mid year payroll post

So, May and its three bank holidays are now behind us. How is it that we’re almost halfway through the year already?!
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This month’s newsletter focuses on the government’s announcement that it has reversed its plan to withdraw almost 5,000 EU laws currently in force in the UK.  Read on to understand how this decision has the potential to impact all of us.
But first, a further update about meeting the P11D filing deadline on 6 July.

​Filing P11Ds when different agents deal with tax affairs

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I’ve mentioned in previous newsletters that since 6 April 2023, forms P11D (for reporting employee benefits) can now only be filed electronically, which is posing problems for some employers who don’t have much time to obtain payroll software to enable them to do this before the reporting deadline of 6 July. 
But there is another group of employers facing unexpected challenges because of this late change to the method of filing of P11Ds: it is not uncommon for employers to outsource their payroll to two different payroll agents, one company to deal with day to day payroll, and another to complete and submit the P11Ds and everything associated with them.
Unfortunately HMRC’s systems do not currently have the functionality to allow an employer to have more than one agent working for them on the same head of duty, in this case PAYE.  So where does that leave employers who find themselves in this position?
The Institute of Chartered Accountants in England and Wales raised the issue with HMRC who advised that an agent can file P11Ds and P11D(b)s, including amendments, for an “unauthorised” client. They would need to add the client to their unauthorised client list in their Agent portal. Once they have done that, they are then able to file returns on behalf of the client. 
If the agent does not have log in credentials, which could well be the case if they have previously only filed paper returns, they will need to register themselves first, before being able to log in and then add a client to their unauthorised list. 

Another Brexit U-Turn?

​Doesn’t Brexit seem such a long time ago? With everything that has happened since, COVID and the war in Ukraine spring immediately to mind, it’s easy to forget that once upon a time we were all keen to know how Brexit would impact payroll, and indeed our lives in general, and that we haven't yet felt the full effect of our departure from the EU.
The driving force for many Brexiteers was the desire to take control of our own laws, and the Retained EU Law (Revocation and Reform) Bill was therefore welcomed as the route to UK autonomy. The Bill contained a “sunset clause” which meant that any EU law, initially retained when we left the EU on 31 December 2020, would be automatically repealed at the end of 2023, unless it had been specifically preserved or replaced.  
However, there were many who had grave concerns that this “sunset clause” would have an adverse impact on employment law, and workers could lose access to long-established rights that currently form an integral part of Britain’s standing as a fair nation, such as holiday pay or protection against fire and rehire.
It was not unexpected then that the news that the government has now decided to scrap the “sunset clause” from the Bill met with mixed reactions.  
Instead of the approximately 4,800 retained laws being discarded on 31 December this year, only around 600 pieces of retained EU law will be set out in a revocation schedule. Any laws not listed in the revocation schedule will be automatically retained.
However, there are some key pieces of legislation affecting payroll and HR professionals, and indeed all of us, that the government is looking to change:

Working Time Regulations 1998 (WTR)

Holiday Entitlement:
Currently we are entitled to 5.6 weeks (28 days) annual leave each year. That is broken down in to two parts; four weeks that we are entitled to as a result of the EU Working Time Directive, and 1.6 weeks that come from the UK’s Working Time Regulations. The government plans to merge these two separate leave entitlements into one pot of statutory annual leave of 5.6 weeks. Whilst most employees won’t know or care about these different types of leave, this will bring a welcome simplification to payroll professionals.
Rolled Up Holiday Pay:
Despite the fact that rolled up holiday pay is illegal, and has been for some years, many employers still use this method of calculating and paying holiday pay, especially for workers with irregular working patterns. However, the outcome of the Brazel v Harpur Trust court case was to declare it unlawful to use the 12.07% method to calculate holiday entitlement, which is central to the calculation of rolled up holiday pay.  
The government now plans to introduce rolled up holiday pay into law, so some workers are able to receive holiday pay with every payslip, rather than when they take their holiday. This is done by adding money onto every hour of pay to represent the holiday pay, and then not paying the worker when they actually take leave.
Now that we are no longer subject to EU law, the government is also consulting on its plan to allow the 12.07% calculation method, which would make it easier to calculate rolled up holiday pay should these reforms come in as proposed. 
Record Keeping Requirements:
The UK’s WTR require employers to keep “adequate records” such as the maximum daily/weekly working time, including for night workers and young workers.
But EU case law takes this much further than the WTR ruling that, in order to comply with the EU’s Working Time Directive, employers must also record the daily working hours for each worker.
The government plans to remove this EU law, reducing the record keeping burden on employers.
Employers will, however, still need to:

• Keep records of time worked to ensure payment is made at the appropriate National Minimum Wage rate
• Keep records to show employers are complying with the maximum 48-hour week

Transfer of Undertakings (Protection of Employment) Regulations (2006)
The government is consulting on an employer’s duty to consult in TUPE situations.
Currently, employers must collectively consult with employees affected by a TUPE transfer via elected employee or union representatives. Individual consultation is only allowed for microbusinesses – ie. where a business employs 10 employees or less.
The government plans to remove the requirement to consult with elected representatives for businesses with fewer than 50 people and transfers affecting less than 10 employees.
This will reduce the need for many SMEs to elect representatives in TUPE situations, but may mean they have to complete more individual consultations.
Restriction of Non-Compete Clauses
The government has also proposed a new law to limit the length of non-compete clauses to three months. A non-compete clause is a section in the contract which prevents a departing employee from working for a similar or competing business.