POLICY HUB
Gain a detailed overview of National Minimum Wage (NMW) & National Living Wage (NLW) including the current rates payable. Learn to identify who is eligible, the calculation steps needed, record-keeping and compliance activities required. National Minimum Wage and other worker entitlements
How to approach the overpayment of salaries Q: How should an overpayment of salary be dealt with? A: In 2009, the CIPP sought clarification of the guidance contained in Her Majesty's Revenue and Customs’ (HMRC’s) booklet: CWG2 Employer’s Further Guide to Pay As You Earn (PAYE) and National Insurance Contributions (NICs), in respect of this subject. A senior HMRC representative confirmed to the CIPP that an unintentional overpayment of wages was not deemed as earnings and therefore not subject to PAYE nor NICs. However, HMRC also confirmed that, for a correcting entry to be made to the payroll, an active recovery process must be in place, for example, letters requesting repayment. For reference, see paragraph 1.19 of: http://ow.ly/9q9j30sjOSZ. Employee contributions to an income protection plan Q: A client is considering amending their income protection policy. The change will mean an employee’s contribution is made to the policy, to increase the percentage of salary to be paid if the employee becomes too ill to work. Can an employee’s contribution to the policy be made via a salary sacrifice arrangement? A: If an employee contributes towards an income protection plan, the portion the employee has funded will not be subject to taxes when the policy pays out, as expressed in Section 221 of the ITEPA 2003. However, the employer-funded part of the policy will be regarded as earnings under Section 62 of the ITEPA 2003 and will be subject to tax and class 1 NICs through the payroll. This would mean that the payment of any sick pay under the policy could make it more challenging to administer. If an employee was required to contribute to such a policy, any contributions must come from net pay, as per HMRC Employment Income Manual 06420, and therefore cannot be made under a salary sacrifice arrangement. For reference, see https://bit.ly/3tNSRqn and https://bit.ly/3pXwkq7. Deducting overpayments from statutory sick pay (SSP) Q: An employee has been absent due to ill health for several months. Due to a payroll administrative error, they
received full pay in December 2021, instead of SSP alone. As the individual is now due SSP only, can the overpayment of salary be recovered from his wages? A: HMRC guidance states that SSP is a replacement of earnings, therefore a lawful deduction can be taken from it. However, consideration should be made for the employee during their time of ill health, as a recovery of overpayment from SSP could create financial issues for the individual concerned. It’s advisable to arrange a discussion with regards to the net overpayment when the employee returns to work. For reference, see: https://bit.ly/365s4Od. The health and social care levy for employees over state pension age Q: Will the forthcoming health and social care levy apply to employees who are on NI table letter C from April 2022? A: Employees who are over state pension age, and still in employment won’t be required to contribute to the levy until tax year 2023/24. From April 2023, the 1.25% levy will be formally separated out and NICs rates will also return to their 2021/22 levels. Graduated return to work and sick pay Q: An employee has started a graduated return to work programme following a prolonged period of illness. They were previously working full-time but will only work in the mornings for the next few weeks. Will they be entitled to SSP for the afternoons they're off? A: An employee isn’t entitled to any SSP on any day they perform their duties of employment. The employee should be paid occupational sick pay if they’re entitled to it. Once an employee has returned to work, normal SSP rules must be followed. To receive SSP for any day they don’t work, the employee must form a period of incapacity for work (a PIW). This is a period of sickness lasting four consecutive days or more, including weekends, bank holidays and non-working days. If a PIW isn’t created, there’s nothing preventing the employer from paying the equivalent amount of SSP as company sick pay, but they’re not obliged to. For reference, see: http://ow.ly/QIsM30sjEJT. n
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CPD 7 points
7
| Professional in Payroll, Pensions and Reward |
Issue 81 | June 2022
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