An employee recognition programme is defined as: 

Communication between management and employees which rewards them for reaching specific goals or producing high quality results in the workplace.

Ironically, it is when times are toughest and high productivity is most important that employee recognition is most likely to be neglected. Christmas parties are cancelled and bonuses are cut as efforts to cut costs increase. But there are a number of low- to no-cost ways to show your appreciation for a job well done, such as: 

• a simple ‘thank you’ speech
• thank you notes
• gift cards
• a weekly work lunch or after-work drinks 

Effective reward schemes should: 

• Reward specific achievements - schemes such as employee of the month can seem too ‘woolly’ and can lead to accusations of favouritism. Reward specific achievements to let employees know exactly what you want from them, and what you consider to be 'going the extra mile'.
• Include peer-to-peer recognition - employees tend to feel more satisfied when rewarded by their peers, who are more likely to know the finer details of what they do.
• Make recognition easy and frequent - don’t save recognition for an annual announcement, make it easy for employees to recognise each other's work.

We take a look at developments in Pay As You Earn since our last Update on this topic. 

Real Time Information (RTI)

Between April and October 2013, almost all employers must make the switch to submitting their PAYE returns using Real Tim­­e Information (RTI). This applies even to the smallest employers. RTI usually means that PAYE information must be reported to HM Revenue & Customs (HMRC) ‘on or before’ the point the payment is made. 

RTI means that you must submit a full breakdown of your payroll every time you run the payroll. This is usually completed automatically by the payroll software.

Employers who must comply with RTI should have received a letter from HMRC setting out the requirements. 

In recent months, some further details have emerged about RTI: 

• A new system of penalties is to be introduced for non or late compliance. This will not apply until the 2014/15 tax year, but you should establish all necessary disciplines before then. Other penalties still apply for late payments or returns. 
• The P38(S) student declaration system can no longer be used from 6 April 2013. This allowed students who worked only in the main vacations and earned less than the annual personal allowance not to have tax deducted at source. Now they will have tax deducted and may be able to claim it back after the year-end.
•  HMRC has confirmed that expatriate employees must have their PAYE accounted for under RTI. This applies even where the payment comprises solely of an annual bonus. There are some practical issues in operating RTI for expatriate employees on which we can advise. 

Talk to us about preparing for RTI. 

Pensions

From 6 April 2014, the annual limit for pension tax relief reduces from £50,000 to £40,000. The lifetime limit reduces from £1.5 million to £1.25 million. Any excess in the value of your pension benefits over the lifetime allowance is subject to a 25 per cent rate if taken as taxable pension or a 55 per cent rate if taken as a lump sum. 

For employees in occupational schemes, these limits include the employer’s contributions. In a final salary pension scheme, a pay rise as small as £3,000 a year could exceed this lower annual limit. For those who have already built up large pension funds it may be possible to apply for fixed protection which, subject to certain conditions, could allow you to preserve a higher lifetime allowance. 

In a more wide-ranging review of pensions, it is planned to introduce a new single-tier state pension from 2016. One of the changes involved includes ending the contracted-out rebate for national insurance on defined benefit occupational pension schemes. Affected employees and their employers will pay more national insurance.

The change will also end the state second pension.  

Income tax rates

The personal allowance will increase to £9,440 from 6 April 2013. It was announced in Budget 2013 that the personal allowance will increase again in 2014 to the Government's stated target of £10,000.  

Against this, the basic rate band is again being reduced. This means that more employees will find themselves paying the higher rate tax.  

From 6 April 2013, the additional rate of tax is reduced from 50 per cent to 45 per cent. Such employees who receive childcare vouchers may now receive up to £25 a week tax-free instead of £22.  

Residence

A new statutory test of residence is introduced from 6 April 2013. This is designed to introduce some certainty into an area where significant amounts of tax can be involved.  

The test has three parts:  

1. First you consider some tests to see if a person is automatically regarded as non-resident.
2. If this is not conclusive, you next consider further tests to see if the person is automatically resident.
3. If neither result is conclusive, you should then consider how many UK ‘ties’ apply to the person and the number of days the person spent in the UK. 

There are tables that determine how many factors must be met for the various bands of UK presence, which will subsequently establish your UK residence status.  

The concept of ‘ordinary residence’ is abolished, but overseas workday relief is retained.  

HMRC has published detailed guidance on this subject. We can advise on how these provisions apply to your workforce.  

Company cars and fuel

From 6 April 2013, there are increases in the percentages used to calculate the tax charge for company cars.  

There is an increase in the car fuel multiplier from £20,200 to £21,100.  

These increases can mean that many employees will be better off not having a company car but being paid more in salary. We can advise on this.  

The taxation of company cars and fuel benefit uses a percentage based on the car’s carbon dioxide emissions.  

From 6 April 2013, the company van fuel benefit charge will also increase from £550 to £564.  

Employee benefits

The Government plans a package of measures to simplify tax-advantaged share schemes for employees. Some measures have already been enacted. In particular, the provisions for the Enterprise Management Incentive (EMI) scheme have been relaxed. 

Luncheon vouchers lose their 15p a day tax relief from 6 April 2013 (postponed by one year). This rate has been unchanged since 1948.

