Contractual Aspects of Payroll Administration

FDPP 1227

Ana Andronie - M02090781

Tutor: Denise Brown

12/10/2020
2544 Words

1
Contents

1.1Introduction 3
1. Legislation and its effect on payroll 3
1.1 Sources of legislation and ERA 1996 3
1.2 National Minimum Wage Act 1998 4
1.3 Workplace pension and Automatic Enrolment duties 4
2. Processes applied during various stages of employment 5
2.1 New appointments 5
2.2 Transfer of Undertakings (Protection of Employment) regulations 6
2.3 Leavers 6
3. Consideration of Special cases and equal opportunities 7
3.1 Special Cases 7
3.2 Equal Opportunities 8
Conclusion 8
Recommendations 9
Appendices 10
References 11

2
Introduction
This report is a deep analysis of contractual aspects of payroll requirements within the
organisation The Fluent Money Group. Fluent Money Ltd was incorporated in 2008 and since
then has been leading in top positions in its field as a financial broker, it has grown into a
group and is constantly expending its boundaries. The aim of the company is to deliver
excellent services. Hence “Fluent Money completes more secured loans than any other
broker” (Fluent Money, 2020) . The group is formed by the companies: Fluent Money Ltd,
Fluent Loans Ltd. and Fluent Mortgages Ltd. The Payroll department works closely both with
HR and Finance department. However, it stands under the Finance department. The payroll is
processed by two parties: payroll officer – gross salary calculations, and the payroll bureau –
gross to net salary calculations.
The report will examine the organisation’s environment and the employee contracts against
the legislative requirements. Consequently, it will identify if there are any areas that put
Fluent Money at risk for not complying with the legislation and would propose clear
recommendations where it is necessary. Further, it will assess payroll process applied during
various stages of employment and will examine the initiation of the new procedures as
required by legislations.
The final part of the report will analyse special cases of employment and will examine if
these cases apply to Fluent Money. Additionally, it will explore equal opportunity legislation
and if there are policies and good practices at Fluent Group that covers it.

1. Legislation and its effect on payroll

1.1 Sources of legislation and ERA 1996

The main sources of legislations are:
- Acts of Parliament – primary legislations issued by the parliament
- Statutory Instruments – secondary legislations issued by the Ministers of the Crown
- Case law or common law - legislation determined by the decisions reached on the
actual cases
There are various legislations which affect the payroll and these are listed in the Annex 1.
However, this part of the report will analyse the Employment Rights Act 1996.
The Employment Right Act consolidated earlier Acts of Parliament: Employment Protection
(Consolidation) Act 1978, Employment Act 1982, Wages Act 1986, Trade Union Reforms
and Employment Rights Act 1993. This change of the law is the base of the current payroll
administration and covers the following aspects:
- Contracts of Employment
- Termination of Employment
- Itemised Payslips
- Deductions from Pay
(Chartered Institute of Payroll Professionals, 2020, pp. 9-10)

3
Both contracts of employment and termination of employment are covered by the HR
department at Fluent Money. The HR Officer issues and distributes the contracts prior to the
first day of employment. These aspects will be discussed in detail later in this report.
The pay frequency at Fluent Money is monthly and the intemised pay elements are indicating
different types of bonuses. This helps the sales advisers to acknowledge each bonus they are
receiving if moved within the company to another department.
The HR Officer issues the termination of employment letters that contain the amount of the
final gross salary which may include remaining/owed holidays, any training deductions or
any other related payments/deduction mentioned in the contract of employment. It some
cases the overpayment must be recovered from an employee. This is the area that put in risk
the Fluent Group since the overpayment deduction have been made previously without
employee’s consent.

