Category Archives: Payroll

Auto Enrolment Earnings

I have been asked what the levels of auto enrolment earnings are that mean an employer has to set up a qualifying auto enrolment pension scheme.

Auto Enrolment Earnings

Although an employer does not have to automatically enrol employees earning less than the earning trigger for auto enrolment, an employee can choose to opt in.

Typically, a pub or café may have no employees earning above the auto enrolment earnings trigger of £10,000 per year.

However, they can choose to opt in and the small employer is burdened by additional employee costs and professional fees processing their payroll and auto enrolment obligations. See my post Auto Enrolment Burden on Small Businesses

Auto Enrolment Earnings and Employee Ages for Eligibility

The Three Employee Categories

Entitled Worker

  • Aged 16 to 74
  • Earn less than the qualifying lower earnings threshold of £5,824 a year (£486 per month or £112 per week)
  • An employer does not have to automatically enrol ‘entitled workers’. If the employee decides to opt in, the employer does not have to contribute to their pension fund.

Non-Eligible Jobholder

  • Aged 16 to 74
  • Earns more than £5,824 a year (£486 per month or £112 per week) but no more than £10,000 a year (£833 per month or £192 per week)

Other non-eligible jobholders:

  • Aged 16 to 21 or between State Pension age and 74
  • Earn more than £10,000 per year (£833 per month or £192 per week)

The employer does not have to automatically enrol ‘non-eligible’ jobholders. If the employee decides to opt in, the employer must contribute to their pension fund.

Eligible Jobholder

  • Aged between 22 and State Pension age
  • Earns more than £10,000 per year (£833 per month or £192 per week)

The employer must automatically enrol ‘eligible’ jobholders and contribute to their pension fund unless the employee decides to opt out.

Disclaimer

The above is not exhaustive and is for guidance only and you should consult your accountant or other professional adviser before taking action on any of the above. See the Disclaimer

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Auto-Enrolment Burden on Small Businesses

Auto-Enrolment

The Auto-Enrolment burden of workplace pensions will be forced on even the smallest business between now and the end of 2017.

Auto-enrolment sounds great, “we’re in” rings from the TV publicity. But it can be heart ache for small businesses that can ill afford such a financial burden.

For career politicians that have never had a proper job, it’s fabulous to come up with these great ideas to encourage pension savings. This perhaps opens up an opportunity for the Government to release it’s State pension responsibilities in the future and pass that responsibility onto employers.

Indeed, for small one person businesses, it can well discourage them to expand and take on their first employee.

Let’s look at the costs for both the employee and employer:

By law you must pay at least the minimum employer contribution in the last column above with the employee making up the difference between that figure and the total minimum contribution in column 2.

I have defined ‘qualifying earnings’, ‘total pay’ and ‘basic pay’ further down this post.

Let us look at a scenario of a small business with one employee earning £288 basic pay for a 40 hour week (£7.20 an hour National Living Wage). The following table shows the minimum annual contributions that have to be paid:

On op of the employer contribution, the business owner will also have to pay the costs of running auto-enrolment. Unless they do it themselves and risk heavy penalties, they will have to use a payroll bureau. Most, if not all, payroll bureaus will insist on doing both the normal payroll and auto-enrolment as one without the other is destined for disaster!

So, a small employer with one weekly paid employee forced into using a payroll bureau because of auto-enrolment may incur the following typical additional costs:

Payroll processing at £16.50 per week plus £22.00 year end processing = Total £880.00 per year

Auto-enrolment processing £31.50 per month = £378.00

Total costs before any contribution to Auto-Enrolment pension scheme £1,258.00

What goes into the pension fund based on employee working 40 hours a week at 7.20 (£14,976 PA):

Annually up to Sept 2017 – £449.28

Annually up to Sept 2018 – £898.56

Annually from October 2018 – £1,347.84

You do the sums, it costs the employer nearly as much in extra overhead after October 2018 as goes into the pension pot.

There may also be a £35 or more set-up fee for each employee and some pension providers like The Peoples Pension are charging the employer a £500 set-up fee. I know NEST Pensions are not making a set-up charge to employers yet. With set-up charges, ongoing processing charges etc, small employers are being hammered with extra employment costs many cannot afford.

