Contractual Aspects of Payroll Administration free essay sample

The department is responsible for the correct and timely administration of all payroll duties within the London office. This report will conclude with any findings, and a number of recommendations are made as to how the company can improve existing practises. 2. Legislation and Payroll â€Å"A contract is an agreement between two parties and is enforceable by law. A contract of employment is a contract of service and comes into being when an employee agrees to work for an employer in return for pay†. (Acas, 2012). The contracts used at Global contain start date, pay rate, pay method and date, notice of resignation or termination of employment, holiday entitlement and job title. These particulars must be included in all written contracts. (Gov. uk, 2013). The company only composes new contracts if there is a major variation in an employee’s circumstances, like change of role. Any other changes are confirmed via letter and filed, so the majority of original contracts are never modified. All starters are issued a contract before the start date which is signed by HR and sent to the new employee for signature. This is in line with the Employments Right Act 1996, where a written contract must be provided within 8 weeks of employment starting. (CIPD, 2012). Included with the contract is the company handbook, which contains all current terms and conditions and legislation that affects the employee whilst working at Global. (Employeradvice, n. d). These must be reviewed by the employee, signed and then returned to the company before commencement of employment. The employee at this point can raise any queries regarding any terms and conditions that are not clear. (ehow, n. d). As per the Employments Rights Act 1996, all employees at Global have access to an itemised payslip on or before pay day. (Carvel, 2012). The payslip must include all statutory deductions, gross salary and net amount payable. (HM Revenue Customs (HMRC), n. d). Payroll also includes all voluntary deductions on all payslips, all deductions on the payslip are itemised individually so that payroll does not need to provide a written statement. (CIPP 2012 p. ). HR performs various checks that are requested by law to comply with current legislation. (UK Border Agency, 2012). Once these checks are completed and approved the employee is fit for work at Global. Upon commencement the new employee is sent to HR and payroll to complete all necessary in-house paperwork. This starter pack includes employee personal information, bank and emergency details; all forms must be signed by both the employee and payroll/HR. The new employee must present a P45 as soon as possible to enable payroll to make the pay run deadline. If this not applicable or the employee does not possess one a P46 is completed. (HMRC, n. d) Due to the type of business and staff at Global, no employee is affected by the National Minimum Wage Act 1998 (Acas, n. d). All staff are employees and are paid in line with market rates which are above the minimum wage. Employees are advised that the first pay will be on the contractual pay date in line with the rest of the company. New employees have induction training with payroll and HR on day one of employment (Businessballs, 2010). The employee is taken around the company and informed of the company’s code of conduct, health and safety and where to find certain amenities. As part of the Asylum and Immigration Act 2006, Global is vigilant in its checks on employees from overseas. The company has numerous foreign workers and the appropriate paperwork is requested and received before the employee commences work. The relevant documents from approved and recognised lists (UK Border Agency 2012) are checked and copied for the payroll files. All new employees are entitled to company benefits which include, pension, season ticket loan, gym subsidy, BUPA and PHI. Employees who wish to participate in any of these schemes, fill in a form with the relevant details which the employee must sign to authorise payroll to make the deductions from monthly pay. The majority of employees are permanent staff; there are only two on fixed term contracts. All employees employed on either a fixed or permanent contract are entitled to all the staff benefits as per The Fixed Term Employees Regulations 2002 (Thompson Solicitors, 2013). Global also has ten staff that are employed on a part time basis; these employees also have entitlement to all benefits on a pro rata basis, as per The Part Time Workers Regulations 2000 (Compactlaw, 2013). Global has had to adopt additional aspects of the Employment Relations Act 1999 as there is a growing number of younger employees starting families. The company has had various parents taking time off for dependants when ill, and a couple of parents have been granted parental leave (Legislation, n. d). Payroll has to make manual adjustments to pay where there is unpaid time off. This has not had a major impact on the business as the tendency is that new mothers take the leave. (HM Government, 2012). Along with the aforementioned legislation, Global has had to update policies on the Employment Act 2002 and Work and Families Act 2006, (Legislation n. d) to coincide with the increasing number of new parents. All maternity and paternity leave and pay have been updated, along with adoption leave and pay as both areas have affected the company. Payroll has been proactive in updating the payroll system where necessary and changing the company in house forms used for maternity and paternity changes. Payroll and HR have also had to incorporate flexible working for parents. (Working families, 2012). This change has meant that payroll and HR need to draw up new contracts, change working patterns on the system and pro rata pay and benefits. Where there are any changes to legislation that affects Global, the staff handbook is updated and all employees are notified of these changes via email. 