Payroll & HR legislation that SMBs need to know 

It’s a minefield out there. Legislation can change at the drop of a hat and if you dare to miss it, you could be slapped with a hefty fine. We’ve pulled together some must-know legislation topics for SMBs.  

Workplace pensions

Whether you employ one or one hundred people, it is a legal requirement to auto-enrol your employees into a workplace pension scheme. To qualify employees must meet the below criteria: 

• Aged between 22 and state pension age  

• Earn above £10,000 per year  

It’s worth noting that some employees might not meet the above criteria, but still need to make minimum pensions contributions, should they decide to join your pension scheme.  

Auto-enrolment applies to all businesses, even industries with high staff turnover. Think about managing employees auto-enrolment in the hospitality industry. How do you manage that process? Is it worth opting for software and structure that handles auto-enrolment for you? 

Whether your employees are on zero-hour contracts or short-term contracts, they are still impacted. As an employer you should think about pensions and auto-enrolment in the same way as National Insurance contributions or tax returns. 

Maybe you don’t have a scheme in place, or your existing pension scheme doesn’t qualify? If this applies to you, you will need to choose a pension provider and scheme to suit your business and employees. 

As part of this process, you must provide all employees with information in writing about your workplace pension scheme. In it, you should explain how they can opt-in or opt-out, and how the pension scheme will affect them.  

The Apprenticeship Levy

As an employer you will be required to pay the Apprenticeship Levy each month if the below applies to you: 

• You have an annual wage bill of more than £3 million  

• You are connected to any companies or charities for Employment Allowance purposes and have a combined annual pay bill of more than £3 million 

The Apprenticeship Levy is paid at a rate of 0.5% of an employer’s annual pay bill. This is paid monthly through your Employment Payment Summary. 

While small businesses may assume they aren’t impacted by this, depending on the number of employees and size of salary, payments could be impacted. 

Right to work

Every employer has the legal obligation to ensure that their employees have the right to work in the UK. That means carrying out a series of checks on the documentation before hiring an employee. As an employer you’re responsible for conducting checks, and you will be penalised if you employ someone who doesn’t have the right to work. If this is the case, you as an employer might get a ‘referral notice’ and you may have to pay a civil penalty of up to £20,000 for each illegal worker.  

Confused about the impact of Brexit on the legality around this topic? Watch our Brexit and right to work checks in under 10 minutes video.  

National minimum wage

Introduced originally in 2016, and recently changed in 2021, national minimum wage impacts all employees and depending on age and contract type, their pay will need to be reflected. As a business there are a few areas to consider within payroll: 

• Identifying employees who are eligible for new rates, or coming up to new eligibility e.g. have birthdays approaching. 
• Actively communicate changes to employees. 
• Consider payment of apprentices if there are any in your business.  

Want to know more about the national minimum wage? Read our blog on companies that missed national minimum wage and how to avoid their mistakes. 

Tax

There are a few things in life that are certain: life, death and taxes. Tax and variation on tax will impact your business and your payroll. There are important considerations that need to be made based on location – for example, Scottish tax codes vary. Income Tax Rates and Tax Allowance need to be considered, as does national minimum / living / real living wage. The list goes on and on… 

Want to find out about the latest changes to payroll tax and legislation? Download our Tax Fact Card 2022 / 2023 

Payroll year end

It is a legal requirement for businesses to submit returns to HMRC and provide a P60 to all employees by 31 May. The payroll year runs from 6 April until 5 April the following year. Those who miss the deadline will be hit by fines for late or incorrect submissions. 

Check out our payroll year end checklist to ensure you hit the nail on the head. 

Worried about compliance?

If you’re struggling to stay up to date with the latest payroll legislation, check out our payroll legislation guide. Employment law keeping you up at night? Our employment legislation guide is for you.