Possible extra burden for the small employer with one weekly paid full-time employee on National Living Wage after October 2018 is £1,857 before set-up costs and all that goes into the employees pension scheme from the employer (before pension fund management charges) is £599. It costs the small employer with one employee as above £1,258 more than the employer contributes.

This really is a true burden on small businesses.

Let’s define the terms ‘qualifying earnings’, ‘total pay’ and ‘basic pay’:

Qualifying earnings’ is the name for a band of earnings you can use to calculate pension contributions. For the 2016/17 tax year, it’s all an employee’s earnings between £5,824 and £43,000.

Total pay’ means all payments made to a worker, including their salary/wages, plus any commission, bonuses, overtime and so on.

Basic pay’ means a worker’s salary/wages and statutory payments like sickness and maternity pay, but it excludes commission, bonuses, overtime and so on.

Employers and employees can pay more than the minimum contribution but the upper limit depends on your pension fund provider.

For more information on what you need to contribute, visit The Pensions Regulator relevant web page.

Disclaimer

The above is not exhaustive and is for guidance only and you should consult your accountant or other professional adviser before taking action on any of the above. See the Disclaimer

 

 

 

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Salary and Dividend Mix – What Your Left With

Salary and Dividend Mix

Let’s look at different director/shareholder salary and dividend mix and see what you would be left with after tax.

The truth is, it will be less than last year due to the changes to the tax on dividends and Employment Allowance but what we want is to be left with as much as possible after the new rules come into force after 6 April, 2016.

Let’s assume you want to have a gross income up to the 40% higher rate band and you are a sole director/shareholder with no other employees (typical of many consultants and freelancers):

Option One (annual salary to NI threshold)

Gross salary £8,060 (no NI or tax to pay)

Dividends £7,940 (£5,000 plus balance of personal allowance tax free)

Dividends £27,000 (taxed at 7.5%)

Total gross income £43,000

Less tax on £27,000 of dividends at 7.5% = £2,025

What you are left with is £40,975

Company gets 20% tax relief on £8,060 salary = £1,612

Overall net remuneration and tax saved by the company is £42,587

Option Two (salary to tax threshold)

Gross salary £11,000 (no tax to pay)

Dividends £5,000 (tax free)

Dividends £27,000 (taxed at 7.5%)

Total gross income £43,000

Less tax on £27,000 of dividends at 7.5% = £2,025

less employees NI at 12% on £2,940 = £353

What you are left with £40,622

If you cannot claim the Employment Allowance then the company has to pay 13.8% Employers NI on £2,888 = £398.54

Company gets 20% tax relief on £11,000 salary plus the £399 Employers NI = £2,280

Overall net remuneration and tax saved (after deducting Employers NI) by the company is £42,503

Option One is marginally better and benefits from less administration paying National Insurance Contributions to HMRC.

If, however, you have other employees and qualify for the Employment allowance, then Option Two is marginally better as the company will not have to pay Employers NI contributions.

Option One is likely to be more beneficial for many consultants and freelancers who only employ themselves as directors.

Again, another affect would be if you have other employees that use up the Employment Allowance and then option one is better again.

Remember: Please get advice from your accountant or payroll bureau before taking action on the above

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Sole Directors Optimum Salary and Dividend 2016/17

Salary and Dividend

Many consultants, freelancers and other small limited companies operate as a one person/director company with no other employees.

For these business owners we look at the optimum salary and dividend mix each year. unfortunately, with changes to the Employers Allowance together with changes to the taxation of dividends from 6 April, 2016 more tax will have to be paid.

 

Optimum Salary and Dividend

If you have no employees other than yourself as the sole director (and therefore cannot claim the £3,000 Employment Allowance) then it may be better to take a salary up to the National Insurance Primary threshold (PT) and the balance in dividend.

You have to earn above the National Insurance Lower Earnings Limit (2016/17 £112 per week £486 per month) to keep your entitlement to future state benefits and pension. There is no National Insurance to pay at this level until you exceed the National Insurance Primary Threshold (2016/17 £155 per week or £671.66).

