Keeping employing staff simple
This week’s blog is for all those interested in knowing more about the facts concerning employee wages, accommodation charges, holiday entitlements and finally sick pay, income tax, national insurance and pensions.
Linda Hudson, Head of Business Development at Educ8 Training, (our Apprenticeship provider partners), has in the last 10 years worked in both college and private training organisations and now kindly offers us all a short review with some handy hints, tips and links for good measure!
The information provided is given in good faith, but do ensure that the information you are working to is correct and appropriate for your specific circumstances and double check with a suitably qualified professional.
Linda possesses that rare ability which most of us appreciate, which is to be able to demystify the nuts and bolts of a normally quite complicated subject in just about the time it would take you to make and drink a nice cup of coffee. Time well spend these days on both counts I am sure you’d agree.
4 Common pitfalls of employing staff
and how to avoid them
by Linda Hudson
When I was Autumn hunting many years ago I saw a bad accident caused by a ‘blind ditch’ and it left me with a fear of riding at speed across Autumn long grass which has remained with me to this day. As many of you will know, at this time of year the long grass falls over, or into, little ditches and they become ‘blind’ or hidden. An accident waiting to happen.
Being unaware of the law as it relates to us when employing staff can cause the same kind of sudden mishap. Most equine employers intend to stay on the right side of the law but, as the old saying goes, ‘ignorance is no defence’ when you get it wrong. When you are an employer there are quite a few ‘blind ditches’, or pitfalls as you might call them, that are easy to stumble into as time passes. Here are a few hints on what to watch out for if you employ anyone – including apprentices.
You will have heard of the National Minimum Wage, and you should also be aware of the National Living Wage because this falls into minimum wage legislation. Did you know, though, that there are now five minimum wage rates? Or that the apprentice minimum wage doesn’t apply to an apprentice who is aged 19 or over and has completed the first year of their apprenticeship?
These rates below are for the National Living Wage and the National Minimum Wage. The rates change every April. In recent years, several equine employers have fallen foul of this legislation quite unintentionally and some fines have been in the tens of thousands of pounds – enough to put many equine businesses out of business! Equine employers have been publicly ‘named and shamed’ by Government after HMRC investigations for breaches of this legislation amounting to as little as under £300 underpayment of their staff.
Handy Tip number 1: have a system so that you can keep an accurate record of hours actually worked by your staff (as opposed to contracted hours) and check this regularly. This allows you to pick up issues such as if a member of staff is struggling with an excessive workload or someone is staying at work unnecessarily after their own tasks have been completed and is counting this voluntary overtime in their own working time records.
Handy Tip number 2: Be clear about what constitutes working time and what doesn’t – for example, if you invite your apprentice to accompany you to a show during their time off, for the experience, but you don’t expect them to work as your main show grooms are in attendance. Even something as simple as making sure your employees understand that their lunch break is unpaid and doesn’t count towards working hours is important especially if they are a young apprentice and this is their first employed position. Voluntarily staying late (different from being asked to stay late) needs to be managed carefully.
Minimum wage rates 1st April 2019 – 31st March 2020
|Year||25 and over||21 to 24||18 to 20||Under 18||Apprentice|
Apprentices are entitled to the apprentice rate if they’re either:
- aged under 19
- aged 19 or over and in the first year of their apprenticeship
Example An apprentice aged 22 in the first year of their apprenticeship is entitled to a minimum hourly rate of £3.90.
Apprentices are entitled to the minimum wage for their age if they both:
- are aged 19 or over
- have completed the first year of their apprenticeship
Example An apprentice aged 22 who has completed the first year of their apprenticeship is entitled to a minimum hourly rate of £7.70.
It’s an employer’s responsibility to be aware of the different minimum wage rates depending on the circumstances of their workers – and to make sure all eligible workers are paid at least the minimum rate they are entitled to.
Handy Tip Number 3: know your employee’s age and birthday. It’s a very nice gesture to give them a birthday card, but it’s essential to ensure you are paying the correct minimum wage!