 The Office of Tax Simplification is considering a review of employee benefits, including abolishing some small reliefs and trying to bring PAYE and national insurance rules closer together.

Payroll giving

Payroll giving allows employees to make donations to charity through the payroll. Currently only two per cent of employers offer such a scheme. The Government has announced a package of measures designed to simplify the administration of the scheme to encourage greater use.  

Statutory sick pay (SSP)

Two changes are planned for SSP: 

1. First, the government will discontinue refunds where SSP paid exceeds 13 per cent of national insurance. 
2. Second, a new advisory service is planned in respect of employees who are off work sick for more than four weeks. The service is to be introduced from April 2014 with a view to getting employees back to work sooner.  

New category of attachment

A new category of attachment order is being introduced to recover debts. The Direct Earnings Attachment (DEA) allows the Department for Work and Pensions to require employers to make deductions from their employees’ earnings.  

The DEA is being tested in pilot schemes during 2013/14 with a view to being adopted nationally from 2014.  

New category of employment

The Government is introducing a new category of employee shareholder. Such employees must be given shares which attract some tax reliefs. However the employees will lose some of their employment rights.  

Other matters

HMRC is only accepting PAYE payments at Cumbernauld for tax months from April 2013. Employers who currently make payments to Shipley should change for the new tax year.  

In a similar vein, HMRC stresses the importance of entering the correct account number on forms submitted to them. Forms which do not set out the number correctly, such as by incorrect use of spaces, risk rejection.   

Talk to us about how these changes to the PAYE system affect you.

The House of Commons Transport Committee will look at how the number and cost of whiplash claims in the UK can be reduced. The inquiry follows a December 2012 whitepaper from the Ministry of Justice, which described Britain as the "whiplash capital of the world".

The whitepaper reported that, between 2006 and 2012, there was a 60 per cent rise in claims for personal injury caused by road traffic accidents despite a 20 per cent fall in the number of reported accidents over the same period.

The Committee's inquiry will also look to establish:

• whether whiplash claims add £90 to the average premium as claimed
• what proportion of this additional cost is due to "exaggerated, misrepresented or fabricated" claims
• whether the Government's proposals to tackle fraudulent claims will help reduce insurance premiums
• the impact of the proposals on access to justice for genuinely-injured claimants.

The Association of British Insurers (ABI) has set out proposals for reducing the number and cost of whiplash claims, which include:

• independent medical assessments of whiplash claims by accredited medical experts
• assessments would take into account the circumstances of the collision rather than the claimant's reported symptoms
• a laid down prescribed level - independently-set - of damage awards for whiplash.

"Our proposals will ensure better medical assessment of whiplash claims, offer a quick, simple way of paying genuine claims; provide certainty for claimants and compensators, and deter fraud that ends up being paid for through higher motor insurance premiums," said the ABI's assistant director of motor and liability James Dalton.

Employers will be able to design and develop their own apprenticeship standards and qualifications, Deputy Prime Minister Nick Clegg has announced.

The decision follows last year's review by entrepreneur Doug Richard, which found apprenticeships should be more focused on the needs of employers in order to encourage take-up, address skill shortages and boost growth.

Government plans include:

• employers setting industry standards for apprenticeships
• incorporating English and maths GCSE qualifications into apprenticeships
• targeting each apprenticeship at a specific 'skilled job'
• creating a more outcome-focused approach towards apprenticeships.

'Misperceptions' about apprenticeships

A recent Chartered Institute of Personnel and Development survey found almost half of parents view apprenticeships as most appropriate for manual or 'blue-collar' jobs. Less than a fifth thought that apprenticeships had the same status as a university education.

We can help with employee issues, including PAYE and apprenticeship schemes.

Millions of UK adults are leaving employment or reducing working hours to care for an elderly, disabled or seriously ill family member, according to research from Carers UK and business forum Employers for Carers.

The research found:       

• 2.3 million adults have given up work to become carers
• three million have reduced their working hours
• 22 per cent believed their work has been negatively impacted as a result of caring
• 27 per cent of those aged 45-55 said that caring had caused their work to suffer
• a £5.3 billion cost to the economy in lost tax revenues and additional benefit payments.

Ian Peters, chairman of Employers for Carers, said: "… these findings highlight that much more needs to be done to make supporting colleagues who juggle work and care part of normal workplace practice, and ensure that families can access the advice, support and services they need to enable them to combine work and home life."

Heléna Herklots, chief executive of Carers UK, said: "… support from employers can only go so far, and families need to be able to access reliable, good quality and affordable care and support services to enable them to juggle work and care. Without urgent action from Government to ensure families can access this support, millions more will see their careers and earnings suffer - with long-term personal costs to families and significant costs to business and the UK economy."

HMRC has changed the fuel advisory rates for the fourth time this tax year. The new rates apply to all journeys on or after 1 March 2013 until further notice.

For one month after the date of change, employers may choose to use either the previous or new current rates.

The latest change is to the diesel and LPG rates.

As we explained in our blog, Taxation And The Company Car, these rates have two purposes:-

• employers reimbursing employees for the cost of fuel for business mileage in the employee's private car;
• employees reimbursing employers for the cost of fuel for private travel in the company's car.

If you have any questions concerning this blog then please contact us here at Trueman Brown Chartered Accountants.