Due to the changes coming in from the 6 April, 2016, if you are the sole director/employee of your business, I suggest a monthly gross salary of £670 which is just below the threshold for paying Employee and Employer National Insurance contributions and take the balance in dividend.

From 6 April, you will have to pay some tax on the dividend but this can still show a small saving on going through the payroll. See Dividends Tax Shocker.

There are different optimum salary and dividend mixes for other circumstances such as if you have other employees or directors. contact your accountant or payroll bureau for advice.

Remember to get advice from your accountant or payroll bureau before taking action based on the above

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National Living Wage

National Living Wage

National Living Wage

The Government’s National Living Wage is due to be introduced on 1st April 2016 for all working people aged 25 and over, and will be set at £7.20 per hour. The current National Minimum Wage for those under the age of 25 will continue to apply.

Employees who have been covered by the National Minimum Wage, and are 25 years old and over, will be covered by the National Living Wage.

The new National Living Wage is different from the Living Wage. The National Living Wage, as with the National Minimum Wage, is a legal minimum hourly rate of pay and is updated by the Government annually. Remember, the National Minimum Wage still applies to employees aged 24 and under. 

The Living Wage is set independently of HMRC by the Living Wage Foundation and this is calculated according to the basic cost of living in the UK. Employers are not legally obliged to pay this higher Living Wage.

As much as I feel that employees should be fairly remunerated, many small businesses just can’t afford to pay a further 50 pence an hour just six months after the last statutory increase. The National Living Wage is a 7.5% increase on the previous £6.70 National Minimum Wage set in October last year!

The increase in the Employment Allowance will help reduce the impact for small employers that have full time employees. It may not help employers that have part-time workers that do not reach the National Insurance threshold of £156 per week.

Pubs, restaurants, cafés and small hotels are likely to be badly affected financially as they tend to employ a lot of part time staff earning less than £155 per week – we may have to pay more as customers!

There are penalties for non compliance and you should get advice from your accountant or payroll bureau who you should consult before taking action on the above.

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Changes to Employment Allowance

Employment Allowance

There is good news and bad news from 6 April, 2016 when important changes to the Employment Allowance come into place.

Since 6 April, 2014 employers have been able to reduce the amount of Employers’ National Insurance contributions (NICs) they pay for their employees by up to £2,000. This is called the ‘Employment Allowance’.

At the moment, businesses don’t have to pay any employer National Insurance contributions at all if they usually pay less than £2,000 a year.

The good news, from 6 April 2016, is that the relief the employer receive’s will go up from £2,000 to £3,000. This means that small businesses will not have to pay the first £3,000 of Employers’ National Insurance contributions for the PAYE tax year.

Note: This allowance is an annual allowance for the whole business – not per employee!

Now for the bad news: sole director employee businesses – i.e. a limited company with just one employee who is also the owner director, will no longer be able to claim the Employment Allowance.

This will affect a lot of consultants and freelancers.

The bad news gets worse!

HMRC today advised me:

If the sole owner director is employed as an employee and pays Class 1 National Insurance, the Employment Allowance can only be claimed if at least one other person is employed in the business and is paid above the Class 1 National Insurance Secondary Threshold (£156.00 per week).

Basically this means that the £3,000 Employment Allowance for Employers Class 1 National Insurance contributions can only be claimed if at least two or more directors or employees are paid above £8,112.00 per annum.

I will look at other scenarios that may put a spanner in the works and prevent employers claiming the Employment Allowance such as:

  • What if the second employee leaves, thus leaving a sole director employee?
  • Can sole traders and partnerships claim the Employment allowance if they employ one person?

Remember, consult your accountant or payroll bureau before taking action based on the above 

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Auto Enrolment Staging Date

Retirement NestEgg

It is important to find out your pension auto enrolment staging date (start date) as early as possible to plan for the start.

Employers that had PAYE schemes before 1 April, 2012 can find their start date by entering your PAYE reference on the Pensions Regulator finding your staging date site page.

