Legal Article - Employment Law

Other Statutory Requirements

Itemised Pay Statement

Employers must give all employees an itemised statement of pay containing the following details:

a) The gross amount of wages or salary
b) Net amount of wages or salary
c) Variable deductions and the purposes for which they are made
d) fixed deductions and the purposes for which they are made
e) Where different parts of the net amount are paid in different ways, the amount and method of each part-payment.
The statement must be given on or before pay day.

The statement of fixed deductions does not have to be given each time if:

a) Instead a cumulative statement of aggregate fixed deductions is given; and
b) Employees have been given a standing statement of fixed deductions, which sets out:
I. the amount of the deduction
ii. The intervals at which the deduction is made; and
iii. The purpose for which it is made

The statement can be amended by notice in writing, and must be reissued every 12 months in an updated form.

Attachment of earnings

An attachment of earnings order (AEO) is a means by which certain types of debts owed by employees may be recovered by deductions from their wages. Under the Attachment of Earnings Act 1971 the courts (county court, magistrates court or High Court) can impose a duty on employers to make deductions before paying employees and pay the amount directly to a third party.

Similarly, under the Community Charges (Administration and Enforcement) Regulations 1989 a local authority can make an AEO to recover council tax owed by a defaulting employee.

Under the 1971 Act the following obligations may be enforced by AEO

• Maintenance orders
• Judgement debts exceeding £5
• Administration orders in insolvency proceedings
• Sums to be paid on conviction for a criminal offence
• Legal aid contribution orders.

The employer must make periodical deductions from the debtor’s earnings (which includes wages/salary, contractual pension and SSP, but not state benefits), after PAYE, National Insurance and any other statutory authorised deductions have been made.

The AEO will specify the normal deduction rate and the protected earnings rate i.e. the rate below which the debtor’s earnings should not fall, usually the social security “subsistence level”. Any arrears will be carried forward.

Employers must also notify the Court making the AEO of any relevant matter concerning the employee e.g. if the employee leaves the job. Failure to make deductions or inform the Court of required matters may result in the employer being fined and/or imprisoned for up to 14 days.

For local authorities the procedure is different. They can only issue an AEO, after issuing reminders and notices to poll tax defaulters and then obtaining a liability order from a magistrate’s court. Once an AEO is made the local authority must specify the total amount owed and the employer must then calculate the correct amount of deductions to make on each pay day.

Child Support Pensions and Social Security Act 2000

This empowers the Secretary of State to seek information from employers when it is needed for certain purposes, specified in associated regulations, connected with child support maintenance and maintenance calculations (e.g. to trace an absent parent, or to establish their level of income).

The duty to provide the information applies to any current and recent employers of the absent parent in question. Such disclosure does not breach the Data Protection Act.

Stakeholder Pensions

Recent legislation has enabled people to take out Stakeholder pensions at a lower cost which will increase their income after their retirement. This legislation will affect employers who employ 5 or more members of staff. From 8 October 2001 employers have the following obligations;

• To designate at least one registered stakeholder pension scheme as available to the employees, after consulting the employees and/or their representatives

• To provide details of the scheme and how to take out a pension to the employees

• To give a representative of the scheme access to the employees to canvass for members
• To operate payroll deductions of employee’s pension contributions if so requested and pay them to the scheme.
The legislation regarding stakeholder pensions in due to change in 2012. Employers must now ensure the employees they provide with pensions are ‘relevant’.

Non Relevant Employees;

• Under 3 months continuous employment
• Member of an existing pension scheme
• Employees who are under 18 or those who are within 5 years of pensionable age
• If employees are under the National Insurance weekly threshold of £102 per week
• HMRC restricted employees e.g. Non UK residents

Employers must enrol eligible employees and must contribute 4% of annual earnings as a minimum.
Employers cannot be held liable if they select a stakeholder provider that turns out not to be the best provider.
Some employers are exempt from providing stakeholder pension schemes. These are:

• The employer has fewer than five relevant employees
• The employer already has a contracted out occupational pension scheme open to all employees
• The employer has a contractual obligation to contribute to a personal pension scheme for all employees who take out such a scheme and to collect the employees’ contributions by payroll deductions.

Employers are also exempt from providing schemes for employees under 18, those who are within five years of retirement, those earning below the National Insurance lower earnings limit and those eligible to join an occupational pension scheme after p to twelve months qualifying service.

Employees have the following options open to them:
• To contribute to an occupational pension scheme as well if they earn less than £30,000 per year

• They can use the stakeholder scheme as a top-up to an occupational pension scheme instead of Additional Voluntary Contributions (AVCs). One advantage in doing so is they will be able to take up to a 25% tax-free lump sum

• They can contribute the higher of £3,600 including tax relief (irrespective of earnings) or a proportion of their relevant earnings. The proportion is determined by age and level of earnings e.g. from 17.5% for people aged 35 or less to 40% for those aged 61 and above

• Very small contributions can be made, with £20 the minimum. These can be irregular and contributions can be from any source

• Contributions will be paid net of basic rate tax. Higher rate tax payers can claim higher rate tax relief through their annual return. People who pay no or lower rates of tax will receive relief at the basic rate even though they are not paying basic rate tax on earnings

• Benefits may be taken between the ages of 50 and 75 irrespective of whether they are still working. Up to 25% of the accumulated fund can be taken as a tax free lump sum on retirement the remainder being used to purchase an annuity.


Published: 27 May 2011


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