[UK] Ask the Expert: How will the UK’s itemised payslip legislation work?

Q.  We are aware of the new itemised payslip legislation that is coming in from April 2019 but are less sure of the guidance that has been issued. We have a monthly paid employee that is going to be paid statutory maternity pay (SMP) from 6 May 2019. She will be paid her full salary for the first few working days and then SMP for the rest of the month. So does this constitute a variation in salary that would require her hours to be shown on the payslip? We were intending to make the payment at the start of May by calculating then number of days rather than hours worked.

For the benefit of other people, before responding it is important to clarify that the legislation you are referring to is the Employment Rights Act 1996 (Itemised Pay Statement) Order 2018. It contains the simple wording: ‘where the amount of wages or salary varies by reference to time worked, the total number of hours worked in respect of the variable amount of wages or salary either as: 

  • A single aggregate figure, or
  • Separate figures for different types of work or different rates of pay.’

The guidance you mentioned has been made available by both the Department for Business, Energy and Industrial Strategy (BEIS) and the conciliation service ACAS, neither of which cover this situation unfortunately. As a result, you are quite right to query the situation. 

The starting point is, of course, the legislation. At the end of the day, that is what an Employment Tribunal will refer to rather than the guidance, which amount to non-statutory interpretations. 

But I do actually believe that this type of situation has been considered in the legislation. You have identified that pay will vary according to the number of hours worked and, as such, it necessary to show these hours on the payslip.

The aim here is to fulfill the requirements of the legislation and UK government’s intention of increasing transparency for workers. In other words, the additional information will enable people to determine whether they have been paid correctly.

Clarifying the guidance

A number of professionals, including myself, have recently questioned various BEIS officials on exactly this type of situation. Similar queries were also put forward at the December 2018 Employment and Payroll Group. 

Unfortunately, these queries were either ignored or were not considered of sufficient importance to mention in either the BEIS or ACAS guidance. The most comparable situation is when there is discussion about adjustments to pay in relation to unpaid leave and statutory sick pay (SSP).  

Here the guidance states that if an employee normally receives a fixed salary but it becomes varied due to unpaid leave or SSP, it does not amount to a variation because of hours worked. Instead, it is a variation as a result of a departure from normal working and pay arrangements.  

But I would suspect that such reasoning has been invented to get around the fact that the legislation did not match either BEIS’ or the UK government’s original intention. In fact, it is nothing more than a manufactured statement with no legal standing whatsoever. Clearly, the hours varied because of the number of hours that were worked and the fact that SMP had to be paid.

What this all means is that you are going to have to carefully consider both this situation and others like it month after month. Therefore, you need to evaluate the aim of the legislation in the first place (visibility of pay to the worker). Also take into account the risk of workers taking you to an Employment Tribunal if they feel a lack of transparency exists. 

If you are sure your existing processes provide workers with sufficient transparency with regards to their payslip, I would not change your payroll practices. Instead continue to pay people for the days they have worked rather than show hours.

Only as a very last resort does it make sense to fall back on the “pay variance because of a departure from normal working and pay arrangements” as it is troublesome that someone even thought of introducing this into the payroll lexicon. Transparent payslips are what it is all about.

 Ian Holloway

Ian Holloway is head of legislation and compliance at Cintra HR and Payroll Services.  He was involved in processing payrolls large and small from organisations across all sectors until 2011 when he started helping to educate the profession by developing course material, newsletters and face-to-face presentations.