If you are a new employer and got a PAYE reference after 1 April, 2012 your staging date can be found from the table below:

Staging dates for employers who set up after 1 April 2012

Date PAYE income first payable Staging date
Between 1 April 2012 and 31 March 2013 1 May 2017
Between 1 April 2013 and 31 March 2014 1 July 2017
Between 1 April 2014 and 31 March 2015 1 August 2017
Between 1 April 2015 and 31 December 2015 1 October 2017
Between 1 January 2016 and 30 September 2016 1 November 2017
Between 1 October 2016 and 30 June 2017 1 January 2018
Between 1 July 2017 and 30 September 2017 1 February 2018

Remember, before taking action based on any part of this post, please seek advice from your accountant or payroll bureau.

 

 

 

 

 

 

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Employment Terms – terms and conditions of employment

Payroll and Salaries

As a minimum, an employer should by law provide an employee with their employment terms, (known as a “statement of terms”) containing the main terms and conditions of employment within two months of starting work.

The statement of terms is the absolute minimum required by law and does not protect employers properly. For this reason an employment contract is far better for both employers and employees.

If only the bare minimum “statement of terms” is provided to a new employee, the following key information must be included in a single document which is known as the “principle statement”

  • Name of employer and employee.
  • Date employment and continuous employment started.
  • Job location.
  • Pay and whether it’s weekly, monthly etc.
  • Working hours.
  • Holiday entitlement.
  • Job description / job title.
  • Details of any collective agreement that directly affect the employee’s conditions of employment.

For details on the following information employers may provide other documents such and staff handbooks, or staff intranet sites for:

  • sick leave and pay entitlement
  • pensions and pension schemes
  • disciplinary and grievance procedures
  • appeals procedure under the disciplinary and grievance procedures.

We can provide payroll bureau clients with a Contract of Employment template for specific types of employee and if you want additional information on the bare minimum “statement of terms” you can check out advice provided by ACAS.

Remember, before taking action based on any part of this post, please seek advice from your accountant, payroll bureau or legal advisor.

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Auto-Enrolment 21 Point Employer Checklist

Direct Debit

 

 

 

 

 

 

 

Here is another useful Auto-Enrolment 21 point employer checklist and you can download it at the bottom of the page:

Download (PDF, Unknown)

See also:

Workplace Pension Auto-Enrolment page

It is important to seek advice from your accountant, payroll bureau and IFA before taking action on the contents of this checklist.

 

 

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Keep Onside with Auto-Enrolment

Retirement NestEgg

Keep on-side with the Pensions Regulator and ensure you cover all the due diligence required for auto-enrolment.

As Auto-Enrolment for small businesses draws ever closer to being a reality I, in conjunction with my accountancy Institute, have linked up with the multi award winning Henry Tapper and his team at The Pension Playpen to help clients through the Auto-Enrolment Due Diligence maze.

Henry and his team will cover all the due diligence necessary to work out which staff are Eligible or Non-eligible, they will provide a report of all the workplace pension providers that will offer you a scheme and finally they will provide all the necessary Certificates and Reports that will prove to the Regulator and the STAFF that the scheme complies and that you have made the choice in a correct manner.

One important point to remember is that it is not just the Pensions Regulator that employers are answerable to it is also their staff who have a right to expect that their contributions are being safeguarded and that the choice of the pension provider has been made in a correct way and not just based on cost or ease of use.

The Dales Accountancy Service – Payroll Bureau

If you use my payroll bureau service, my systems are ready for auto-enrolment. I will also happily assess your workforce for free if you are a client (doing your own payroll or using my payroll bureau) as required in stage two of the auto-enrolment compliance below.

Planning for Auto-Enrolment

One – Register with the Pensions Regulator

It is important that you nominate someone from your organisation to be the main point of contact on all auto-enrolment matters. The primary contact must be the most senior person within your organisation.  A secondary contact will be the person responsible for implementing auto-enrolment.

