Hello - would be really grateful of a steer on this one please:
The issue of paying staff 'early' in December has raised it's head - normally staff are paid on 28th of the month and some staff have asked if they can be paid 'early' - pre 25th. Operationally I don't mind doing two dates but it made me wonder about offering a 'Christmas saving scheme' by deduction from payroll Jan to Oct 2020 for payment out 1 November 2020 (let's say). Have only just passed my AATQB so have tried to do some googling! Credit unions seem to offer this type of thing & the money is protected by FSCS but there isn't a local credit union that we can use for this purpose.
I'm wondering if we can simply hold the money in a nominal code titled 'Staff Creditors - Christmas Fund' (or something similar) or would we have to hold the money in a separate bank account - google mentioned something about 'bare trust' - needless to say that hasn't come up in my studies yet..........(am on with level 4).
Thanks in advance for any guidance offered.
Replies (16)
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First thing to consider. Have you discussed this with the staff? At the very least you need an ok from them before anything.
Why anyone would take the credit risk on one of those savings schemes, including one run by an employer, is beyond me.
Is your company a bank/building society/similar?
No?
Then don't act like one by holding peoples' savings.
My apologies if you found my response brusque - but the point stands. It can certainly be a Good Thing for employees to be able to save direct from their wages into a proper bank/building society/credit union. But not for their employer to hold their savings.
Deposits of up to £85,000 with UK banks etc are protected by the FSCS. The savings an employer holds are protected by... nothing. Especially if all they are is a separate nominal ledger account - not even a separate bank account. If the company goes down, employees are likely to lose all of their savings as well as their jobs.
Like I said, if you're not a bank, don't do it.
I know this doesn't answer your question, but I thought you'd like to know that HMRC has recently issued some guidance about early payments at Christmas. It is on page 4 of the October Employer Bulletin, here:
https://www.gov.uk/government/publications/employer-bulletin-october-2019
Part A...... Paying early....... have found that paying employees early at Christmas creates its own set of problems. For a start it makes January a very long month (up to 6 weeks) and I have often had requests to pay out emergency payments to see people through to the end of January. If you pay early and flag it to HMRC through RTI you may interrupt payments from the Universal credit system. The DWP's calculated payments may classify an early payment as being two payments within the same month. Entitlement to benefits will be automatically stopped and a reclaim requested for previous benefits paid could be issued - a lot of hassle and lots of phone calls to make!
Part B....... employee savings....... not necessarily a bad thing to offer employees. If it were me I would set up a Trust. The trust would have its own bank account and keep the monies well away from the company. In terms of risk I would expect there to be a slight delay in the money each month from the company to the trust in the period between deductions from salary and the payment to the trust.
All in all = more hassle than you would have expected!!
In addition to all the other good points which have been made, there's the little matter of Minimum Wage. HMRC held a while back (in a case involving Iceland) that the money paid into this type of scheme couldn't be counted as pay when assessing if minimum wage had been paid. If this is still the case (I've not seen anything about it being overturned), you need to be careful if the staff are paid at/around the minimum. Just another complexity!
So on top of the things you have to do:-
PAYE
Employees NIC
Employers NIC
SSP
SMP
SPP
ShPP
Adoption SAP
Auto Enrolment
Student Loans
Post Graduate Loan Repayments
AEOs
Some I've probably forgotten.
you want to introduce another variable with all the overhead that entails? You asked for a steer, I'd suggest the opposite direction.
You say "you are demonstrating to your employees that you care about their financial well-being.", problem is where does it stop?
So if an independent savings scheme is offered, then the saving is a voluntary deduction not for the benefit of the employer. No impact of minimum pay.
However, if the employer is taking activity to administer a scheme even in trust, then it is likely to be viewed presently as a deduction for the benefit of the employer. So risk of minimum pay underpayments. Each case viewed on its application.
So take some care and ensure that the employer is at arms length from any arrangement and the savings organisation is administering the scheme.
There are completely independent schemes that an employee may gain access with via an appropriate deduction from pay.
You could consider an loan advance say on 21st with recovery from actual pay on 28th.
Or just move the payday for all early as is common practice, just ensure the FPS payment date remains as 28th.