Knowing when and how to legally charge employees for their accommodation
If you provide live in accommodation it is important to consider whether you wish to make a deduction from wages for this or not and, if so, how much. Providing accommodation as part of a wage and benefits package can be helpful with regard to minimum wage calculations as a nominal value (accommodation offset rate) can be included towards the minimum wage.
The MAXIMUM accommodation charge which can be deducted from an apprentice is the ‘accommodation offset rate’ and is fixed by the government in April each year. From 1st April 2019 – 31st March 2020 it is £52.85 per week or £7.55 per day and is explained more fully here.
Note – this is maximum, and you may choose to deduct less than this but should not deduct more from an apprentice, or any other employee who is receiving the National Minimum/Living Wage.
There is no rule to say that employers must deduct an accommodation charge but if no deduction is made, the offset rate is added to the employee’s wage for the purposes of checking whether the applicable minimum wage is being paid.
It is feasible, though, if the accommodation is free, that the combined wage and benefit in kind could be later construed by HMRC as producing an unexpected tax and/or National Insurance liability later.
The offset rate can be counted towards the minimum wage but of course, the minimum wage itself is a MINIMUM and may be increased if an employer wishes to pay more. Many equine employers start an apprentice on the minimum wage but increase this as time goes by to reward progress and achievement, which helps with staff job satisfaction and retention.
When it is so difficult to recruit good apprentices another consideration for employers is that if you’re providing accommodation you can advertise your hourly rate of pay at the amount which includes the accommodation charge. For example, if you are paying £3.90 per hour for a 30 hour week this is £117 per week. Add on the accommodation offset rate of and the job can be advertised at a weekly wage of £169.85, or hourly rate of £5.66. This may attract more applicants but should, of course, state that there is a deduction for accommodation. Be careful with this though as you generally can’t pay different hourly rates for staff simply because they don’t live in.
If you provide free accommodation be careful and check with your accountant as in certain circumstances this could lead you to an accidental underpayment of National Insurance contributions or a failure to count your employee as eligible for Statutory Sick Pay – more on this later in the article.
Neglecting or getting in a muddle over paid holidays
There is no doubt that it is better for business to give your staff time off – they come back refreshed, rested and with their enthusiasm restored especially after a long hard winter! But there are things you can do to ensure that staff holidays don’t cause disruption to your business.
All employees, including apprentices, are by law entitled to a total of at least 5.6 weeks of paid annual leave. There is no additional entitlement for Bank Holidays. The Government website is especially useful for calculating holiday entitlement for full time, part time, irregular hours and hourly paid staff. There is also an easy-to-use calculator for part of a year. You can make use of these online facilities here.
Carrying leave over from one leave year to the next
Employees must take at least 4 weeks of statutory leave during the leave year, they may be able to carry over any remaining time off if their employer agrees. So if a worker gets 28 days of holiday, they may be able to carry over up to 8 days. Workers who receive statutory leave don’t have an automatic right to carry leave over to the next holiday year, but employers may agree to it.
Handy Tip number 4: make sure your contract of employment, employment offer letters or staff handbook state the start of your business’s holiday year. For example, does it run from 1st January to 31 December? Or 1 April to 31 March? This is important for making sure that staff do take their allocated holiday within the year.
When employees are unable to take their leave entitlement because they’re already taking time off for different reasons, such as maternity or sick leave, they can carry over some or all of the untaken leave into the next leave year. An employer must allow a worker to carry over a maximum of 4 weeks if the worker is off sick and therefore unable to take their leave.
If an employee chooses not to take statutory annual leave during sick leave, they can carry forward the untaken leave for up to 18 months from the end of the leave year in which the leave arises. This means that if a leave year ends on the 31 December the worker would have 18 months after that date in which to take the annual leave for that year.
Handy Tip number 5: keep a written record of when staff are on holiday – especially odd days!
It can be challenging to organise cover for holidays and Caroline Carter Recruitment can assist with this but the key to effective cover is ensuring your staff give you adequate notice. If your contract of employment doesn’t state the notice you require, then you can’t insist on it. It’s usual to ask for at a week’s notice for one or two days’ holiday and two weeks ‘ notice for any more than this. It is possible to decline holiday requests which don’t meet these criteria or which need to be declined for reasonable needs of the business. But be wary of this – declining holiday requests is one of the quickest ways to cause your staff to become disenchanted with their job!
