BDO Payroll Newsletter - November 2019

Professional services firms face many of the same challenges as the businesses they work with. Operational efficiency and effectiveness, retaining and rewarding staff and achieving sustainable growth are all common issues. Having advisers who can help you navigate these varied challenges for your own firm is key to success.

PAYROLL ON POINT NOVEMBER 2019

CONTENTS X X Tracking your globally mobile employees X X IR35 and off-payroll workers X X Average holiday pay X X HR solutions – update X X Managing transfer pricing risk via payroll X X Accelerate workshops – let’s kick it up a gear X X Paying our fees by direct debit – reminder

Welcome to the autumn edition of Payroll on Point. This newsletter is designed to help you keep up to date with legislative changes, new developments and key dates in the future. We hope you will find Payroll on Point informative and if you have any questions on the topics raised please don’t hesitate to get in touch. Kind regards,

MARIA MASON DIRECTOR

BREXIT – UK NATIONALSWORKING INTHE EU

We had all hoped that there would be more clarity on Brexit by now, but even though the terms of the UK’s departure from the EU remain unresolved, there are some key points to take account of now. GLOBALLY MOBILE EMPLOYEES If the UK agrees a deal with the other 27 EU member states, a transition period will come into force. A series of rules in relation to social security coordination have already been agreed for this scenario and these rules will be applicable until 31 December 2020 (or possibly later). We would expect the UK Government to enter into discussions with the EU during this period to agree further rules which will be applicable after the transition period.

Should we leave the EU without a deal, there will be no transitional arrangements and a direct social security impact on employees that you have sent/are sending to work in the EU, the EEA or Switzerland. If an employee with a UK-issued A1/E101 was already working in the EU, EEA or Switzerland, NIC would be paid in the UK until the form expiry date. If the end date is after the eventual Brexit day, the relevant EU/EEA/Swiss authority should be contacted to determine whether social security contributions will be due in that country. Helpfully, new social security agreements with Ireland and Switzerland have already been agreed. The agreement with Ireland will come into effect from Brexit day in the event of a ‘no-deal’ Brexit, but the UK and Switzerland have also completed a transitional social security agreement that would will apply until 31 December 2020 even if the UK leaves the EU without an agreement in place.

IDEAS | PEOPLE | TRUST

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BREXIT – UK NATIONALSWORKING INTHE EU (CONTINUED)

The UK also has historical social security reciprocal agreements with the following EU/EEA states – Austria, Belgium, Croatia, Cyprus, Denmark, Finland, France, Germany, Iceland, Ireland, Italy, Luxembourg, Malta, the Netherlands, Norway, Portugal, Slovenia, Spain and Sweden. These agreements were in place to avoid double social security contributions liabilities arising. However, it is unclear whether the countries concerned will implement the agreements. In the event the UK leaves the EU without a withdrawal agreement, the Government has stated that it will keep these reciprocal agreements under review. Whether these come back into force will be subject to discussion and agreement between the UK and the relevant EU Member State. WHAT CAN YOU DO NOW? UK employers with employees currently working in the EEA should now consider whether: X X They would have additional social security contributions costs as a result of a no-deal Brexit X X They would have additional employer reporting and compliance obligations to ensure social security compliance on a country by country basis. BDO has an extensive network of social security specialists throughout the EEA. For help and advice please get in touch with your usual BDO contact, george.milmine@bdo.co.uk or karen.mcgrory@bdo.co.uk .

PAYROLL SERVICES Finally, we would just like to confirm that, whatever happens, there will be no impact to the delivery of our payroll service to you. We hold all your payroll data here in the UK, and we do not envisage any changes to our online portals and payslip hubs. Keep up to date with Brexit developments at www.bdo.co.uk/brexit .