1.2 National Minimum Wage Act 1998

The National Minimum Wage Act 1998 is setting out the minimum hourly pay that the
employee is entitled to received based on the workers’ age or whether is an apprentice. Since
April 2016, National Minimum wages and National Living Wage is increasing each year on
the 1st April. The employer that is found guilty of not complying with the national minimum
wage legislation must pay the difference to the employee and support the penalty. The
amount of penalty has been increased from April 2016 to 200% of the amount of the
underpayments. However, it can be reduced by 50% if the employer pays it within 14 days.
Also, the names of the employers who are not in compliance with the National Minimum
Wage legislation are published on the Named and Shamed list on the government website
GOV.UK.
(Chartered Institute of Payroll Professionals, 2020, pp. 31-32)

Fluent Money Group is revising workers’ salaries accordingly to the National Minimum
Wage legislation each year in March and increasing on the 1st of April. All changes of
salaries are coming to the payroll department from the HR department through the internal
system. Consequently, Payroll officer is actioning the changes and is checking if the hourly
rate is not below the NMW legislation and that the Fluent Money is not facing HMRC fines.

1.3 Workplace Pension and Automatic Enrolment duties

To ensure that each person is covered for their retirement the government introduced a
legislation called The Pension Act 2008. “Under the Pensions Act 2008, every employer in
the UK must put certain staff into a workplace pension scheme and contribute towards it.
This is called 'automatic enrolment'.”
(The Pensions Regulator, 2020)

4
The Pension Act 2008 was followed by The Pension Act 2011 which put in laws the
timetable of the State Pension age, the changes that affect workplace and other various
regulations.
Under Automatic Enrolment a new employer or an existing employer who takes a new
employee have a duty to place the new employee into a pension scheme. Also, the employer
must monitor the age and the earnings of the staff to ensure the employee is automatically
enrolled as soon as it meets the qualifying criteria. Among this, the employer has to manage
the requests to join or leave the scheme, make a minimum pension contribution and increase
the minimum contribution into the workers’ pension scheme each year.
The employer must go through a re-enrolment process every three years. This means that the
employer has to enroll certain employees into a pension scheme and submit a re-declaration.
The worker has the right to opt-out from the pension scheme within the first month of
automatic enrolment and receive the contributions back.
(ACAS, 2020)

At Fluent Money Group there are two pension providers: People’s Pension for Fluent
Mortgages and Royal London for Fluent Loans and Fluent Money. Each employee is
automatically enrolled and the group contributes to the pension’s pot. This year Fluent
Mortgages complied with the duty to re-enroll into the scheme and automatically enrolled
existing workers again to the pension scheme. However, the payroll officer did not send a
notification letter on behalf of the employer relaying on the fact that the notification letter
will be sent by the pension provider. This caused staff to be upset when the payslips were
distributed, as the salaries were smaller than expected. As a result, the notification letters
were sent after the pay date.

2. Processes applied during various stages of employment

2.1 New appointments

The payroll process is very complex and may be sometimes difficult since it has strict
deadlines for data submission by various departments. The deadlines help to ensure the
correct salaries payment in a timely manner. One of these processes is the assignment of a
new appointment – a new starter. When adding a new starter, the employer must be
compliant with several legislations such as employee’s legal right to work in the UK, national
minimum wage pay legislation, Disclosure and Baring Services check, ERA an auto-
enrolment legislation which has been discussed in previous chapter.
(Chartered Instutute of Payroll Professionals, CIPP, 2020, pp. 80-83)

The new appointment process begins with the payroll officer assignment of a cut-off date;
this is communicated to all line managers and relevant departments of the group. To ensure
the new starters are added to the system and receive their pay on the first working month, the
HR Officer must arrange all paperwork to be sent to the payroll on time. Sometimes it is
difficult for the HR Officer to send new starter notifications to payroll. Whenever the
appointment has started working after the cut-off day, the new starter is receiving its pay on
5
the following month. While HR is in charge of Fluent’s compliance with the ERA 1996, right
to work checks and BDS checks, the payroll officer is monitoring national minimum wage
pay and performing the automatic enrolment duties in to a pension scheme.

