The new legislation that comes into effect from 6 April 2019 requires all workers to be given itemised payslips.
That includes employees but also casual and zero-hours workers who are currently vulnerable; as their tendency to work varying hours in different positions across various pay grades makes checking total pay calculations notoriously difficult.
From April 2019, in cases where the rate of pay and hours are variable, either details of how the payment was calculated or the different payments for varying types of work and/or pay must be set out in written, printed or electronic payslips.
The amendments are much-needed and will mean that around 1.2 million agency workers will finally be entitled to a clear itemised payslip detailing both what they have earned and any costs deducted, something that has previously caused confusion as well as potential underpayment for many UK workers.
In 2012 recruitment expert Staffline estimated that, because of certain 'travel and subsistence' expenses schemes that continued to be run by some employers despite being made unlawful in 2011, at least 250,000 temporary workers were not receiving the right amount of pay.
Then came the Low Pay Commission’s 2016 report, followed by the recommendations of the Taylor Review, and all of a sudden pay transparency became a hot topic.
The Low Pay Commission recognised that the inability to understand exactly what work people were being paid for was creating a barrier to both workers bringing cases against their employers, and to HMRC ensuring minimum wage legislation was being adhered to. It advised that employers’ obligations in relation to the provision of payslips should be reviewed. It also recommended the itemisation of payslips.
It was this advice, in addition to the recommendations of the Taylor Review in relation to increasing both the rights of workers and clarity around their status, that led to the government introducing the Employment Rights Act 1996 (Itemised Pay Statement) (Amendment) Order 2018, which set out the requirement that employers provide a breakdown of pay.
A second Order, The Employment Rights Act 1996, was also amended to require employers to provide all workers with written itemised payslips, becoming The Employment Rights Act 1996 (Itemised Pay Statement) (Amendment) (No. 2) Order 2018 in the process.
So now, in addition to the information set out in Section 8 of the Employment Rights Act 1996 – including earnings before and after any deductions, the amount of any deductions that change each payment period, the net wages to be paid, and an explanation of any fixed amount deductions – employers must also include a breakdown of pay.
The question for most companies is what actions they should take to ensure they comply with the new legislation by April 2019.
The first step must be to review payroll processes. This means ensuring that the necessary basic information is already included on every payslip. At this point businesses should also take into account the new legal requirements and look at how the current payslip format can be amended to incorporate the new data.
They should also consider how they’ll collate this new information. Will it be automated or manual? What sort of training will be introduced to ensure HR teams understand the new process? Whatever way they do it, this needs to be as foolproof as possible as any failure to pay all or part of the wages due to an employee could provide grounds for a legal dispute.
Finally, those businesses that decide to outsource payroll should remember that they must let their employees know that they are doing so as part of their GDPR obligations.
Admittedly this is no small task, and will require meticulous planning to ensure all aspects of the new legislation are factored in. That said, once in place it should offer both workers and employees greater assurance that they are receiving the correct payment, reducing time-consuming pay-related enquiries in the process.
Lindsey Knowles is head of employment law and partner at Kirwans