3. Processes The payroll department has written procedures in place which explains the processes the team complete for the pay run. â€Å"Documented procedures ensure a clear and defined approval process, efficient payroll activities, availability of forms and appropriate controls. † (ehow, 2013). Global operates a negative payroll for all staff (CIPP, 2008 p15). This means that no action is required for the payroll to be run every month. The small amount of manual input is overtime and any pay adjustments arising from change of employee circumstances. All contractual changes are only actioned once payroll have a copy of the signed confirmation letter by the HR manager. All paperwork that is copied and filed by payroll/HR is secured away in locked cupboards every day, and only the four members of payroll and HR have access to these files. In compliance with the Data Protection Act 1998 (Legislation, n. d. ), all employee’s paperwork are kept confidential and only senior management can request information from these files. Employees also have the right to gain access to any of the information kept on file relating to the individual. ICO, n. d. ) Payroll only deducts payments that are either required by law, payroll has had written instructions from the employee or HR manager, or it has been outlined in the staff handbook. (Emplaw, 2013). Payroll or HR will acknowledge these changes with a confirmation letter to the employee, of which a copy will be filed. In the event of any over or under payments, these are collected as inst ructed per the staff handbook. The same applies if an employee leaves with a season ticket loan balance, this will be deducted in the final pay in accordance with the handbook. In the event of an employee leaving the company either by resignation or termination of contract, for the majority of the time the rules and legislation are adhered to. Every employee has the notice period specified in the contract of employment, which are above the statutory requirements (Gov. uk, 2013). Every employee must tend written resignations, which are passed onto payroll for processing. Payroll manually calculate the prorated pay and benefits for the relevant month of leaving, along with any holidays due or overpaid which are paid or deducted from the final salary. This is stipulated in an exit letter from the HR manager; however there is currently no guidance on how a day’s pay is calculated. All leavers are paid the final salary and issued a P45 on the customary pay date. (HMRC, n. d). In the event of death in service, which has occurred twice at Global, the same procedures apply for notifying HMRC and the deceased box is completed. (HMRC n. d). Although Global performs checks before employing members of staff, there have been numerous staff employed that have not been satisfactory in performing the duties of the role. This has led to Global paying compromise agreements to certain staff to leave the company amicably. (MS-solicitors, 2013). Management and HR have not been thorough with background checks, and this has meant staff have been unexpectedly dismissed. There have been several redundancies over the years of varying ages and capabilities, all of which have resulted in different redundancy packages. Depending on pay scale and length of employment, this will determine what the company will pay out. (Citizens Advice, 2013). Generally Global pays the statutory minimum, however longer serving employees have been paid more. There are currently no terms and conditions in the handbook on how the company calculates redundancy pay. The final payment is usually paid on the last date of employment. Global generally has a period of consultations with the employees that are up for redundancy. (CIPD, 2013). When payroll calculate the final redundancy payment, the element of actual redundancy pay is tax and national insurance free up to ? 30,000. (HMRC, n. d). Any monies above this limit are deducted tax and national insurance, the pay that is taxable will be included on the P45 which is produced and given to the employee on the last day of employment. When employees decide to retire, the process is dealt with in the same manner as leavers. The employee is issued a P45 and the final salary is paid on the last day of employment. Global do not pay pensioners, it is payable by an external pension provider. (CIPP, 2012 p. 62) The payroll department notifies the providers with the relevant details so that payment can commence at the earliest opportunity. The company helps employees with the transition from full time employment to retirement with a number of resources; these include retirement seminars and reduced working hours. (Employee benefits, 2012). All leavers from Global are processed by payroll either on the contractual pay date or last day of employment, whichever has been mutually agreed. Every employee is issued a final P45 upon leaving the company, and the P60 is posted at the end of the tax year. External bodies are notified of leavers, HMRC are electronically sent P45’s (HMRC, n. d). Benefit providers are informed of employee’s last date of employment and all benefits are cancelled thereafter. To date Global has not been affected by any transfers to new ownership, so currently does not have any guidance in the staff handbook relating to Transfer of Undertakings Regulations 2008 (Legislation, n. d). 