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Payslips and employment contract PDF Print E-mail

As the employer you must provide your employee with a payslip every time you pay them. The payslip must show their gross wage, the tax and NI deductions made on their behalf, as well as their net wage. Your employee should keep their payslips in a safe place, as they act as proof of earnings when applying for a loan or a mortgage. When you subscribe to Stafftax we send out payslips, monthly or weekly as required, showing all correct deductions.

You must also provide your employee with either an employment contract or a statement of the terms and conditions of their employment within two months of their starting date.

The document should include all terms and conditions that you have agreed upon, including the start date, hours of work, starting salary (which should specify gross or net), holiday entitlement etc. It should also include your agreement to operate PAYE on your employee's behalf. The contract might also include a detailed description of your employee's duties, house rules and disciplinary procedures and any other benefits to which you may make available to your employee (e.g. use of a car or re-imbursement of motoring costs if they use their own vehicle for work).

The contract of employment is a legally binding agreement and obliges both you and your employee to keep to the terms of employment spelled out in it. These terms can of course be changed at any time by mutual agreement.

A standard form of contract is available from Stafftax when you subscribe to our services, and it can be modified to fit the circumstances specific to your particular requirements. If you need help with making changes to the contract don't forget to contact our legal support team, who will be happy to help.

It is your legal responsibility, not your employee's, to ensure that a PAYE scheme is set up and that your employee's income tax and NICs are paid when due. Non-compliance is a criminal offence and may result in a substantial fine.

 

employment law

Employing European nationals

Most nationals from the European Economic Area (EEA) can enter and work in the UK without restrictions. You will need to ask nationals from all EEA countries to produce a document showing their nationality since their are specific restrictions for certain nationalities.

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employment costs

Benefits in kind

Benefits in kind are sometimes provided by the employer in addition to the employee's salary. They are often taxable benefits and must be reported annually as part of employee's gross earnings.

Who pays the tax?
Benefits in kind offer a good example of why it is important to agree a gross wage with your employee. In almost all other types of employment the employee is always responsible for paying the tax on benefits. But as many domestic staff have net pay arrangements it means that you, the employer, are responsible for paying this tax, which can potentially be a very expensive experience.

Tax on benefits in kind is payable in arrears and is not reported until July following the end of the tax year. Sometimes it can take up to two years before payments are claimed by HMRC, and during the interim your employee can have moved from one job to another, leaving the new employer responsible for paying what can in some cases be a very large sum of money. If your employee is on a gross wage, however, then the tax is deduced from their gross income at their current rate of tax.

In addition to tax there may also be a Class 1A NI charge of 12.8% of the value of the benefit to be paid - the employer always pays this charge.

Examples of taxable benefits

  • Car
  • Accommodation
  • Health Club Membership
  • Travel
  • Interest Free Loan

NB: PLEASE NOTE THAT THIS LIST IS NOT EXHAUSTIVE.

Mobile phones are not considered a taxable benefit

Use of Car
The use of a car is not considered a taxable benefit if your employee only uses it during working hours. If however your employee is permitted to take the car home and use it as a means to get to and from work, then it must be reported as a benefit in kind.

Accommodation
If accommodation is provided for the employee and it has a separate front door and separate metering for gas, water and electricity, it is considered a taxable benefit and must be reported as such.

Please note that the information and examples contained on this page are to be used as guidelines only. If you have specific questions please contact Stafftax.