Two – Assess your workforce

If you have staff on PAYE it is very likely that you will have to enrol at least some of them. Use The Pension Playpen’s free Workforce Assessment to see how your workforce is divided between Eligible jobholders, Non-eligible jobholders and Entitled workers and the cost of contributions into the scheme for each category. All these calculations are done for you and all you need to do is input some basic data into their system. Should you then decide to proceed with Pension Playpen’s ‘Choose a Pension’ service this data will be pre-loaded. Note that all of your information which Pension Playpen hold will remain secure and fully confidential.

If you wish to assess your workforce yourself for free register with The Pension Playpen

Three – Choose a pension

Pension Playpen have researched the market for workplace pensions and considered the differing requirements of each pension provider. Their system analyses your data and will quickly match you with those workplace pension providers willing to offer you a scheme. There is a charge for this service but you only need pay after we have confirmed how many providers are willing to offer you a quote.

Please note that if you are a Dales Accountancy Service client the charge is substantially discounted due to the volume that my Institute and it’s members put through, so please talk to me to get your discount code.

This can be done through The Pension Playpen

Four – Integrate your payroll

Setting up auto-enrolment into a new pension scheme might lead to other complications like integration with your payroll systems or with the providers own systems used to manage contributions. These issues are best addressed early on. Pension Playpen will help you with the questions you need to ask of your payroll system provider and chosen pension provider.

The Dales Accountancy Service payroll bureau system integrates with most pension providers.

Five – Auto-enrolment compliance

You can use Pension Playpen’s service to choose a pension with no obligation to purchase a scheme from your chosen provider. After you have chosen a scheme they will give you a package of reports and an Actuarial Certificate to confirm that your chosen scheme will comply with the rules and regulations for auto-enrolment and minimum terms required by the Regulator.

This can be done through The Pension Playpen

Six – Implementation and beyond

Auto-enrolment does not finish once you have made your first contribution. You will need to continue to pay regular contributions into the pension scheme, monitor the age and earnings of all staff and any new staff joining, process any opt-in, joining or opt-out requests, keep and maintain accurate records and re-enrol every three years.  Once your systems have been set up this will need to operate just like real-time PAYE and as part of your usual business process.

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Employee Accommodation – Accommodation Offset

National Minimum Wage and Accommodation Offset
(This post is based on rules as at 1 October, 2015)

Accommodation provided by an employer can be taken into account when calculating the minimum wage.

The offset rate for accommodation charges from 1 October, 2015 is £5.35 a day or £37.45 a week. If an employer charges more than this, the difference is taken off the worker’s pay which counts for the minimum wage.

This means the higher the accommodation charge, the lower a worker’s pay when calculating minimum wage.

If the accommodation charge is at or below the offset rate, it doesn’t have an effect on the worker’s pay.

If the accommodation is free, the offset rate is added to the worker’s pay.

No other kind of benefit (eg food, a car, childcare vouchers) counts towards the minimum wage.

Use the National Minimum Wage calculator to check if the minimum wage has been paid.

What counts as accommodation charges

Include these costs as part of your overall accommodation charges:

  • rent
  • charges for gas, electricity, furniture, etc
  • laundry

Working out if the employer provides the accommodation

The employer is providing accommodation if any of these apply:

  • the accommodation comes with the job
  • the employer (or a connected person or company) owns or rents the property the worker lives in, even if there’s no direct link between the job and the accommodation
  • the employer (or an owner, business partner, shareholder or director) gets a payment or benefit from the worker’s landlord or a member of the landlord’s family

Accommodation costs count towards the minimum wage even if the worker doesn’t have to use the accommodation to do the job. If the accommodation is optional, it only counts as a cost if the worker uses it.

Accommodation charges: effect on the minimum wage

This depends on how much an employer charges for accommodation.

It’s calculated by ‘pay period’, the intervals at which someone is being paid. This can be weekly, monthly or in irregular intervals like every 10 days.

If the accommodation is free, it still affects the minimum wage. There is an offset rate of £5.35 per day for this.

It doesn’t matter if the cost of the accommodation is taken from the worker’s wages beforehand or if the worker pays the cost after they get their wages.

Example 1: accommodation is free

John is 27 and gets £5.50 an hour. This is below minimum wage.

He works 30 hours a week.

He gets paid every 7 days (his pay period).

His employer provides free accommodation 7 days a week.