TRACKING YOUR GLOBALLY MOBILE EMPLOYEES With more and more business now becoming international, tracking your employees’ global movements is key. There are many different rules and regulations across differing locations, but knowing how many days are spent in a particular location is key for most. Using multiple spreadsheets or working back thorough staff calendars to ascertain the number of days in any given location post the end of a tax year, can be a real headache. At BDO we have a tool that can help ease that burden. BDO QuickTrip offers a dedicated, intuitive and secure HR portal allowing you quick access to all traveler information in real-time. Your employees are provided with an easy to use smartphone app which enables them to enter their business trips manually, or using the GPS functionality within their phone. Visit www.bdo.co.uk/bdoquicktrip for more information on this tool or contact your usual BDO expatriate tax specialist or stuart.strong@bdo.co.uk .

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IR35ANDOFF-PAYROLLWORKERS New legislation being introduced from April 2020 will result in businesses in the private sector having to consider the employment status of individuals providing services through intermediaries - including their own personal service company (PSC) or similar. As a result, payroll costs are likely to increase for any business that does not qualify as an exempt small business. WHERE DO RESPONSIBILITIES FALL? The ‘Client’ is the organisation in the supply chain that is ultimately receiving the individual’s services, and is responsible for determining whether the individual would have been regarded as an employee if they were engaged directly. In cases where the worker is a deemed employee, the ‘Fee-Payer’ is treated as the employer for the purposes of income tax and NIC. The Fee-Payer is the organisation paying the PSC for the worker’s services. For example, an individual supplies IT services to A Ltd through their PSC. In this case A Ltd is the Client as it is receiving the individual’s IT services. As the party responsible for paying the individual’s PSC, A Ltd is also the fee-payer. It must deduct PAYE and NIC from the payment made to the individual’s PSC: from April 2020 onwards, RTI returns will incorporate a separate indicator to allow HMRC to identify payments for such off-payroll workers. INFORMING THE PARTIES Where the new rules apply, the Client must inform both the party they are engaging with and the worker of their decision (whether the worker is a deemed employee or not), detailing the reasons for its determination. Where necessary, each entity should inform the next entity in the chain of the decision. The Client will also need a process for managing disputes – they must respond within 45 days if a worker contests the decision. X X Whether they fully understand their entire supply chain for the provision of labour and not just the immediate party they contract with? X X Are they the ‘Client’ or ‘End User’? If so, do they have the skill set to carry out status assessments internally or is additional training/resource required? X X Are they the ‘Fee Payer’? If so, are their systems able to manage with the communication between purchase ledger and payroll? X X What are the financial implications – if PAYE and NIC is to be accounted for, who will bear the cost? NEXT STEPS Businesses need to consider: CLIENT/ END USER INTERMEDIARY – PSC ITWORKER A LTD SUPPLY WORKER PAYMENT CONTRACT

To discuss the implications for your business, please contact your normal employment tax contact or mark.seaden@bdo.co.uk .

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AVERAGE HOLIDAY PAY

Currently, when calculating average pay for holiday pay for each employee, an employer has to look back at the employee’s earnings over the prior 12 week period, known as the ‘holiday pay reference period’. However, from April 2020 the holiday pay reference period will be extended to 52 weeks. One of the main reasons behind this change is to accommodate seasonal workers so they are not disadvantaged by the employer using just a 12 week reference period for the calculation - they may not have worked in that period.

However, one item to note is that if the employee has worked for the employer for less than 52 weeks, the pay reference period is then the number of weeks that the employee has been in that employment. Whilst the change has been announced, no guidance has yet been published about how the change to a 52 week holiday pay reference period will work in practice. It is expected that it will work much in the same way as before, but we will provide further updates on this change and any transitional rules once the guidance has been published.

For help and advice on holiday pay issues, please do not hesitate to contact your regular payroll contact.

