Saving through payroll

Operate a 'saving through payroll scheme'

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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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By SXGuy
30th Oct 2019 07:31

First thing to consider. Have you discussed this with the staff? At the very least you need an ok from them before anything.

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Replying to SXGuy:
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By jane
30th Oct 2019 09:23

Thanks for your kind reply - I thought I'd check out the 'legalities' / responsibilities of operating it before potentially offering something to staff which would be very onerous to do.

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By Matrix
30th Oct 2019 07:37

Why anyone would take the credit risk on one of those savings schemes, including one run by an employer, is beyond me.

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By paul.benny
30th Oct 2019 07:46

Is your company a bank/building society/similar?

No?

Then don't act like one by holding peoples' savings.

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Replying to paul.benny:
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By jane
30th Oct 2019 09:31

Thank you for your curt reply - it is the first time I've encountered anything other than helpfulness on this platform.

Here is a link to 'Saving through Payroll' endorsed by the CIPP
https://www.cipp.org.uk/best-practice/financial-education/saving-through...

"What are the benefits of saving through payroll?

By offering a means to save through payroll, you are demonstrating to your employees that you care about their financial well-being."

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Replying to jane:
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By paul.benny
30th Oct 2019 10:29

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.

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Replying to paul.benny:
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By jane
30th Oct 2019 18:39

Thanks for your reply - the employer is in fact a Dr surgery so (hopefully) a little more stable than some Companies but I realise that 'potentially' employees could save in good faith and end up with nothing.
Opening a separate bank account is such an arduous task these days that I was hoping for a workaround.

"Like I said, if you're not a bank, don't do it." - trouble is once a banker always a banker & I was one for 20 years!

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By Steven Tucker
30th Oct 2019 14:03

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

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Replying to Steven Tucker:
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By jane
30th Oct 2019 18:41

Thanks for referring me to this - this sorts out the issue of paying people early..........

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By kestrepo
30th Oct 2019 16:49

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!!

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By neiltonks
30th Oct 2019 17:28

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!

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Replying to neiltonks:
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By jane
30th Oct 2019 18:43

Oh dear oh dear - think I'll just impose a 28 Dec payday and leave it at that!

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By Wanderer
30th Oct 2019 18:02

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?

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By jane
30th Oct 2019 18:47

Ha ha Wanderer - good answer!

Thanks very much everyone for good advice - I think I will keep my good ideas to myself in future and give up thinking outloud.

Thanks again.

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By psimonparsons
31st Oct 2019 21:44

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.

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By psimonparsons
31st Oct 2019 21:47

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.

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