On your behalf
Policy team update
This month’s update includes, amongst other things, survey responses, confirmation of overpayment recovery process, and the team’s reaction to the postponement of the RTI penalty regime
NMW survey
In response to the government’s recent debate and with political parties potentially using the national minimum wage (NMW) as part of their election campaign, the CIPP wished to seek the profession’s views on whether the NMW rates should increase from October 2014. There were over sixty responses in total
with 53% responding as an employer, 47% as a payroll service/agent provider. Representation was received from those paying between 26 and more than 10,000 employees/pensioners. The largest category of respondents was from those paying between 251 and 1,000 employees/pensioners. Nearly 70% of respondents believe
the NMW rates should be increased, 27% stating there should not be any increases and 3% were unsure.
Due to the economic climate, there has been much political debate as to whether now be the right time to increase the NMW. In addition to the ‘yes/no’ answers there were additional and important comments made by the profession. Even where respondents said it should increase, with some recommending it should be linked to the living wage and/or retail price index the main concern was for the small business. Some respondents acknowledged whilst increasing the NMW wage would be good for the economy and potentially encourage people off benefits and into work, the financial impact on small to medium-size enterprises could conversely lead to a reduction in staff due to the profit margins shrinking too low. As one respondent stated, in these times when many employees have not had a pay-rise for some years, the continual
6 PayrollProfessional
rise of NMW can erode the differentials between the lowest paid workers and their direct line managers/team leaders. Even the largest of employers operating
the NMW commented they see it as an administrative burden especially where salary sacrifice schemes are in operation. One respondent commented that employers often use the NMW to their own advantage by not giving company pay-rises and therefore potentially supress wages which again can result in people on benefits not wanting to enter the workplace as the wages are too low. In conclusion the majority of respondents to our survey believe the NMW should increase in October 2014. In its press release the CIPP, however, urged the government to consider the plight of the small business in what are already difficult economic times and continue to look for financial benefits for SMEs to offset some of their employment costs. The CIPP also raised awareness of the impact of the change in April 2014 when the government will introduce an employment allowance which as members are aware provides up to £2,000 employer national insurance relief though this allowance does not extend to the domestic sector. An example from our membership: if the NMW rises in October along with other employment costs will parents continue to employ nannies enabling them to work, or will it become more cost effective for one parent to stay at home? A stay-at-home parent, of course, would reduce the revenue normally received in the form of income tax etc to the Treasury. Legislation is meant to be actively encouraging all back to work so the CIPP is surprised to see a policy that
does not actively promote this. The CIPP urged the government to also consider extending the employment allowance to all employers (except the public sector) which the CIPP believes will help an already struggling industry. This was lobbied for by a number of stakeholders at the February Employment Consultation Forum.
Recovery of overpayments
Recently we have received some enquiries in respect of the recovery of overpayments and when the payroll figures can be adjusted. The Policy team thought it would be useful to remind members and perhaps inform new members of the correct procedures. In 2009, the CIPP sought clarification of the guidance contained in HM Revenue & Customs’ (HMRC’s) booklet CWG2 Employer’s Further Guide to PAYE and NICs, in respect of this grey area. A senior HMRC representative confirmed to the CIPP and a number of payroll software providers that an unintentional overpayment of wages was not deemed as earnings and therefore not subject to pay as you earn (PAYE) nor national insurance contributions (NICs). However, HMRC also confirmed that in order for the payroll to be reversed and therefore collect overpaid PAYE and NICs (employee and employer) an active recovery process must be in place e.g. letters requesting repayment etc. You would of course expect employers to do this as an employee is due to repay monies. The accuracy of this advice was challenged again in 2012 and so the Policy team sought to clarify with HMRC once more, especially as the previous HMRC representative had since retired.
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