4. Special Cases Equal Opportunities 4. 1 Other payroll considerations Global encounters various situations where different considerations of payroll processing are applied. (CIPP, 2012 p66). Global is a multinational company which sees overseas and local staff being seconded to various branches of the company. The main reason for this is that a range of skills are required for certain projects. The company has had a few members of staff from the London office working abroad on secondment for up to six months. As per HMRC (n. d), the seconded employees are paid as per usual on the contracted pay date. Due to the employees working overseas for less than a year, the pay is processed no different than if the employee worked in the UK. A new contract is drafted for the period of secondment covering any new terms and conditions. The London office has also had a few employees from foreign branches working for several months. The employee completes a P46 (Ex-pat) and HMRC advice is sought for payment of employee depending on which country it relates to. (CIPP, 2012 p67). The company actively takes on student workers during holiday season, mainly on behalf of various members of staff. Every student completes a P38(S) upon commencement of employment. This form entitles all students to receive wages without income tax being deducted. (HMRC, n. d). All students are set up on the system as a new starter, issued a contract and are paid on the same date as all Global employees. The majority of the student workers are of school age, which means the company does not have to pay the minimum wage (Gov. uk, 2013). However, all students are paid ? 10 an hour whilst employed by Global, which is above the National Minimum Wage and means that all students are covered by legislation regardless of age. 4. 2 Equality Diversity Legislation states that it is unlawful for an employer to deny any potential applicants a job based on age, sex, gender, religion, race and disability. (Home office, 2012). Global has documented policies in the staff handbook elating to equal opportunities, and procedures if and when discrimination was to take place within the company and how to make a claim. The Equality Act 2010 covers a broad group of employees that are protected by any form of discrimination or harassment. (Acas, 2011). All areas of the Equality Act 2010 are addressed within the policies of Global, due to the ever increasing members of staff with varying ethnic backgrounds a nd religious beliefs joining the company. The Equal Pay Act 1970 which was replaced by the Equality Act 2010 (Equalpayportal, 2012), states that all men and women employed to do the same job are to be treated equal. Within the company there are no apparent differences between men and women doing similar roles, however payroll are aware that the pay structure and pay rates are not comparable with each other. Both areas need reviewing and updating. Redundancy is an area that could create a cause for discrimination. (Gov. uk, 2013). Employers cannot make an employee leave the company once retirement age has been reached. (Acas, n. d). This would be classed as age discrimination; all employees have the right to work passed retirement age. Payroll need to make sure that procedures are followed and the system is updated where employees are passed retirement age and tax and national insurance codes are changed where necessary. 5. Conclusion Recommendations The findings in this report conclude that Global is a relatively well managed company. Global has numerous procedures in place which are generally effective, but also have room for improvement. The main areas for concern are recruitment and employee dismissals. The findings and conclusion in this report support the following recommendations: TUPE procedures should be addressed and included in the staff handbook in the eventuality there is a change of ownership. †¢ The working day calculation should be included in the staff handbook. †¢ Employee contracts should be reviewed and updated on a regular basis, covering all aspects of employment legislation. †¢ Recruitment of staff should be processed more meticulously and all background checks and references should be scrutinised. †¢ When conducting the annual PRP reviews, any competency issues should be addressed along with possible disciplinary actions. Global and employees would benefit if the company had a probation period for new starters. Depending on the pay scale and role, there should be various lengths of probations. †¢ The company should include redundancy terms and conditions in the staff handbook. †¢ Revise pay scales and structure and ensure all are in line with current market rates. †¢ Treatment of student workers should be included in staff handbook. 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