2.2 Transfer of Undertakings (Protection of Employment) regulations

The Transfer of Undertakings (Protection of Employment) Regulation 2006 was introduced
to ensure the protection of employee’s rights when a business is sold or undertaken, or when
the employee is transferred to a new employer.
The TUPE applies when:
 “the employees’ jobs usually transfer over to the new company - exceptions could
be if they’re made redundant or in some cases where the business is insolvent
 their employment terms and conditions transfer
 continuity of employment is maintained”
(Crown copyright, 2020)
TUPE is a procedure that has been regular at Fluent Money since the group bought Fluent
Mortgages Ltd, however, with the beginning of the pandemic all TUPE were assigned an on-
hold status. Currently, when the employees are returning to work from furlough, HR
department might offer some employees the option to work for a different company within
the group. For instance, a sales adviser from Fluent Money could accept to be move on a
secondment to Fluent Mortgages for an agreed period of time, but still remains on the Fluent
Money payroll. The Finance Manager and the Payroll officer has raised this issue with the
Compliance Director and the HR Officer. It has been agreed that at the moment it is difficult
to arrange the TUPE taking into consideration the global circumstances. However, the answer
giving by the director was that this practice prevents the group to apply the redundancies
within the organisations.

2.3 Leavers
The employer has the obligation to calculate and process the final payment to the employees
as soon as possible, to ensure that the payroll records are amended accordingly and the
leavers are not receiving further payments. There are various types of leavers:
- Normal Leavers (resignations and dismissal)
- Redundancy
- Retirements
- Death in service
- Constructive (dismissal/discharge/termination)
It is essential that payroll has the correct data in order to pay any final outstanding monies.
These can possibly include final salary, holiday, bonus to the employee or can consist of a
deduction such as unpaid absence/sickness/holiday as exemplified in previous chapter.
Further, the employer must ensure the correct calculation and deduction of the NICs, income
tax and to issue P45 Form. It is important to remember that the employer cannot make any

6
deductions that are not specified in the contract of employment or without special
arrangement between the employer and the employee. Moreover, if the employee has
Attachment of Earnings, the employer has the obligation to notify the relevant organisations
about the termination of employment.
(Chartered Institute of Payroll Professionals, 2020, pp. 100-109)

The Fluent Money has in its processes normal leavers every. The leavers are usually
receiving the final pay one month in arrears. This is due to the bonus payment process that is
one month in arrears. Conversely, a leaver that is not a sales adviser and is not due to receive
any sales bonus, receives the final payment in the leaving month.
The issues that the organisation is facing regarding leavers is the loss of monies with the last
payment. For example, if an employee resigns prior the pay date which on the 25th and the
payroll has been closed on the 23rd, the employee is paid until the end of the month without
working those days and without the possibility to recover the monies.

3. Considerations of special cases and equal opportunities

3.1 Special Cases
Previous chapters of this report have looked into the legislation that covers the employers and
the employees throughout UK. However, there are special cases that haven’t been analysed
but need to be treated with the same diligence. These are:
Special employees’ situations
- Foreign workers
- Workers working abroad
Special employer situations
- Industrial actions (internal and external)
- Employer structure changes (software implementations)
Special absence
- Industrial injury or disease
- Absence due to the third-party accidents
The PAYE and NICs guidance of how to treat the foreign workers is covered in CWG2.
These are treated as a normal worker. Potentially, the foreign worker might not have a NINo
on a first date of employment. However, this will be issued later by DWP. In the case where
the foreign staff doesn’t have a NINO yet, the employer must provide as much personal data
to HMRC as possible. Moreover, the employer must give the foreign employee a Starter
Checklist Form which contains all essential information required by HMRC. Where the
foreign employee has intention to leave without returning to the UK, the payroll administrator
must ensure that the correct deductions are made from his final pay.
(Aldous, 2020)

7
Despite the fact the DWP is not issuing at the moment NINo’s to foreign workers due to the
difficulties cause by the pandemic, Fluent didn’t happen to have any foreign staff employed
in this period of time without a NINo. Although there are no special cases at the moment at
the Fluent Money Group, potentially the change that the group is planning to implement by
the next financial year is to bring payroll in house.