This brings John’s pay up to £6.75 an hour which is above the minimum wage rate of £6.70.

Calculation:

  1. £5.35 (offset rate used when accommodation is free) × 7 (days accommodation provided in pay period) = £37.45
  2. £37.45 + (£5.50 × 30 – the total pay in reference period) = £202.45
  3. £202.45 ÷ 30 (total hours in pay period) = £6.75

Example 2: accommodation is charged below the maximum rate

Lisa is 30 and gets £6.71 an hour. This is above minimum wage.

Her employer charges £3.75 per day for accommodation which is below the threshold of £5.35. No offset rate is applied.

The accommodation charge doesn’t affect Lisa’s pay of £6.71 an hour.

Example 3: accommodation is charged above the maximum rate

Sam is 35 and gets £6.75 an hour. This is above minimum wage.

He works 45 hours a week.

He gets paid every 3 weeks (his pay period).

His employer charges £7.00 per day for accommodation.

Sam lives in the accommodation full time which is 21 days for his pay period.

This brings Sam’s pay down to £6.49 an hour which is below the minimum wage.

Calculation:

  1. £7.00 (accommodation rate) × 21 (days accommodation provided in pay period) = £147.00
  2. (£6.75 × 135 – hourly rate × total hours in pay period) – £147.00 = £764.25 + (£5.35 × 21 – offset rate × days in pay period) = £876.60
  3. £876.60 ÷ 135 = £6.49

Please get advice from your accountant or payroll bureau before taking action based on the above content.

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Minimum Wage Going Up

The minimum wage goes up in two weeks on Thursday 1 October, 2015.

  • For adult rate for employees aged 21 years and over it increases by 20 pence from £6.50 to £6.70 per hour
  • The rate for 18 to 20 year old’s will increase by 17 pence from £5.13 to £5.30 per hour
  • The rate for 16 to 17 year old’s will increase by 8 pence from £3.79 to £3.87
  • The apprentice rate will increase by 57 pence from £2.73 to £3.30 per hour
  • The accommodation offset increases from the current £5.08 to £5.35

What is the Accommodation Offset?

This is the largest real-terms increase in the National Minimum Wage since 2007, and more than 1.4 million of Britain’s lowest-paid workers are set to benefit.

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Tips at Work

In the hospitality trade tips and gratuities are part of an employees reward for good service.

I dined out this evening and added a gratuity to my debit card payment and my wife, unaware of this also left a cash tip on the table for the waitress (a double tip can be quite unsettling for us accountants).

This got me thinking and as a typical accountant I thought it a good idea to do a blog on HMRC’s advice on the subject (a bit sad I know!).

Employees receiving tips have to pay tax on any tips they get, and sometimes National Insurance contributions as well.

How the tax is worked out, and whether you have to pay National Insurance depends on:

  • who the tips are given to
  • who decides how the tips are shared out

Cash tips paid directly to the employee

If an employee is given a tip in cash directly by the customer, the employee must pay tax on them but not National Insurance by declaring tips on their Self Assessment tax return.

If the employee does not normally complete a tax return then HMRC will estimate their tips based on business sector and/or information from the employer. The tax on the tips will then be collected through the PAYE system by an adjustment to the employees tax code.

Tips included in card or cheque payments

If these tips are paid to the employee directly, the employer is responsible for making sure that it is included as part of the pay subject to tax through the PAYE system.

Sometimes the tips are pooled together and shared out – this is called a ‘tronc’ and has a separate PAYE registration and the person who looks after the ‘tronc’ known as the ‘troncmaster’ is responsible for making sure tax is deducted from the tips.

HMRC has a detailed guide on tips and troncs if you are or have a troncmaster

Download (PDF, Unknown)

.

If the employer decides how the tips are shared out, National Insurance is due as well as tax. The employer is responsible for making sure tax and National Insurance is deducted through PAYE.

Service Charges

These are added to the bill before it’s given to the customer.

If the charge is compulsory, it’s not a tip so if it is given to the employees, it is treated as part of their wages and subject to tax and National Insurance.

If the charge is voluntary, the employee pays tax and National Insurance in the same way as for tips above.

