Get Ready For Big HMRC Changes

Following a crackdown on payment of National Minimum Wage earlier this year, HMRC has proposed changes to the law which will see businesses give a more detailed account of hours worked by their employees. Changes aren’t expected until April 2025 but failure to comply will mean facing penalty charges. Keep reading to find out more and how you can prepare to get ahead of the game.

The Big Change For Payroll

Of the proposed new compulsory data requirements, the relevant change for payroll is that every employer will be required to provide detailed information on employee hours worked via RTI (Real Time Information) PAYE reporting. Today, employers only have to indicate the most appropriate hours worked in bands: (a) Up to 15.99 hrs, (b) 16-23.99 hrs, (c) 24 – 29.99 hrs, (d) 30 hrs or more, or (e) Other. Many do not report this accurately because it is so broad e.g. zero hours one week and 40 hours the next.

The big change for payroll stems from the fact that HMRC is assuming that all employers are keeping records of hours worked and they can simply amend their processes and send this via payroll RTI! We think most businesses running old-school payroll – which only includes pay and not hours worked – will struggle as these systems will not have the information needed.

What Data Do You Need?

In order to comply, your payroll software will need to record the following information for each pay period:

  1. Hours worked (salaried, overtime, zero-hour worker shifts etc.) with dates
  2. Any holiday taken in the pay period with dates
  3. Any absence taken in the pay period with dates
  4. Prior adjustments or future advances

The reason why dates are so important is the new change requires an understanding of hours worked versus hours of holiday or absences. Simply adding in pay for a holiday or absence, without knowing the worked date (hours) will not allow you to meet the new legislation.

The Data Already Exists in paiyroll®

The great news is that paiyroll® is able to calculate this automatically for you because it is date-aware. Being date-aware means knowing how pay is allocated to each day in order to calculate which pay is to be included, allocated to holidays/absences or excluded due to a previous/future period correction.

  1. For fixed-hours salaried workers, paiyroll® supports unlimited salary schemes that specify annual hours. Therefore paiyroll® will be able to use the pay frequency, annual hours and holidays/absence dates to automatically report the correct information for any salaried employee.
  2. Variable-hours workers who receive a salary and variable pay on top, such as commission or overtime, paiyroll® can add the hours and date to the base salary to automatically report the correct information
  3. For zero workers hours workers, payroll shifts already include the hours and dates worked – and therefore paiyroll® can automatically calculate and report this information.
  4. Adjustments from earlier periods and Advances for future periods can be excluded.

All this is possible because paiyroll® already includes all the information to automatically assess National Minimum Wage (NMW) compliance every pay run. Importantly all the above need to be analysed against holiday/absence bookings – because payment for holiday is not worked hours.

How paiyroll® Can Help You Prepare

There is time to prepare and consider moving to a date-aware payroll system as the changes won’t come into effect until April 2025. If you’d like to get a headstart, see how paiyroll® can help.

This is just one of the ways paiyroll® simplifies payroll for businesses. If you’d like to know more about paiyroll® book a free personalised demo with us!

Source: Change to data HMRC collects from customers [GOV.UK]