Pay & Benefits
Pay
There is often confusion when using the terms “pay”, “salaries” and “wages”.
Traditionally, salary was a fixed amount of pay per week, month or year and wages usually referred to an amount paid per hour.
However, the definition of “wages” under the Wages Act 1986 is “any sums payable to the employee by an employer in connection with that employment”. It does not differentiate between payments made by the hour and those made for longer fixed periods.
Also under the National Minimum Wage Act 1998 the entitlement of salaried workers is calculated by reference to “salaried hours work” i.e. a basic number of minimum hours for which payment is made by equal instalments over a fixed period.
Fortunately, in practice, it is seldom necessary to differentiate between salary and wages as the term “pay” is used in most situations.
Pay is defined in the National Minimum Wage Regulations 1999 as payments paid by the employer to the worker in his capacity as a worker before any deductions are made but excluding specific payments such as a loan or advance of wages or those related to pension or redundancy entitlements.
It is of course a matter of agreement between the employer and worker as to the amount of pay and also the actual pay days and method of payment. Since the Wages Act 1986 employees cannot insist on payment in cash.
The employer has very specific duties including:
· Payment of at least the National Minimum Wage.
· Complying with Equal Pay legislation.
· Ensuring payment is made on time.
· Making all correct deductions
· Making any statutory payments due, e.g. holiday pay, sick pay, maternity/paternity pay, etc.
· Providing itemised pay statements
Deductions from Pay
Deductions from pay have always had the potential to cause disputes between employers and workers.
Part 1 of the Wages Act 1986 (since re-enacted in the Employment Rights Act 1996 – sections 13 to 27) was partly designed to address the problem by protecting workers from unfair deductions from their pay. The legislation provides that deductions can only be made if they are authorised:
1 by statute or
2 by a written provision in the contract of employment or
3 by the written agreement of the worker prior to the event giving rise to the deduction.
For retail workers there are additional provisions where the employer makes deductions from pay on account of cash shortages or stock deficiencies. In such event the employer can only deduct 10% of gross pay in any pay period unless the deduction occurs upon termination of the employment when any outstanding amount can be deducted. Proper procedures must be followed and the demand for payment made in writing.
Retail employment (which includes convenience store workers and garage forecourt staff) is defined in the ERA 1996 which also prescribes the form of demand that the employer must make for any repayment and the timescale within which the demand must be made. Deductions must be shown on the workers pay statement..
Deductions to which the legislation does not apply include:
1 an overpayment of wages or
2 an overpayment in respect of expenses incurred by a worker in carrying out his employment, made (for any reason)by the employer to the worker
3 payments under an attachment of earnings order imposed by the Court.
Additional Benefits
Such benefits are normally offered to attract, retain and motivate staff. In some instances they can provide a tax efficient way of enhancing the remuneration package.
All PBS information sheets are designed to provide the detail needed to implement best business and employment practices. They are not a detailed commentary on the current law and where advice is required in a specific case you should contact PBS for expert consultation. .