Under the Employment Rights Act 1996 employees have the right to be given a written itemised pay statement detailing gross salary, the amounts of any deductions and the net salary. Any deduction which an employer has made without explanation on an itemised payslip is referred to as an un-notified deduction.
From 6 April 2019, the Employments Right Act 1996 (Itemised Pay Statement) (Amendment) Order 2018, will require employers to provide itemised payslips to all workers on their payroll, not just employees. The aim of the legislation is to provide greater transparency and clarity over the hours workers are being paid for, allowing workers to react quickly in situations where their pay has been incorrectly calculated.
In addition to the requirement to provide all workers with itemised payslips, where pay varies depending on the number of hours worked, employers will also be required to provide workers with additional information on payslips, detailing the number of hours worked during the pay reference period. This information can either be shown as a single combined amount or an itemised list of hours worked for different rates of pay.
By way of example, for a worker engaged on a zero-hours contract, all hours worked must be detailed on the itemised payslip. For a worker who has a fixed salary each month and works overtime entitling them to additional pay at an hourly rate, only the hours of overtime worked will need to be shown. If, however, a worker’s pay does not vary by time worked, there is no requirement to include an hourly figure on the payslip, even in situations where the worker takes a period of unpaid leave or statutory sick pay.
Failure to provide workers with a payslip, or a payslip that lacks the required information, will entitle a worker to pursue an Employment Tribunal claim. If successful, the Tribunal will make a declaration detailing the employer’s failure to comply and this will be published on the Tribunal’s website. The Tribunal also has the discretion to order repayment of un-notified deductions made in the 13 weeks preceding the claims presentation, whether the employer was entitled to make the deductions or not.
Employers should review their payroll arrangements to ensure that they have adequate payroll systems in place to capture and record the additional information required. Employers will also need to ensure that the format of itemised payslips is adequately updated to clearly show the new information.
Whilst a declaration of non-compliance from an Employment Tribunal may not be a sufficient deterrent to encourage employers to comply with this legislation, the risk of an order to repay un-notified deductions for 13 weeks could be a significant incentive to get it right.