3.2 Equal Opportunities

“The term equal opportunities upholds the idea that all workers within an organisation should
be entitled to and have access to all of the organisations facilities at every stage of
employment, including the pre-employment phase.” (Equal Opportunities Commission ,
2020)
Under Equality Act 2010 each individual should have the right to apply and be selected for
pre-employment; the right to be trained and promoted during the employment; the right to
terminate the contract equally and fairly. All workers must be treated equally regardless of
sex, race, age, pregnancy, disability, marital status, sexual orientation, gender reassignment
and religious background.
The Fluent group is an organisation that has an Equal Opportunities policy in place. The
company has about 350 employees that are different ages and races. Continuous recruitment
process is targeting candidates of all ages. The internal CPD system gives all employees an
equal opportunity for continuing professional development. Also, Fluent is a flexible
employer that gave the opportunity to its staff to choose whether they want to continue
working from home during the pandemic when the government did not require it anymore

Conclusion
This report has analysed the contractual aspect of the payroll administration within the Fluent
Group organisations. In the first part has been examined the company’s compliance with the
following legislations: The Employment Right Act 1996, The National Minimum Wage Act
1998 Legislation, the workplace pension and the automatic enrolment duties. The group is
complied with the majority of the legislation. However, the areas that put in risk the employer
is the unlawful overpayment recovery and late automatic enrolment notification, both risks
are linked to the deductions from pay.
The second part of the report has analysed the payroll processes in regards new starters,
TUPE and leavers. The assessment of the Goup’s processes on various stages of employment
has outlined the conclusion that the payroll officer must review payroll practices in regards
overpayment recovery from a leaver where possible as it causes the organisation the financial
loss. Also, the TUPE procedure must be review. Overall, the new appointment processes are
compliant with the legislation.
The final part of the report concluded that the Fluent Group doesn’t have any special cases of
employment at the moment and the equal opportunities policies is implemented and followed
continuously in the organisation.

8
 Recommendations

 To stop with immediate effect the deductions form pay of overpayment that are not
stated in the contract of employment or without employee’s consent for a repayment
plan
 To communicate with the payroll bureau about the potential payroll correction prior to
the pay date, to minimise the financial loss of the company
 To raise the TUPE matter with HR department in the near future

9
Annex 1

Legislation affecting payroll

Employment Rights Act 1996
Employment Relations Act 1999
Part-Time Workers Regulations 2000
Fixed Term Employees Regulations 2002
Employment Act 2002
Work and Families Act 2006
Transfer of Undertakings (Protection of Employment) Regulations 2006
Asylum and Immigration Act 1996/2006
National Minimum Wage Act 1998
Data Protection Act 2018
Working Time Regulations 1998
Agency Workers Regulations 2010
Unfair discrimination and Equal Opportunities
Equality Act 2010
Pensions Act 2008 / 2011
Children and Families Act 2014
Apprenticeship Levy
Gender Pay Gap Information Regulations
The Computer Misuse Act 1980
The Limitation Act 1980
Reporting of Injuries, Diseases and Dangerous Occurrences Regulations 2013

Source: (Contractual Aspects of Payroll Administration, 2020)

References

10
Books
Chartered Institute of Payroll Professionals, C. (2020). Contractual Aspects of Payroll Administration.
Chartered Instutute of Payroll Professionals, CIPP. (2020). Contractual Aspects of Payroll
Administration. CIPP.

Websites

ACAS. (2020). Automatic pension enrolment. Retrieved from ACAS:

https://archive.acas.org.uk/index.aspx?articleid=4757
Crown copyright. (2020). Business transfers, takeovers and TUPE. Retrieved from gov.uk:
https://www.gov.uk/transfers-takeovers
Equal Opportunities Commission . (2020). Home. Retrieved from Equal Opportunities Commission :
https://www.eoc.org.uk/
Fluent Money. (2020). About Fluent Money. Retrieved from Fluent Money:
https://www.fluentmoney.co.uk/about-fluent-money
The Pensions Regulator. (2020). Employers. Retrieved from www.thepensionsregulator.gov.uk:
https://www.thepensionsregulator.gov.uk/en/employers/

Audio Recordings

Professionals, C. I. (2020). Payroll Administration Module Workshop [Recorded by M. Aldous].

Contractual Aspects of Payroll Administration, T. S. (2020). Contractual Aspects of Payroll
Administration [Recorded by C. Warrington].

11