Planning for Christmas
Are you are intending to employ temporary staff over Christmas, or your existing staff are working extra hours? Be aware this might cause issues with Workplace Pensions. Paying a Christmas bonus is also something to look out for if it takes the employee over one of the thresholds.
Every member of staff, even if only employed for one day, generates duties under PAYE regulations and the Pensions Auto-Enrolment legislation (Workplace Pensions). So, do not assume that you can ignore short term workers.
Below are some of the points you need to be aware of:
Employing anyone means that you need to ensure you deduct the correct tax and NI, if applicable. We advise getting everyone to complete a “New Starter” form from which the correct tax code can be obtained. Do not just assume that a temporary worker should not have tax deducted.
It is a legal requirement that any employee must be given written terms and conditions (or a contract) on or before the date they start. It used to be within two months of starting – now it is “on or before”.
Don’t forget that even temporary staff are entitled to holiday pay so don’t forget to factor this in when calculating the cost of employing someone.
If you are a small “director only” company and therefore probably exempt, employing someone temporarily will create a requirement to comply with the pension legislation. Most employers in this situation will apply “postponement.” This means that they intend to postpone their workplace pensions duties for three months. That sounds good except that the temporary member of staff must receive a written communication within six weeks of starting, advising them of the postponement and giving them the option of joining a scheme.
If you already employ staff and the temporary employee is in addition, the same postponement rules apply and you may need to advise your pension provider.
If an existing member of staff works extra hours, this may take them across a threshold for Pensions, so they become either “Eligible” or “Non-Eligible” triggering additional responsibilities. It may also result in NI being payable.
Paying a Christmas bonus is common but beware. The bonus may take the employee above one of the thresholds. It may also trigger an additional NI charge, particularly for employees normally under the Lower Earnings Level. It may be better for both the employer and employee to spread any bonus over two or more pay periods.
Something to Consider;
Monthly pay is easier to control than weekly pay. Earnings are spread over a longer period. If a weekly paid employee earns extra in one week but is back to normal the following week, that “higher” week might trigger an auto-enrolment action. If you pay an employee monthly the two weeks would “even out” meaning that the threshold may not be reached.
There are all sorts of potential dangers when employing additional staff or existing staff working extra at holiday times. It is best to think about these in advance because it is very easy to fall foul of the various pieces of legislation.