Payroll insight
system development work to ensure that individuals from this payroll do not have holiday entitlement created or accidentally get included in our management reporting suite of information. Separating on a totally independent payroll seemed like the only solution to avoid confusion. Of course, we are in a position where we have definitions conflicting with each other such as the apprenticeship levy where they are in scope for inclusion due to the Class 1 NICs so finding some clarity has been really hard. We have also had the challenge that though operating an integrated HR/payroll solution for this legislation it is actually the finance system that needs to be drawn in to the integration to somehow join together orders being raised on the procurement system but with payment of the invoice being made by payroll. In respect of still keeping the systems all in place this has meant we have had to really think through our processes and the guidance we give out to the business. Ian Holloway: Again, we have made clients aware that these individuals are not employees or workers and the rights associated with these need to be withheld. The reality, however, is that given the right circumstances, some integrated HR and payroll software products may make statutory payments and will deduct student loans. HMRC have been made aware of the need for a ‘deemed employee’ flag that would have the function of supressing these things – and the issue of student loan SL1s in the first place from HMRC. I do believe that this is an issue that needs to be addressed by HMRC with urgency for 2018–19 and onwards, especially if the off-payroll working rules
enrolment and other employment rights. Neil Tonks: There certainly needs to be some differentiation to enable employers to avoid attaching items such as holiday and sick pay rules, auto-enrolment and other pension schemes and so on to the records for the contractors. How this is done will differ between payroll systems and we’ve given our clients guidance on how to achieve this on our product. It’s complicated a little by there being two approaches (using the payroll just for the tax, NI and RTI but still making the actual payment via accounts payable, or doing the whole job including the payment from the payroll system) but we can cope with either. One question we do get is whether these individuals should be on a separate payroll. In our case this is not vital but I personally believe it’s a good idea as it means that it’s easier to spot potential issues such as these individuals being attached to student loan deductions. If you have a few contractors mixed with employees in a large payroll, these things are much harder to spot. Karen Beckett: Our HR/payroll software allows us to identify the individuals as being excluded from being treated as ‘employee’ or ‘workers’ for the purposes of employment rights. This is particularly important especially as HMRC are unable to identify them through the FPS and may issue student loan notifications which are not due for processing by organisations under the rules. Duncan Groves: Many public bodies already differentiate employees from others paid through payroll. For example, ‘office holders’ are already treated as employees for tax/NICs purposes but enjoy no employment rights. Clearly, it would be helpful to differentiate them, but I’m not sure how clients are managing this task. How are service suppliers reacting to the changes? Do you expect to see an increase in the rate charged for the work? Do budgets from April fully reflect increased costs (e.g. employer NICs, holiday pay, increased rate for the work)? Ian Holloway: We have not increased our prices at all or revised our service provision substantially with regards to this
Duncan Groves, director and head of employment taxes, PSTAX
are rolled-out to the private sector at a later date. Further, I feel that we are fast- approaching the time when employers will have to identify not only workers’ names and personal information but whether they are an employee, a worker, self- employed – or ‘other’! In fact, this may not be such a bad additional administration Jas Jhooty: It is definitely a requirement to differentiate between actual employees and deemed workers as a result of the imposition of these new measures. However, this means even more work for HR and payroll software providers who have been put under lots of pressure with all of the other changes announced over the last few years (e.g. real time information (RTI), auto-enrolment etc) to deliver such solutions. David Paul: The recent raft of high profile employment law cases such as Uber, Pimlico Plumbers and CitySprint have determined that many contractors are ‘workers’ and so are entitled to rights such as holiday pay, sick pay and pensions contributions. But they may be self- employed for tax purposes in which case PAYE doesn’t apply. The mis-match works the other way around for these new provisions. The contractors are ‘deemed’ employees for tax legislation alone and this does not confer entitlement to the employment rights that other public sector workers might enjoy. An added layer when agencies are involved is the Agency Worker Regulations which after prescribed periods provide for certain employment rights in line with those provided to regular employees. In some instances, a separate payroll is being used for the contractor population, either in-house or externally via the use of an umbrella which enables easy flagging. Where the contractor is paid via the main payroll then flagging is essential to identify those who will fall into pensions auto- burden to place on employers, as they should then realise their legal responsibilities from the very start.
21
| Professional in Payroll, Pensions and Reward |
Issue 32 | July/August 2017
Made with FlippingBook - Online Brochure Maker