HR SOLUTIONS - UPDATE

X X Full HR management of personal details, contracts, assignments, disciplinary and grievance, employee files, right to work, absence management and new starter and leaver management X X Management of Tronc payments, on-line payslips and expense management X X Work management module enabling forecasts and targets, scheduling, shift change, time and attendance, workload and budgets, task management and daily dashboard X X Learn module for assessment and checklists, training administration, training content X X Recruitment module with applicant portal, management of vacancies, applicant management, offer and hire and interview management X X A news and communication portal with events calendar and document repository X X Full analytics module and query builder X X Full integration with our payroll systems, removing the need for information to require manual intervention. Our strong partnerships with employment law specialists enable us to give you access to wider HR advisory services including: X X Drafting of policies, contracts, handbooks and other staff documentation X X Settlement agreement advice and support X X Restructuring advice and support X X Redundancy advice and support X X TUPE advice and support X X Disciplinary and grievance advice and support X X Background checks, where relevant subject to role etc. X X Issuing of staff contracts. If you would like any further information on any of the above services, please contact paul.hammond@bdo.co.uk or nigel.honnor@bdo.co.uk .

We are pleased to announce that we have now launched an extensive range of HR solutions offerings for our clients, to ensure we are able to support all areas surrounding our clients’ staff members, whilst providing full compliance. These solutions are tailored and flexible, ensuring they accommodate all your specific requirements. We offer a low cost and simple to use HR software solution for businesses with fewer than 250 staff which provides: X X Access to a simple, easy to use HR system, which is cloud based allowing access for both the central team and all staff, whenever and wherever they are X X Access to central staff for updating of records and adding of new starters information X X Ability for the BDO payroll team to download a monthly file of all changes entered by the client each month, to be fed into the payroll system, removing the need for duplication of data transfer X X Ability for online announcements to all staff X X Shared policy documents and templates X X Employee self-service for all absence recording X X Ability to submit, approve and report on expense claims from one seamless easy to use system X X Automation of holiday booking and sickness processes X X Line management authorisation X X Staff responsibility for updating of their own records X X Email reminders for key events X X Tracking benefits and rewards, training and career development X X A performance management process.

For businesses with more than 250 staff, we now have a partnership with a provider that offers a full HR solution, offering:

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MANAGING TRANSFER PRICING RISKVIA PAYROLL

Payroll can be a very important source of contemporaneous information about a groups transfer pricing risks. It can help provide early indication of changes to a group’s operating model which will typically trigger a requirement to revisit the transfer pricing applied by the group. THE BASICS Most countries apply transfer pricing in their corporate tax regimes. The rules require that global multi-nationals pay tax according to the economic activity conducted in a country. The analysis of the pricing of transactions between the local company and other companies in the international group (their ‘transfer pricing’) will often be guided by the people functions of an organisation: who does what and where is key in assessing where income and costs should sit within a global group for corporate tax purposes. We have seen an increase in HMRC transfer pricing (TP) enquiries and challenges to the allocation of profit within global corporate groups. Failure to comply with TP requirements can result in: X X Negative corporate tax adjustments X X Tax geared penalties X X Interest on late tax payment X X Prolonged HMRC enquiry process resulting in ongoing tax uncertainty

HOWCAN PAYROLL HELP IN MANAGING TRANSFER PRICING RISK? People are usually the most important asset of any business. Payroll activity can provide an immediate indication of changes to a business which could have significant TP implications. Early identification of changes to a group‘s operating model will normally allow a more considered TP policy and better manage the corporate tax risk. For example: X X New international payrolls being run by a group will be evidence of expansion overseas. This will nearly always require TP consideration from a corporate tax perspective X X A large increase in staff numbers could be an indication that a new business line has been established or significant expansion has resulted in operating model changes X X Significant changes to bonus policy and bonus payments could be an indication of a change in business activity or business operating model X X Multiple country payrolls for an individual could be indication of a mobile employee who spends time working for the benefit of an overseas company X X The addition of new directors fees which relate to overseas companies X X Tax equalisation payments going through payroll will usually be evidence of international secondments or assignments. This activity can result in TP implications. If changes in payroll activity fall into any of these categories there may be a need for your business to revisit its TP assumptions and model. BDO has the breadth of expertise and capability to broadly assist with managing the tax risk arising from business change. To discuss any of the issues raised above, please contact paul.daly@bdo.co.uk or ben.henton@bdo.co.uk .

and requiring groups to commit significant internal resource until resolution.

