Tag Archives: national insurance

Getting real with PAYE

TaxOn 6th April 2013 the PAYE system changes to a ‘real time information system’ (RTI).  Under RTI  employers are required to update HMRC during the year about changes to staff earnings – so that people on earnings-related credits are not paid out the wrong amount.  This will include benefits and bonuses.

Here are the key points:

  1. Get  employees’ NI numbers on their first day of work with you (if not earlier).
  2. If you use a payroll bureau/agency, your payroll cut off date may be earlier in the month as they will need to collect and process more information. Make sure you note the new  deadlines they send you.   Give yourself time to collect and report on the new information.
  3. If you run your own payroll, make sure your software is up to date with the latest versions – check with your software provider for when “real time compliant” upgrades are available.
  4. If you are still on a manual payroll system, take advice on how to comply. It may be time to get a payroll bureau or some software.

New starters

  1. You’ll need the employee’s National Insurance number. If the paperwork supplied by the employee (P45 etc) does not give you this information, you can get HMRC to do a trace for the number – the form to do that is available from this HMRC’s website
  2. You have to check eligibility to work in the UK.  There is a help page setting out which documents you need to see (and copy) – available online.   If you need to use the new employee’s passport for this check, you will also need to give the passport number to HMRC.
  3. You will need employees to sign a declaration stating:
  • Whether this is their first job during the tax year
  • That this their only job OR
  • Whether they have another job or pension

Advantages

If RTI works employers and employees will be paying the right tax under PAYE and not building up liabilities for underpaid tax that need to be settled the following year (or paying too much tax and having to claim a rebate).

Top tips

If an employee is wrongly classified as self-employed for PAYE purposes, liabilities will be accruing and will need paying later.   You need to be  confident that self-employment is appropriate.  Just calling someone self-employed isn’t  enough – you have to meet the right tests based on the real way you work with them.

HMRC are on to how much tax this can save employers/employees and it is only a question of time before they start auditing some of the more dubious arrangements.

The tax goal posts have moved.    What seemed like a good idea five years ago can be inappropriate today – review your self-employed and freelance arrangements.

From the employer’s point of view, a newly appointed employee now has to serve two years before they qualify for unfair dismissal rights, so employment is an increasingly more flexible option.

For tax advice, please speak to your accountant.  More technical information is available from HMRC.

For a free talk on how employment law includes freelance workers check our KoffeeKlatch website.

If you have out of date arrangements or contracts, now is the time to review them and get it straight – talk to us.

Irenicon Ltd, Airport House, Purley Way, Croydon CR0 0XZ
Tel: 08452 303050 Fax: 08452 303060
Email: advice@irenicon.co.uk Website: http://www.irenicon.co.uk

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Filed under contract, Freelance Workers, pay

No staff, no employment law problems? Think again!

Do you think employment law is nothing to do with you?

Don’t have any staff?The tax man may want tax from you

Think again:

You might find yourself having an uncomfortable session with the tax man.

 

  • You can be liable for tax and national insurance for self-employed workers
  • You don’t automatically own the copyright in designs produced by sub contractors
  • You can be liable for injury to contractors as well as staff
  • Workers have discrimination and other statutory rights even if they are self-employed
  • ………… and there is more

Entrepreneurs tend to start with very informal business structures and then things grow over time.  It is easy to imagine that having good relationships with the people around you means you won’t run into trouble.

Sometimes that works, but other times it is a disaster – when the relationship breaks down there is nothing to protect you from harm.   It’s heartbreaking when we hear from people who say “I trusted them” and there is no agreement to set out who is doing what.   Even large business can have blind spots when it comes to freelance workers.

We have come across businesses who did not own their own website or designs in their own work. We have worked with others who spend months tolerating behaviours they could have put a stop to right away.   We know of others hit with tax bills going years back because they couldn’t meet the current IR35 test and owe tax to the revenue (talk to your accountant about this)

We are not trying to frighten you, but it is a good idea to get real at an early stage.

If you want to think about this in terms of your own business, check our regular free teleseminars on managing freelance workers.  http://koffeeklatch.co.uk/category/events/

If you are using freelance workers and have no agreements in place check out our agreements and guidance.  Designed using more than 30 years of experience in what can and does go wrong – save yourself the experience and set it up right! http://koffeeklatch.co.uk/category/contracts/.

Annabel Kaye is Managing Director of Irenicon Ltd, a specialist employment law consultancy. You can follow Annabel on twitter – http://twitter.com/AnnabelKaye

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Filed under contract, employment law, free stuff

Benefits – are they really so great?

