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Kickstart scheme

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A client is employing their first employee. It is through the Kickstart scheme.

The employee will be paid 25 hours a week. I don't do weekly payroll but would the monthly payroll be:

25xNMWx52/12

Or does the employer need to find someone who does weekly payroll?

Thanks

Replies (13)

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By Paul Crowley
01st Jun 2021 22:25

That would do for me, but really it should be 52.143 if thinking in normal years or 52.179 taking account of leap year.

Usually recommend just slightly over NMW to cover unforeseen issues.
We had a client move from weekly to monthly probably 30 years ago where one employee pointed out that 52 x 7 is only 364 days.

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Replying to Paul Crowley:
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By Hugo Fair
01st Jun 2021 22:58

If you're going to use this approach, then you definitely need to use an hourly value that is greater than NMW.
This is not just because of unforeseen circumstances (Paul is quite correct about that), but because of a basic concept that most people don't seem to understand:
* NMW is the minimum rate that must be paid each time for the hours worked for which payment is being made.

So, for instance, in March this year there were 23 weekdays in the month - which at 5 hours/day comes to 115 hours for the month (assuming a Mon-Fri week).

To keep the maths simple I'll pretend that NMW is £10/hour. So, if an NMW inspection took place, they would look at payment for this person in March and issue a fine if he/she was paid less than £1,150 (gross).
[The average over the course of the year is deemed irrelevant].

Unfortunately, based on OP's formula pay would only have been £1,083.33 ... or with Paul's improvement £1,086.31 ... so client would be deemed to have failed to pay NMW.

It may sound crazy but this is a real world example where penalties were applied.

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By Matrix
01st Jun 2021 23:10

Thanks both.

So should the employer work out the number of working days in the month and multiply NMW by 5 to get monthly hours instead? What about holiday?

Who should my client approach for assistance with these matters, do they need an HR expert? Does an HR expert calculate pay? I just process monthly pay provided by the employer normally.

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Replying to Matrix:
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By Hugo Fair
01st Jun 2021 23:59

Well, the Kickstart Scheme is described as providing funding to create new jobs for 16 to 24 year olds on Universal Credit at risk of long term unemployment.

But in operation it is (roughly) akin to a specialist version of CJRS that, although it has nothing to do with Covid-19, provides funding for:
* 100% of the National Minimum Wage (or the National Living Wage depending on the age of the participant) for 25 hours per week, for a total of 6 months; and
* associated employer National Insurance contributions; and
* minimum automatic enrolment pension contributions.

So if you "just process monthly pay provided by the employer normally" then someone in the loop certainly needs to understand both the HR & Payroll rules.

I'm not sure that an HR 'expert' is needed so much as someone who understands the rules (of the scheme and of NMW). Has your client considered asking their local employer contact for the scheme?

My personal solution is simple but (slightly) more effort for your client ... in that I would suggest the contract is for hourly pay, and the pay frequency is monthly. So you need the employer to confirm each month how many hours are to be paid (having previously let you know the hourly rate in force until they notify you otherwise).
Holiday pay (and other common exceptions to mere worked hours) have their own regulations, as I'm sure you know.

Then all you need to do is to work out how your software needs to be set up so as to report on the associated payroll costs under the scheme (in case this is asked for later as part of checking on your grant).

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Replying to Hugo Fair:
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By Matrix
02nd Jun 2021 00:14

Thanks. The client asked their contact who told them to add them to the payroll and pay them like any other employee you have. I agree hourly pay appears to be the way forward.

I don’t get involved with holiday. Again, who would the client contact about this? I think advice is funded.

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Replying to Matrix:
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By Hugo Fair
02nd Jun 2021 00:35

Holiday pay has always been a bit of a nightmare (particularly for employees with highly irregular hours or rates, like many zero hours workers). The best set of guidance can be found at ACAS rather than GOV.UK

In essence, a week’s holiday pay is calculated by reference to the average number of weekly hours a worker has worked in the previous 52 weeks, at their average hourly rate. This is to accommodate those working irregular number of hours per week - but in your case it sounds like the hours and the rate are regular, so this should be simple (although personally I'd work to the concept of hourly, not weekly, holiday pay - for the same reasons as before).

There are many pay-for providers of HR services, but I don't know of any that would be cost-effective for your client's size of operation. So again, I would have hoped that some help would have been forthcoming from the local employer contact for the scheme. Otherwise, someone has to plough through the online guidance (which covers calculation of holiday entitlement as well as of holiday pay, and who has to give how much notice when booking it, and how much can or cannot be transferred to the next holiday year, or can be paid in lieu of taking the holiday ... and so on)!

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Replying to Hugo Fair:
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By Paul Crowley
02nd Jun 2021 01:43

Much appreciated
I temporarily took over wages (reluctantly ) of a care home type service charge company that had the most convoluted pay and holiday arrangements set up by the prior property group. Prior group ran at least 30 similar service charge type companies.
Long story short, they operated NMW exactly as per Matrix original calculation.
I gave three months notice and it still took four months to get rid of.

My concern was the holiday pay, management issues and the complete incapability of getting accurate details before pay day. And the reluctance to pay a penny more than minimum wage. And they had a suitable dress expectation that could be interpreted as uniform.
The main director considered that the prior group were perfect and my concerns just plain wrong.
Looks like my concerns were not all the real concerns.

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Replying to Hugo Fair:
By Moonbeam
02nd Jun 2021 11:54

Thank you for this. It's a lightbulb moment for me. One of my clients has a minimum wage person who is paid monthly, and by treating him like any other monthly person, it looks as if I've transgressed here.
I'm going to sort this out fast.

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By SteveHa
02nd Jun 2021 09:50

What software do you use for payroll? If you are using Moneysoft then by correctly using the diary function you can get a holiday report. From memory (it's been a while) I think you can also get a holiday calculation report.

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By Matrix
02nd Jun 2021 10:07

Thanks I use Moneysoft but I do not advise on holiday since this is one responsibility we can do without. All my other clients calculate it themselves. I have now referred this client to the employer helpline used by another client.

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By sallyrichardson
03rd Jun 2021 10:46

We have clients with Kickstart employees and have asked for a total of hours worked each calendar month. This is then paid at minimum wage. If they take holiday that is calculated according to the rules. This stops any "guesswork", different working days in each week (they only worked Wed - Fri).

Hope this helps.

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By john hextall
03rd Jun 2021 12:00

For straightforward 5 day weeks, we use 52.2 weeks in a year. This gives 108.75 hours per month. I reckon, averaged over 4 years, this means paying people on minimum wage about 3p a month more than strictly necessary. But it does create a problem in months with 23 working days and a lesser one in months with 22. This is usually 3 months a year including July and August. The simplest solution would probably be to get the agreement of the employee to average their pay over the months employed in return for technically breaching minimum wage regulations in the odd month of the year; or, if this is not possible, to pay the actual hours worked month by month. If either of these options are too much hassle, then you have to pay slightly more than the minimum wage.

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Replying to john hextall:
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By Hugo Fair
03rd Jun 2021 14:06

"in return for technically breaching minimum wage regulations in the odd month of the year"

It's not a 'technical' breach, it is quite simply a breach - and will be treated as such upon inspection (i.e. not just a 'slap on the wrist').

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