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Pay and Employee Rights

Issuing pay statements

Whenever an employee is paid you must provide an itemised payslip, this payslip should be isssued at the time or before the employee is actually paid, it should illustrate:

the gross amount of the wages or salary before any deductions
the amounts of - and reasons for - any fixed deductions and any variable deductions that you make every pay period.
the net amount of wages or salary, this is the amount payable after all deductions. The wage slip should illustrate all types of payment - such as part payments made by check or part payment made in cash.
If the pay statement does not illustrate the amount and purpose of every separate fixed deduction every pay time, then you must give your employee a standing statement of fixed deductions at least every 12 months.

The itemised pay statement must also show:

Variations in fixed deductions

When there is a change to an employee's fixed deductions as an employer you should:

notify your emplyee in writing of the details of the change
issue your employee with an amended standing statement of fixed deductions, which would then be valid for up to 12 months

Penalties

Failure to provide employees with a correct payslip, or even no payslip at all could result in being subjected to an employment tribunal. If found guilty of not providing the neccesary notice of any deductions, you may be ordered to repay up to13 weeks of unnotified deductions back to your employee.

Employees must make their complaint whilst employed by you or within three months of leaving.

Statutory Maternity, Paternity and Adoption Pay

Employees who become parents, including through adoption, are entitled to a number of payments, including Statutory Maternity, Paternity and Adoption Pay.

To qualify the employee must:

have worked continuously for you for at least 26 weeks by the 15th week before the expected week of childbirth. If they are adopting the employee has to have been working for their employee for at least 26 weeks before they are matched with an adoptive child.
earn more than the lower earnings limit for National Insurance contributions (NICs), for 2007-2008 tax year:
If you're employed and earn above £100 a week (the 'earnings threshold') and up to £670 per week you pay 11 per cent of this amount as 'Class 1' NICs

Statutory Maternity Pay (SMP)

SMP is payable at a rate of 90 per cent of average earnings for the first six weeks. The remaining 20 weeks are paid at the lower rate set by the government, which is the lower of £106 per week or 90 per cent of the woman's average weekly earnings. The payments are subject to normal deductions.

If you can't get Statutory Maternity Pay, you may be able to get Maternity Allowance instead.
As of 1 April 2007 Statutory Maternity Pay is:

90 per cent of the employees average weekly earnings with no upper limit for the first six weeks of their maternity leave
for the remaining 33 weeks either £112.75 or 90 per cent of your average earnings, if this 90 per cent rate is less than £112.75
An employer will usually pay an employee Statutory Maternity Pay in the same way and at the same time as their normal wages.

Maternity Pay is treated as normal pay so an employer will deduct tax and National Insurance as usual from the maternity pay.
How and when to claim - To claim Statutory Maternity Pay an employee must tell their employer at least 28 days before they intend to stop work to have their baby. The employer may require you to tell them in writing.

If an employee wishes to change their mind about the date they wish their Statutory Maternity Pay to start they may do so but they should still give your employer at least 28 days' notice of the new date.

Statutory Paternity Pay (SPP)

Working fathers are entitled to up to two weeks' paternity leave within 56 days of the birth, if they:

have a responsibility for the child's upbringing
are the child's biological father, or the mother's husband or partner
have continued working for an employer until the birth of the child
the rate of paternity pay is the same as the standard rate of maternity pay.

Statutory Adoption Pay (SAP)

Employees adopting a child are entitled to adoption leave of 52 weeks, of which 26 are paid weeks. If your average weekly earnings are £87 or more (before tax), Statutory Adoption Pay is paid at £112.75 or 90 per cent of your average weekly earnings if this is less.

On 1 April 2007 the length of time Statutory Adoption pay is available for increased from 26 weeks to 39 weeks if you qualify.
An employer will pay Statutory Adoption Pay to you in the same way and at the same time as your normal wages. Just the same as normal pay SAP will have tax and national insurance contributions deducted.

Statutory Sick Pay

Statutory Sick Pay (SSP) is the minimum level of payment an employee must make to an employee who is off work through illness - in some circumstances their contract may entitle them to more than this.
Some employers have their own sick pay scheme instead.
If you're working for an employer under a contract of service (even if you've only just started), you're entitled to Statutory Sick Pay if the following apply:

you're sick for at least four days in a row (weekends and bank holidays are included)
you're earning at least £87 a week on average

Not eligible?
An employee can't get Statutory Sick Pay if they are away from work due to any of the following:

They are taking part in trade union action
They are in legal custody
They have been claiming Incapacity Benefit during the eight weeks before their illness

Statutory Sick Pay is paid for every day that an employee would normally work. It starts on the fourth day of any period of sickness and lasts for a maximum of 28 weeks.

