When payroll plays catch-up to legislation

When payroll plays catch-up to legislation

Q: We have just realised that we have not been providing our workers with their weekly payslips since the new requirement was introduced on April 6. What is the risk here?  

A: Previously only employees were entitled to receive payslips; however, a change to the law in April this year extended the scope to include workers.

Since workers now have a statutory right to receive a payslip, failing to provide this will leave your business open to legal proceedings. Workers may submit a claim for a failure to be provided with a fully itemised pay statement, which could result in significant financial repercussions.

If a claim is lodged, an employment tribunal has the authority to order you to pay compensation to the workers involved. When determining the amount of compensation due, the ET will to refer to any unnotified wage deductions made in the 13 weeks prior to the date of application.

The amount of compensation cannot exceed the amount of unnotified deductions during this period. However, when you consider the amount of potential deductions made during this time, this could be a costly sum.

With this in mind, you will want to resolve the situation as soon as possible. While it is clear that you need to provide workers with payslips going forward to meet your legal obligations, you will have a decision to make on how to proceed.

You could simply begin to provide workers with an itemised payslip from the next pay reference period and hope not to draw any attention to the fact they have had a right to receive these since April 6. 

Alternatively, providing you have the correct facilities in place, it may be more favourable to issue multiple payslips, incorporating any pay reference periods since April 6.

Although these additional payslips will still have been issued late, this will generally be considered a best practice approach and may benefit you in any tribunal proceedings.

Unfortunately, there will always remain a risk that this sudden change in procedure will alert suspicions among workers and encourage them to lodge a claim against your business.

However, you must avoid the temptation to carry on without issuing payslips, as this will only make the situation worse in the long run.

Instead, to prevent this from occurring again in the future, make sure you identify all those with worker status and ensure their payments are accurately reflected in payslips.

It is also important to keep up to date with all future legislative developments, such as the government’s Good Work Plan, which is set to come into force in April 2020.

Both workers and employees will benefit from additional employment rights as part of the plan, including the right to receive a written statement of main terms from day one of their employment.

Therefore you should encourage your HR department to make sure the correct provisions are in place ahead of time, reducing the risk of any additional tribunal proceedings.