Can employers lawfully provide electronic payslips instead of printed payslips?

The requirement for employers to provide an “itemised pay statement” is set out in Section 8 of theEmployment Rights Act 1996.  It says: “An employee has the right to be given by his employer, at or before the time at which any payment of wages or salary is made to him, a written itemised pay statement.”

Section 8 also defines the information that must be included on a payslip.  This is not usually an issue for employers as computerised payroll systems generally provide more information on their standard payslips than is required by law.

However, a number of other issues are raised by the right to an “itemised pay statement”, as quoted above.  Notice that:

  1. the payslip must be “given” to the employee by the employer,
  2. this must be done “at or before” the time when the payment is made, and
  3. the payslip must be “written”.

There is no doubt that considerable financial savings can be achieved by issuing electronic payslips instead of paper ones and this is generally the motivation for introducing the arrangement.  But is it lawful?  HMRC appears to think so.  In the context of issuing P60 End of Year Certificates to employees, HMRC states: “Even if you have been giving your employees electronic payslips, you must give your employees a paper form P60 at the end of the tax year.  You must not, by law, give them P60 details electronically for them to print off.”  (See Guide to filing PAYE forms online and paying electronically, paragraph 6.15) (Note: It will be lawful to provide P60s electronically from the end of the 2010/11 tax year.)

There is clearly an acceptance by HMRC that providing electronic payslips is permissible.  No help is provided by the DTI and Acas however; the guidance on their websites makes no reference to electronic payslips (see links below).

The critical issue, therefore, when planning the introduction of electronic payslips, is whether the electronic delivery arrangements meet the statutory requirements.  Consider the following issues:

  • Is each employee being “given” a payslip?  The responsibility is on the employer to make the payslip available to the employee.  If the employee does not know where to find the payslip or has no computer access to it, then it has not been “given” to the employee.  Employees who normally view or print out their payslips at their desks or workstations may not have access to them when they are sick or on holiday.   Many employers will find, therefore, that scrapping paper payslips altogether is not possible and some employees will still require a paper payslip.  Also, personal circumstances change so there must always be the option for employees to revert to paper payslips.
  • Is the electronic payslip always available on or before payday?  This imposes the same strict deadline on the payroll department as does the production of paper payslips, although issuing payslips electronically will likely reduce time pressures.  However, can all employees actually see their payslip on payday if they wish to do so?  What about employees who only have access to their payslip on their work computer but who do not normally work on their payday?
  • Can employees make a “written” copy of their payslip?  When the legislation was originally devised, this referred to a hand-written or typed piece of paper.  Many employees will be happy just to read their payslip details on-screen and file the document away somewhere, but others, for a variety of reasons, will want to print it out.  Employees without printing facilities, or who have privacy concerns about printing their payslip on a network printer, may need to be given paper payslips instead.  A further practical problem is that a payslip printed out by an employee may not be accepted as valid proof of earnings for mortgage, loan, work permit or other status purposes, requiring the employer to make special arrangements to supply copy payslips or to sign and stamp the employee’s payslip.

As a result of these issues, it may not be possible for employers wishing to introduce electronic payslips to get the full benefit of stopping the production of paper payslips altogether.  The statutory requirements cannot be ignored because the penalties can be severe.  The objective of the legislation is to ensure that employees are aware of all of the deductions that have been made from their pay at each payday.  If they are unable to see those details on payday they can make a complaint to an employment tribunal.  If the tribunal considers that the statutory requirements have not been met, the employer can be required to repay to the employee up to 100% of all of the unnotified deductions made from the employee’s pay in the 13 weeks prior to the date of the complaint, even if they were legitimate or statutory deductions.

Further information:

Acas – Itemised Pay Statements

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Payroll Update 2013