If you get sick again within eight weeks of the previous period of illness, you can claim Statutory Sick Pay from the first day.

The standard rate for Statutory Sick Pay is £72.55 a week.
How it's paid - an employer will usually pay an employee SSP on their usuall payday in the same way as their wages or salary.Statutory Sick Pay is subject to tax and National Insurance contributions, although earnings may not be high enough unless the employee receives other payments on top of Statutory Sick Pay.

Some people are NOT entitled to SSP, including:

people who an employer pays who are non-employees, eg freelancers and contractors
employees who are under 16 or over 65 on the first day of sickness
employees who earn less than the lower earnings limit for National Insurance contributions (NICs)

An Employer may be able to recover some SSP from the income tax and NICs that you pay to the Inland Revenue. If your total SSP payments are more than 13 per cent of the total gross Class 1 National Insurance liability for your whole company in the same tax month, you can get the difference back. The amount you may recover is the amount by which the SSP you have paid exceeds 13 per cent of your National Insurance liability.

You must keep records, for at least three years, of any SSP you pay and of the dates of any periods of sickness lasting at least four days in a row.

National Minimum Wage

You must ensure as an employer that you pay your workers at least the National Minimum Wage (NMW).

This applies to workers who are:

aged 18 and over
as of 1 October 2004, young workers aged 16 to 17 who are above the age of statutory schooling
normally working in the UK or on UK ships - including foreign nationals
apprentices aged 19 to 26 after 12 months' apprenticeship
on commission only
on standby, at or near the place of work
home, agency, part-time, casual, piece or agricultural workers

Workers who are not entitled to the NMW are:

apprentices under the age of 19 and those between 19 and 25 in the first year of their apprenticeship
share fishermen
genuine voluntary workers
au pairs living as part of the family
family members living at home and helping to run a family business
some apprentices and trainees
university or college students on placement with an employer as part of their course
genuinely self-employed

The National Minimum Wage Rates
The minimum wage is a legal right which covers almost all workers above compulsory school leaving age. There are different minimum wage rates for different groups of workers:

Workers aged 22 and over are entitled to £5.35 an hour.
The development rate for 18-21 year olds is £4.45 an hour.
The development rate for 16-17 year olds is £3.30 an hour.

On 1 October 2006, the Employment Equality (Age) regulations abolished the Older Workers Development Rate and removed the age limit on the apprenticeship exemption.

Calculating the NMW

How the NMW is calculated depends on whether the work is:

time work - a set number of hours or period of time
salaried-hours work - a set number of hours each year, paid by annual salary
output work - payment is according to the number of things produced or sold
unmeasured work - specific tasks but no set hours

Since 1 October 2004, employers have to either pay minimum wage every hour for output workers or a fair piece rate that allows average workers to earn minimum wage.

Holiday pay

An employee is allowed to take paid leave equal to four weeks per year. This period of holiday should be taken by the worker and should not be exchanged for pay in lieu.

Most employers will allow employees to take this holiday period in terms of days: An employee should discuss their holiday entitlement with their employer before booking any time off. Using this method means workers are able to take individual days off instead of whole weeks. Bank holidays are usually given as extra to holidays, although it is not a legal requirement and usually depends on what sector of work you are in, for instance, most offices close on bank holidays, but large shops will open.

Rates of pay

Holidays, inluding bank holidays are usually paid at the normal rate for the employee. This means that an employee who is on holiday will not see any change to their wage packet for the month (week).

Only where workers have varying pay rates, such as piece workers, is there the need to work out a special payment. In these cases, the holiday pay will be worked out to be equal to the average rate over the 12 weeks before the holiday. However if extra leave is granted over and above contracted holiday allowance, then the holiday pay for this extra period does not legally have to be the average of the 12 weeks. Employees should discuss this with their employer and come to an agreement.

In the real world, holiday pay, like normal pay, is dictated by market rates. If you offer less annual leave and lower rates of pay than your competitors, you are unlikely to get the best workers.

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