Bonuses

These are part of wages and subject to deduction of tax and National Insurance through PAYE.

Cash in hand wage payments

It is illegal for employers to pay wages ‘cash in hand’ without deduction of tax and National Insurance.

Remember

Discuss any issues raised in this blog with your accountant before taking action as every business has different circumstances.

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Single Director Companies & Auto Enrolment

If you have a limited company and you are the only director/shareholder with no other employees, HMRC will be sending you a letter at some point to explain your situation regarding pension auto-enrolment.

The letter is aimed at single director companies and explains that as you are only paying yourself, and you do not have any other workers, you are exempt from auto-enrolment.

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UK to Raise Minimum Wage

A note for your diary that from 1 October, 2015 the UK minimum wage for employees increases.

The minimum wage will increase by 20 pence (3%) from £6.50 to £6.70 per hour from 1 October, 2015 for employees aged 21 years and over.

Employees aged 18 to 20 years old the minimum wage increases by 3.3% £5.13 to £5.30 per hour.

The minimum wage for apprentices will increase by 20% £2.73 to £3.30 per hour

With inflation at 0.5% this is an increase in real terms for all employees.

 

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IRIS AE Suite for Auto Enrolment

See how Iris KashFlow payroll can help you comply with workplace pension automatic enrolment legislation with the IRIS AE Suite. This complete solution includes assessment, required employee communication and P60 publishing and electronic distribution.

We use IRIS KashFlow payroll for our clients and will be bringing in the IRIS AE Suite for our clients. Click the link below to see a short 3 minute overview:

IRIS AE Suite Overview

For other payroll tutorials and information click KashFlow Payroll Tutorial’s

 

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KashFlow Payroll Year End

KashFlow payroll have provided a free resource video that will guide users through their responsibilities when running the Payroll Year End in KashFlow Payroll and answer any questions you may have on the Year End process.

Year End 2015 in KashFlow Payroll

Note that when running your final pay period in the payroll tax year (‘How to’ in above KashFlow Payroll Video), the P60’s should not be generated until the final pay period FPS’s have been submitted to HMRC. These are automatically processed by KashFlow two days before the pay date. Effectively, two days before your Month 12 or Week 52 pay date you should find that the P60’s start to pull in all the data. Personally, I will be generating the P60’s on 6 April, a day after the payroll tax year end.

Legislation changes in 2015/16 are also summarised within the KashFlow Payroll PYE Video above.

Should you require any further assistance when running your Payroll Year End please contact support@kashflowpayroll.com or glynn.harby@dalesaccountant.co.uk

You can also look at the KashFlow Payroll Tutorials page for other guides.

Legislative updates have been released today in KashFlow Payroll for the 2015/16 tax year.

Key legislation changes within KashFlow Payroll to note include;

– Introduction of new ‘Upper Secondary Threshold’ meaning that employers will not be required to pay Class 1 NICs on earnings up to UST for employees under the age of 21. Four new letters, M,Z,I and K have been added to KashFlow Payroll to correspond to this change. Employees NI letters will be updated automatically within KashFlow Payroll

– Statutory adoption pay has now been increased to match maternity pay. The statutory payment rates have been increased within KashFlow Payroll

– The tax threshold has been increased to £600 so the standard tax code is now 1060L

– Marriage allowance has been introduced for married couples or civil partners, allowing an employee who is not liable for income tax above the basic rate to transfer up to £1060 of their personal allowance to their spouse or civil partner. There are two new tax code suffixes to accompany this, M and N

– Shared parental leave has been introduced, allowing eligible mothers, fathers, partners or adopters to choose how to share time off work after their child is born or placed. When creating a record for ShPP in KashFlow, there are 5 mandatory fields to complete that are listed in the Release Notes.

– The student loan threshold has increased to £17,335

– All tax code changes, rates for tax, NI and statutory payments have been updated for 2015/16

To view the 2015/16 release notes, please visit

KashFlow Payroll 2015/16 – Release Notes

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How to Calculate Holiday Entitlement for Full and Part Time Employees

Many employers are confused about annual holiday entitlement for employees particularly when they are part-time or work irregular hours.