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ACCELERATEWORKSHOPS – LET’S KICK IT UP A GEAR BDO Drive delivers a range of services to help ambitious businesses, by reducing day to day strain or by finding ways to add real value to a company. Our teams have a passion for X X Optimisation of your current accounting system – are your systems fit for purpose, can you get it to do more of the things you need and is it saving you time or costing you effort? X X Review of your management

X X Building budgets and forecasts – do you have a basic budget/forecast that you need assistance refining, or do you need guidance in building a new one for future growth/changes in strategy? As well as our Accelerate workshops, BDO Drive is also able to leverage from its cloud-based technology stack to ensure that you focus on building your business rather than losing time focussing on administrative functions and compliance tasks such as management reporting, bookkeeping, VAT submissions and dashboard reporting. Our BDO Drive Performance offering brings seamless data capture, streamlined processes and bespoke solutions together to ensure you get key insight into business performance without becoming tied down by back office administration. If you are interested in either BDO Drive Performance or our Accelerate Workshops, please speak to your local BDO Drive contact.

information – do you get the timely and accurate information that allows you to make good business decisions, could it be presented in a more meaningful way, and are you seeing the KPIs that your business or investors rely upon? X X Document and review of internal process flows – do you have inefficiencies in the finance process or otherwise that is costing key people unnecessary time, is there a bottleneck that is slowing down the management reporting, and could processes get done more quickly and using automation? X X Identifying funding needs – are you looking for funding but don’t know where to start, what options are on offer, or have the time to invest to get it right?

helping clients and finding practical ways of supporting them, whether they are a start- up or a long-established high growth company. Our Accelerate Programme is a series of high impact workshops designed to identify key strains and stress points, building clear steps and setting goals to assist the company to overcome them so they can concentrate on growing their business. Each workshop focuses on key areas of the business, and aims to provide real value with minimal time investment and disruption on your side. These workshops include:

PAYINGOUR FEES BY DIRECT DEBIT – REMINDER

As you are aware we are now invoicing our clients on the basis of each time the payroll is completed, which for most of our clients is on a monthly basis. We believe that with the technology available through most accounting systems on the market, this should not incur additional administration for our clients. However, we understand that this may not be the case for all and to assist with any additional administrative work this may cause, we are able to offer a Direct Debit facility. With this method of payment, the invoice issued for the processing of the payroll will be collected at the end of the following month it was issued in. This facility can be used for all BDO invoices issued, or just this from your payroll service if you wish. If you would like to make payment of our invoices by Direct Debit please speak to your usual contact about obtaining the form required to be completed.

FOR MORE INFORMATION:

The proposals contained in this document are made by BDO LLP and are in all respects subject to the negotiation, agreement and signing of a specific contract. This document contains information that is commercially sensitive to BDO LLP, which is being disclosed to you in confidence to facilitate your consideration of whether or not to engage BDO LLP. It is not to be disclosed to any third party without the written consent of BDO LLP, or without consulting BDO LLP if public freedom of information legislation applies and might compel disclosure. Any client names and statistics quoted in this document include clients of BDO LLP and may include clients of the international BDO network of independent member firms. BDO LLP, a UK limited liability partnership registered in England and Wales under number OC305127, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. A list of members’ names is open to inspection at our registered office, 55 Baker Street, London W1U 7EU. BDO LLP is authorised and regulated by the Financial Conduct Authority to conduct investment business. BDO is the brand name of the BDO network and for each of the BDO member firms. BDO Northern Ireland, a partnership formed in and under the laws of Northern Ireland, is licensed to operate within the international BDO network of independent member firms.

MARIA MASON +44 (0)738 445 5344 maria.mason@bdo.co.uk

Copyright © November 2019 BDO LLP. All rights reserved. Published in the UK.

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