Handy Tip number 6: make sure your staff know what notice you expect for holiday requests – ideally in writing in their offer letter and contract of employment or staff handbook
There may be times of the year when you do not permit holidays to be taken. For example, if you always spend time away competing at a large international event and need all staff on hand to cover the show and home yard, you can state that no annual leave is permitted during this time. Again, make sure this is in writing and they are aware of it well in advance. Equally, you can specify that some of the annual holiday entitlement must be taken at a time to suit you. Christmas and New Year are common examples of this, especially with small, privately run competition yards where the yard owners prefer to cover the yard duties themselves.
There is no legal entitlement to Bank Holidays, including Christmas and New Year. However, all good employers will ensure that employees are able to spend some of the holiday period at home with their families and/or friends. Advance notice of what you expect, fair allocation of the days, and advance planning of the rota, are essential for a happy team.
Handy tip number 7: if there are times when you do not allow annual leave to be taken, or when you require some leave to be taken, this should be stated in your contract of employment
Overlooking the finer details – sick pay, income tax, national insurance and pensions
Statutory Sick Pay
All employers have to pay Statutory Sick Pay to eligible employees who are absent due to sickness and the rate of SSP is set in April each year. For April 2018 – 2019 it is £92.05 per week and is paid for up to 28 weeks. Statutory Sick Pay starts after 4 ‘waiting days’ which includes non- working days, i.e. the first 4 days of sickness are unpaid and this includes non-working days.
If an employee earns less than the lower earnings limit for National Insurance contributions (currently £116 per week) they are not eligible to be paid Statutory Sick Pay during sickness absence.
For example, an apprentice earning £3.90 per hour, for a 30 hour week, with no accommodation included would not be eligible for SSP as their total pay is £117 per week. The same apprentice with accommodation which is not deducted from their pay WOULD be eligible for SSP as their wage would be calculated as £117 plus £52.85 accommodation offset rate so the total weekly wage would be counted at £169.85 and above the threshold for Statutory Sick Pay and National Insurance. (see my Blog Part 1 for details of the accommodation offset rate).
There is a threshold for payment of income tax which is also set in April each year, called the ‘personal allowance’ and it is unlikely that apprentices will be paid above this amount. Again, the personal allowance is set in April each year and is from April 2019 is £240 per week, £1,042 per month or £12,500 per year. Find out more here.
There is a threshold for payment of National Insurance contributions set in April each year called the ‘lower earnings limit’ and from April 2019 – 2020 this is £118 per week, £512 per month, £6,136 per year. Find out more here.
Pensions legislation applies to certain employees who earn over £192 per week. You must enrol and make an employer’s contribution for all staff who:
- are aged between 22 and the State Pension age
- earn at least £10,000 a year
- normally work in the UK (this includes people who are based in the UK but travel abroad for work)
From April 2019 the minimum employer contribution is 3% so if you have an employee who is aged 25 or over and on the National Living Wage of £8.21 for a 40-hour week the employer pension contribution would be £9.90 per week. So it’s not usually the cost of pension contributions that puts employers off, it’s just a lack of time and understanding about how to go about setting one up. It’s actually quite simple! So sit down with a coffee and check this out – it will only take you 15 minutes to get to grips with the basics.
Read Caroline Carter Recruitment’s explanation of Workplace Pensions here.
Here’s a guide to working out if you should have a workplace pension scheme – click here.
And for a quick and easy guide to setting up a workplace pension scheme here.
So for relatively little effort and very little cost, you can give your employees a workplace pension. This is a really attractive additional benefit which could make all the difference when you’re trying to recruit a good groom.
I hope you’ve found this information useful and interesting – stay safe, stay on the right side of the law and watch out for those blind ditches!!
There’s lots of helpful guidance available on the Government website – www.gov.uk – and I’ve included links to some of these. If you think you may be breaking any of this guidance you should take advice from your qualified legal advisor or accountant.
If in doubt, take advice from a suitably qualified professional such as your solicitor or accountant.