There is an argument for giving staff access to ‘cafeteria style’ benefits, paid out of net taxed income. These arrangements allow employees access to ‘wholesale rates’, without tying individuals into employer-specific schemes.  Then employees can establish a “personal benefit package” which, like a personal pension scheme, does not automatically end when changing jobs.

From the employer’s point of view, this makes TUPE transfers so much easier administratively.  It also keeps contractual pay entitlements clear and simple, and avoids the need for contractual clauses making some or all benefits ‘non contractual’ or substitutable.

One of the ‘advantages’ of the old company-style benefits packages was that they promoted lack of pay transparency, but of course this is in fact a disadvantage, causing complications when it comes to diversity or equal pay.

Annabel Kaye is Managing Director of Irenicon Ltd, a specialist employment law consultancy.   Tel: 08452 303050  Fax: 08452 303060  Website : www.irenicon.co.uk.  You can follow Annabel on twitter – http://twitter.com/AnnabelKaye

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Filed under benefits, pay

Benefits – are they really so great?

Time was when there was a real financial reason to offer staff benefits.  Years ago, many benefits were exempt from National Insurance (although not tax for higher earners), and a generous benefits strategy represented a real saving for employers and employees.

Today, almost all benefits are subject to National Insurance, and there is an argument that there is little point in retaining any benefits that are not tax or National Insurance exempt. 

It is almost impossible to apportion some benefits – half medical insurance for half time workers?  Some benefits cost more for older workers, or by gender, where they are based on actuarial data.    Employees often have no idea of the real cost of providing benefits and undervalue them when considering the value of their employment package.

Annabel Kaye is Managing Director of Irenicon Ltd, a specialist employment law consultancy.   Tel: 08452 303050  Fax: 08452 303060  Website : www.irenicon.co.uk.  You can follow Annabel on twitter – http://twitter.com/AnnabelKaye

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Filed under benefits, pay

Paperboys, young workers and illegal contracts

Reports of a 15 year paperboy finding he had no employment rights make most intriguing reading. http://www.timesonline.co.uk/tol/news/uk/article6041259.ece

There are legal limits on not only the hours a school age person can work, but the actual start and finish times. Some free spirits may view this as discrimination against young workers, others as protection against being exploited when school should be a priority. Either way this young worker sought to enforce his rights but found himself not having any!

The case is at tribunal level and be subject to appeal. It would seem that most paperboys/girls are really young part time employees and I am not at all clear how the tribunal found – no mutuality. Like any other part time worker this boy was supposed to turn up at a certain time, do a certain number of hours of work and get paid a certain sum. It is not obvious where the lack of mutuality arose!

On the basis of the reports, the ’employer’ plainly required this young person to turn up at an illegal time. There is a long history of employment rights being affected by whether or not the contract is ‘tainted with illegality’ and few ordinary individuals seem to understand how it works.

  • If I commission you to steal a car and you do so and deliver it to me, you cannot sue me if I don’t pay you, since the courts will not enforce a contract tainted with illegality – think of it as an outlaw clause – if you are outside the law it won’t protect you.
  • If I employ you and we both agree there will be no tax and deductions payable (where they would normally be due) ‘cash in hand’ then you will find an employment tribunal will not give you any unfair dismissal rights since the contracted is tainted with illegality – although what you did may have been legal, the way we arranged to pay you was not and this has the same effect.
  • If your employer gives you itemised pay statement showing deductions for tax and NI but does not make them, this does not have the same effect since you would have no way of knowing.

This has had an interesting effect when it comes to illegal immigrants employed in breach of immigration rules. Unscrupulous employers have managed to use the ‘taint’ clauses to get out of unfair dismissal claims. This does mean confessing to another breach or crime – so this is not a ‘get out of jail’ clause for employers but nonetheless it can leave employees without any rights. Recent cases have suggested the race discrimination (and by other implication other forms of discrimination ) rights exist whether there is ‘taint’ since these rights to not rely on a contract of employment. Perhaps age discrimination rights also exist in this way and the young paperboy can find a way to show a contract of employment or failing that that he was discriminated against on the grounds of his age?

Meanwhile if you want employment protection in the fullest sense, check you get itemised pay statements and that you are ‘paying into the club’ that gives you admission to full employment rights – eg tax and national insurance where you earn enough to need to pay it.

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Filed under discrimination, young workers