It is important to provide the legal holiday entitlement to avoid breaking the law and the penalties that may result.

In my previous blog I discussed calculating holiday pay for workers on irregular hours, This post looks at employees on a fixed salary who are full or part time.

Full-time employees (working 5 or more days per week) are entitled to 28 days paid holiday a year. The 28 days includes bank holidays. This scenario is quite straight forward, however, if they start or leave during the holiday year, the 28 days is time apportioned.

For example, if someone leaves are joins 6 months into the holiday year, they are entitled to 14 days holiday including bank holidays that are taken in the period employed.

Part-time employees on regular hours

It gets more complicated when an employee is part-time working regular hours over 1 to 4 days a week. These employees are paid 28 days pro-rata.

Example of holiday entitlement calculation:

Working 4 days a week: 28 days x 4/5 = 22.4 days a year

Working 3 days a week: 28 days x 3/5 = 16.8 days a year

Working 2 days a week: 28 days x 2/5 = 11.2 days a year

Working 1 day a week: 28 days x 1/5 = 5.6 days a year

Note that 28 days is the maximum statutory holiday. Employees working 6 days a week are still only entitled to 28 days’ paid holiday and not 33.6 days (28 days x 6/5).

Bank or public holidays do not have to be given as paid leave although employees can take any bank holidays that fall on their normal working days out of their annual holiday entitlement.

A part time employee that works Tuesday to Friday does not work on any of the Monday bank holidays but still gets 22.4 days holiday entitlement.

I know of one employer that had an employee that worked four days a week from Tuesday to Friday and the employee was told correctly that there holiday entitlement was 22.4 days a year but then told incorrectly that it was 22.4 days less 8 bank holidays leaving 14.4 days holiday a year plus a maximum of 4 bank holidays that did not fall on a Monday. The employee lost out on a minimum of 4 days holiday a year and in some years it was 6 days when just boxing day and Good Friday fell outside of a Monday.

I would like to repeat that it is important to provide the legal holiday entitlement to employees and avoid breaking the law and the penalties that may result.

Consult your accountant, book-keeper or payroll bureau for further help.

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How to Calculate Holiday Entitlement for Workers on Irregular Hours

Calculating holiday entitlement can be easy for employees who are full-time and on an annual salary. But what if they are casual workers or work irregular hours?

The hospitality industry such as pubs, restaurants, café’s and hotels often employ workers on irregular hours and on an hourly wage. In these circumstances, calculating holiday entitlement can be a nightmare.

Fortunately, help is at hand through a Government web site where there is a tool to calculate holiday entitlement in days or hours for a full holiday year or work out holiday someone is entitled to when they start or leave a job part way through a holiday year.

For my hospitality industry clients I maintain a spreadsheet listing in the first two columns the employees and the hours they have each worked in the holiday year to date.

Here is a PDF of my Holiday Accumulation Spreadsheet . You can look at my example whilst you follow the blog.

I then use the Government holiday calculator tool to work out the holiday hours due to date and note it in column 3.

When employees want to take holiday, they can get holiday pay up to their entitlement and the holiday hours taken are recorded in column 4 and the monetary amount is recorded in column 5.

Column 6 is the holiday hours remaining taking the cumulative holiday hours entitlement in column 3 less holiday hours taken in 4.

Finally, column 7 is the monetary value of holiday pay remaining and the total of this column is the total future holiday pay owed to staff in the future at that point in time. Under new reporting standards for limited companies, future liabilities have to be shown in the accounts (applicable for accounting periods commencing after 1 January, 2015).

The link to the Government tool for calculating holiday entitlement is below. Once you go on it, click the button ‘Start Now’ and choose ‘casual or irregular hours’ button then click ‘Next step’. Then you can enter the hours worked in the holiday year to date and click ‘Next step’ where on the next page it gives you the holiday entitlement to date in hours and minutes.

Click here to access the Government  Holiday Entitlement Calculator

Consult your accountant, book-keeper or payroll bureau for further help.

Next time, I will explain holiday entitlement for full and part-time employees on a fixed salary.

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