All change for payroll managers
Is your payroll strategy aligned with recent legislative changes?
Along with impacts on Human Resource and Human Capital policies within UK business, changes to the Age Discrimination law also impact the operation of payroll.
Requirements to record birthdates
Some employers have already gone public in following ACAS advice in removing the need for the birthdate from recruitment forms and documents. Some employers are hinting that they will go further and remove the use of the birthdates entirely for their employees as a consequence of the changes. This reasoning takes the changes just a little too far and conflicts with requirements of HM Revenue and Customs where the birthdate is compulsory for employees who do not have a valid National Insurance number. With the onset of compulsory electronic exchange from April 2008 and the requirements for accurate employee data, it will be a statutory requirement to hold employees' birthdates and report them on the end of year P14 to HMRC. How else will employers know which valid National Insurance Categories are to be applied to employees and deal with pension and retirement requirements?
Statutory Payment entitlements for all employees
Subject to appropriate earnings tests (earnings have to exceed the Lower Earnings Limits for National Insurance purposes), all employees are now entitled to Statutory Payments regardless of age; that includes: Statutory Sick Pay (SSP); Statutory Maternity Pay (SMP); Statutory Paternity Pay (SPP); and Statutory Adoption Pay (SAP) - although you do have to be 21 or over to adopt a child.
So employees who are currently excluded from Sick Pay because they are over state pension age now come into entitlement to Statutory Sick Pay (subject to the appropriate earnings tests), even though they still no longer have any requirement to make National Insurance Contributions.
The ACAS guide for employers to the new legislation can be found at http://www.acas.org.uk/media/pdf/d/t/6683_Age_and_the_Workplace_AWK.pdf
National Minimum Wage (NMW) changes – from 1st October 2006
Also from 1st October 2006 changes are made to the rules for National Minimum Wage (NMW). Another reason why the birthdate of employees remains an important information point for employers.
The development rate for workers aged 22 and over is now abolished for payments starting on or after 1st October 2006. From that date all workers aged 22 and over qualify for the main rate of NMW, even if they were previously in receipt of the development rate.
Entitlement to the youth rates are dependent on the employee being older than the “compulsory school age”:
In England and Wales: a person is no longer of compulsory school age after the last Friday of June of the school year in which their 16th birthday occurs.
In Scotland: pupils whose 16th birthday falls between 1 March and 30 September may not leave before the 31 May of that year. Pupils aged 16 on or between 1 October and the last day of February may not leave until the start of the Christmas holidays in that school year.
In Northern Ireland: a person is no longer of compulsory school age after 30 June of the school year in which their 16th birthday occurs.
NMW Rates
There are three levels of minimum wage from 1st October 2006:
- £5.35 per hour for workers aged 22 years and older
- £4.45 development rate per hour for workers aged 18 - 21 years inclusive
- £3.30 per hour which applies to all workers under the age of 18 who are no longer of compulsory school age.
New entitlement for Statutory Payments
Also from 1st October 2006 new Statutory Parental Payment rules come into force. If your employee's baby is due from 1st April 2007, then the following new statutory entitlements apply:
- All pregnant employees are entitled to have 52 weeks maternity leave whether they qualify for Statutory Maternity Pay (SMP) or not
- Those that qualify for SMP are entitled to 39 weeks (6 higher rate / earnings related weeks and 33 standard rate weeks subject to earnings qualification)
- They can choose to start maternity leave and SMP on any day of the week (not just Sundays)
- The employee and employer are allowed to agree up to 10 Keeping In Touch (KIT) days where the employee can work during the maternity leave and not lose any maternity pay entitlements
- Employers may now optionally choose to pay SMP in alignment with the standard pay period operated for employees
- Employers are now allowed 8 weeks' notice for those employees who wish to change their dates for returning to work
So for standard payments of SMP for mothers who choose to start their maternity leave 11 weeks before, the earliest start dates for the new rules and payment entitlements is 14th January 2007 and possibly earlier for some premature birth situations (potentially as early as November 2006 in some rare cases).
So start gearing up for the new maternity payment rules as they will be coming very soon and will ordinarily start impacting payments from 14th January 2007. Look out for medical evidence that shows the “week baby due” date as being on or after 1st April 2007.
Similar changes are made to SAP for placements from 1st April 2007.
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