Making a payment in lieu of notice (PILON) is a way of ending an employment contract with immediate effect meaning that the employee will not work a notice period. An employer will make a payment of the amount that an employee would normally have been paid if they had worked the notice period.
Whether tax is payable on the PILON all depends on the contractual agreement between the employer and the employee and whether it is usual
practice for the employer to make this type of payment.
If under the terms of the contract, the employer has the right to make a payment in lieu of notice then the payment is made as part of the contract and taxable. The same would apply if it was customary for the employer to make payments in lieu of notice when terminating an employee’s employment regardless of which party chose to give notice to end the contract.
If however, PILON is not covered in the employee’s contract of employment nor customary practice for the employer to make this type of payment, then PILON would be treated as damages for a breach of contract on the part of the employer and so would not be taxable.
Other payments made at the time of leaving such as holiday pay will be taxable as they are a contractual payment.
In November 2014, a landmark Employment Appeal Tribunal case ruled that employees have the right to claim for overtime to be included in their holiday pay if the overtime is regular or compulsory. The Tribunal has not clarified whether this could also benefit staff who work voluntary overtime.
The ruling was based on the supposition that UK had incorrectly interpreted the EU Wide working time directive, which was implemented into law as the Working Time Regulations in the UK in 1988. The current legislation in the UK states that holiday should be paid at the basic rate. This has now changed as a result of these test cases.
It is anticipated that due to the impact this ruling could have on business that an Appeal on this ruling is likely. If the ruling stands or is appealed unsuccessfully, then employers must include overtime when calculating workers’ holiday pay. Employers need to consider how they will apply the ruling until any appeal process which may take a considerable length of time, has been completed
The judgement has created a time limit on how far back employees can backdate claims of overtime on their holiday pay, which means employees must make a claim within 3 months of taking their holiday or they lose their right to make a claim.
ACAS have produced useful guidance on overtime, commission and other payments to be considered when calculating holiday pay for employees.
The HMRC are responding to increased false self employment on the part of employment intermediaries acting on behalf of self employed workers who should legally be regarded as employed, and therefore attract the same rates of Tax and National Insurance as an employed person would do.
From 6 April 2015, Employment Intermediates must send details of workers they place with clients who are not:
HMRC will not charge a penalty if you are a new employee and you have sent your first FPS within 30 days of paying an employee or if it’s the first failure within the tax year to submit your report on time. This also will not apply to employers with fewer than 50 employees for the Tax year 2014-15.
For more information about how to avoid penalties for late submission see the HMRC website
If you are a business the buzz around apprenticeships won’t have escaped you. There are a lot of good news stories in circulation which show how apprenticeships are benefitting businesses, particularly SME’s, and providing young people with the opportunity to learn new skills. Providing young people with a real route to a career through the Apprenticeship scheme is good news for everyone.
What may be less clear is how to get started if you are interested in taking on an Apprentice.
Businesses may be able claim up to 5 different grants to cover the initial costs of hiring an Apprentice, which includes £1,500 in the form of an Apprenticeship Grant for Employers of 16-24 year olds.
An Apprenticeship normally lasts for a minimum of 13 months and can last up to four years. This is an investment for a business but gives business owners a real opportunity to shape and develop their workforce.
It is worth noting that an Apprentice does become your employee and has full employment rights as would any other employee.
Apprenticeship schemes are facilitated through local colleges and independent training providers, and they can offer more advice and support to get you started. The Apprenticeships Website includes a search facility to help employers locate training providers depending upon the type of apprenticeship being offered.
New regulations which affect current maternity and paternity leave and pay take affect as of 1st December 2014, and will apply to parents if:
Their baby is due on of after 5 April 2015
They adopt a child on or after 5 April 2015
Shared Parental Leave (SPL) and the Statutory Shared Parental Pay (ShPP) must be taken between the baby’s birth and their first birthday.
It effectively enables parents to make choices about how and when they take their SPL and gives them the opportunity to share the leave or the pay between them.
Some key points for businesses
If a baby is due on or after 5 April 2015 and born early, these new rules will be applied in the current 2014/15 tax year
It is the employee’s responsibility to check they are eligible for shared parental leave and/or pay and they must give their employer a written declaration confirming that they are eligible. An employer is not required to check or confirm the information given by the partner to determine whether the employee is eligible for shared parental leave and/or pay.
Parents have to meet the eligibility criteria to qualify for SPL and ShPP. To view the eligibility criteria click here
If eligible once the Maternity or Adoption leave and pay are ended early, parents can
Take the rest of the 52 weeks of leave (up to a maximum of 50) as SPL
Take the rest of the 39 weeks of pay or Maternity Allowance (up to a maximum of 37 weeks) as ShPP.
NB the mother must take a minimum of 2 weeks maternity leave following the birth (4 weeks if working in a factory)
There are some formalities in terms of what information the employee must give the employer about their plans to take the SPL.
It is recommended that the employer has early informal discussions about their plans with regards to how they intend to take SLP so they can plan effectively for the period(s) of leave.
An employer cannot refuse a notification for continuous leave request. Each eligible parent can give up to 3 separate notices to book leave or to vary previously agreed leave although an employer may choose to accept more notifications from an employee.
Phishing is the attempt to obtain sensitive personal information such as usernames, passwords, bank or credit card details by masquerading as a reputable organisation through electronic communication.
Definition based on Wikipedia
What types of phishing scams are currently in circulation?
There are loads of different scams in circulation in any one time. Whether these are purporting to be from “your” bank or more worryingly, there is an increase in deceivingly well presented email scams which purport to be from the HMRC.
HMRC scams have been around for a while, but new versions of scams are frequently being refreshed and re-circulated. It is becoming increasingly hard for business owners to identify whether an email communication is genuine or not.
Thankfully, help in verifying genuine communication is out there, as is good advice to prevent you from becoming a victim of a scam.
The HMRC have a good online resource to show you current and previous versions of scams as well as advice on the type of unofficial communication you will never receive from them. Click here for their advice page on scams.
Another good resource for advice against phishing scams and other forms of cyber crime is GetSafeOnline . GetSafeOnline also provide advice on protecting your computer and data whilst working outside of the office, and compliance with Data Protection.
To report any fraudulent e-communication, contact Action Fraud
Changes to National Insurance Contributions as of 6 April 2015
Some good news! If you employ anyone under the age of 21 years, Employers Class 1 secondary National Insurance Contributions will change to a rate of 0% up to the equivalent of the new ‘Upper Secondary Threshold’. At the moment the rate is 13.8% so this is a cost saving that may encourage employers to employ more young people.
We recommend that you check that you have the correct date of birth for your employees stored in your payroll software to ensure that the correct NI rates are used from April 2015.
Useful guide on Employing Staff from the HMRC is available here
Children at work – did you know?
If you are employing a child between the ages of 13 until they are considered as legally having left school, you need to notify the Local Authority, which will be the local County Council or equivalent body.
Each authority publishes guidance on employing young people of school age. As an example to find out what the requirements are for businesses located within East Sussex and when they apply please follow this link to East Sussex County Council guidance.