The disappearing payslip

October 2016, Nick Clark

I recently took part in an HMRC “webinar” on the National Minimum Wage, offering help and support to union reps wishing to assist members enforce their rights. During the course of this, participants were told of the importance of checking payslips to see if workers had been properly paid.

This confirms views expressed by some of the advisors interviewed in the early stages of Unpaid Britain, and my own experience assisting workers in the past. The payslip is an important piece of evidence in identifying errors, unpaid wages and unlawful deductions, and its absence is usually a sign that there is something seriously wrong with the employment relationship.

The general right to “written pay advice” dates back to the 1960 Payment of Wages Act, and the requirements have changed little since. Then, gross pay, net pay and any deductions had to be shown, and this remains the case now under Section 8 of the Employment Rights Act 1996. However there is no requirement in law to show how the gross figure has been calculated – by showing the number of hours worked and the hourly rate of pay for example. Unions have argued that this can leave workers with insufficient information to assess whether they have been paid enough. In the latest Low Pay Commission (LPC) report (para 66), the LPC have taken note of these points and recommended (not for the first time) that the government consider requiring that payslips of hourly-paid workers should include the number of hours for which they are being paid.

But the absence of details on a payslip is not the only problem. The absence of a payslip at all seems to be a growing problem – and in London the effect is particularly marked (see chart)[1]. Our analysis of data from the official Family Resource Survey, shows that one in four employees in London does not receive a physical payslip, 15% because it is now said to be provided in electronic form, and over 10% because workers report that their employer does not provide one at all.

Unlawful

There are two troubling aspects to this. Firstly the failure to provide a payslip is unlawful, and could (if taken to an Employment Tribunal) result in the award of a penalty. This is explained by Unpaid Britain Advisory Group member Jo Seery of Thompsons Solicitors:

“Where a tribunal finds that un-notified deductions have been made in the 13 week period immediately preceding the… claim being lodged, [they] may order the employer to pay a sum not exceeding the aggregate of the un-notified deductions … So a tribunal could order the sum of tax and NI contributions be paid by the employer where these have been deducted but not notified to the employee.” 

As Jo also points out, for those workers whose earnings are below National Insurance or tax thresholds, there is no penalty for a failure to provide. And in my experience, employers will often “discover” the missing payslips and provide them before any ET hearing, thus avoiding any penalty. Where the employer has disappeared, or is insolvent, or resists recovery attempts, the penalty is neither here nor there because even if it is awarded, it will not be paid.

Without payslips, employers may deny that those claiming owed wages were ever employed by them, or were employed by other associated companies. Workers who suspect that NI or tax deductions were not paid to HMRC have little to support them when they attempt to ensure that their contributions record is correct. This may have serious consequences for pension and benefit entitlements, and for migrants seeking to establish residency rights (for which the paperwork requirements are ridiculously stringent).

Workers suspecting contributions are not being paid over by their employer can complain to the tax authorities (HMRC) via their “tax evasion hotline”, or online, or by post although “HMRC won’t reply to confirm they’ve received your letter”[2].  Workers using this method may never find out what steps have been taken to rectify matters, so as an enforcement method, this leaves something to be desired.

Employers are also required by law to maintain records to demonstrate that they are paying at least the National Minimum Wage (NMW), and although workers may have the right to inspect these, so too do NMW inspectors. Failure to maintain such records is a criminal offence, but there do not appear to have been any prosecutions for this.

Digital

The shift to electronic payslips presents separate problems. Most employment lawyers seem to agree that this probably fulfils the legal requirement, as long as the opportunity is afforded to workers to access a computer to see their payslips. However, in the real world of aggressive management, many workers will be reluctant to assert this right, even if it is notionally available. Secondly, while it is true that many workers now have smart phones or tablets and can easily access their employers’ system, or open the attachment to an e-mail, or the SMS message (this is apparently used by some employers), not all will be able to do so. And even if they do, does the system permit the worker to save a copy, so that if they leave the employer, they have a record of deductions?

Respondents in Chartered Institute of Payroll Professionals surveys are asked if e-distribution is under consideration by those not already using it, and in the latest survey available (2103/14), 23 out of 62 said it was. From this admittedly rather small sample, it seems likely that there is a continuing trend towards the use of digital payslips, with serious implications for workers who have problems with access to technology, and for the use of payslips as evidence.

Enforcement

There is clearly a case for making the required format of payslips more detailed – providing hours worked, and holidays outstanding, for example – and a case for unions to keep an eye on the design and administration of pay systems, ensuring that workers are aware of the need to check and retain payslips (and that they can easily do so).

But union coverage is partial, particularly in the private sector, so penalties for non-provision need to be dissuasive, and accessible. This means no Employment Tribunal fees! Providing reliable routes for workers to complain of non-provision of payslips, and a system of inspection of payslips could both help to identify other abuses of workers’ rights and be of benefit to the exchequer.

[1] Of the UK regions, Wales is worst with 14.3% reporting no pay slip and a further 12.7% receiving an electronic version. London showed the second highest proportion. Nationally, 8.6% of workers report receiving no payslip, and 11.6% an electronic one (2014/15 figures).

[2]https://www.gov.uk/government/organisations/hm-revenue-customs/contact/reporting-tax-evasion, accessed 23 June 2016