)) of the National Minimum Wage Regulations 1999). The legislation is clear in this matter and is reflected in guidance for employers which states: “You cannot make any deduction or take a payment that reduces a worker’s pay below [NMW] rates, even if you have their permission to do so”. The policy team went back to HMRC with concern that as the £1 deduction is taken from net pay, after the deduction of tax and NI contributions (NICs), why is the deduction not permitted? We also questioned the ‘employer’s own use and benefit’ arguing that the employer has had the duty to process AEOs imposed on them – it is not employers’ choice to provide the service on behalf of the courts etc but merely a vehicle to deduct and pay over amounts on behalf of these organisations. The £1 deduction is not an employer benefit but recompense for the employer and in some cases the employer will employ resource to cope with such an admin duty and the £1 deduction does not come close to funding that resource. For legislation to be written in such a way preventing the deduction does appear to be unfair. We respectfully requested again that consideration be provided to review the regulation in question. We also requested provision of employer guidance that reiterates and clarifies the current rules as they stand and to give consideration to including this guidance in HM Courts and Tribunal Services’ (HMCTS’s) handbook for
operation of AEOs. We were informed that as BIS would be considering the NMW regulations as part of other employment law reviews the points we raised in relation to regulation 32(1)(b) would be considered as part of this work. It may surprise readers to know that this review did not come to fruition. This issue has been raised again recently with HMRC and BEIS but the position has not changed: “The £1 deduction for administration charges does have the effect of reducing pay for [NMW] purposes. NMW Regulations 2015, Regulations 12(1) & 12(2)(e) …” (See http://bit.ly/2fU9htR.) ...lack of funds and resource within government has restricted the work... AEO guide At the beginning of 2015, the policy team were informed that HMCTS were to review the AEO guide and at this time we were asked to assist with this work. You may recall that we asked for member input and duly fed our contributions to HMCTS. Unfortunately, we are no further forward with this review as the lack of funds and resource within government has restricted the work happening. In the meantime, pay attachments become more numerous and the need for an accurate update to the guide, that recognises differences across the four UK nations, is more vital than ever. CIPP members and other payroll professionals will benefit enormously from this work and so we feel that payroll professionals, across all sectors, would add real value to this update. This subject was raised at our Annual Conference in October during the Advisory Panel session and we asked at the time if there were any members who would like to volunteer to be involved with in a working group with the sole aim of updating the guide and we were pleased to receive several offers on the day and since then. If you would like to be involved in this working group, please email policy@cipp. org with ‘AEO guide’ in the subject box.
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Issue 26 | December 2016/ January 2017
| Professional in Payroll, Pensions and Reward |
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