Payroll, oncosts and breakdown costs associated with employing a PA in care

One of the key responsibilities of managing a Direct Payment is handling payroll if you employ a PA in care. Please note that you do not need payroll if your PA’s employment status is self-employed.

A payroll ensures compliance with a broad spectrum of aspects including:

• Registering you as an employer

If you employ staff directly, you must first register as an employer with His Majesty’s Revenue and Customs (HMRC). This enables you to operate payroll and fulfil your tax obligations. The payroll service will help you with the process of registering with the HMRC.

• Employment law

Payroll assists with managing how your staff are paid and how their work is tracked. This includes the number of hours worked, leave taken and pension contributions, where applicable.

• Tax deductions

Employees in the UK are subject to income tax, through automatic payroll deductions from earnings through the Pay As You Earn (PAYE) system. Your payroll service will manage this on your behalf. Even if your staff member earns below the tax threshold (£12,570), you still have to notify the HMRC of this. And your staff member retains the right to a payslip.

• National Insurance contributions

The UK has one of the world’s earliest national insurance systems, passed into law in the National Insurance Act (1911). National Insurance Contributions (NICs) fund various state benefits, NHS healthcare and the state pension. They are a legal requirement for both companies and individuals. NIC payroll deductions are taken by the Government from both employers and via PAYE for employees. Like income tax, NIC payroll deductions for individuals are dependent on an employee’s earnings.

• Liaising with His Majesty’s Revenue and Customs (HMRC)

If it is necessary to liaise with HMRC over a payroll matter, the payroll service can do this on your behalf. There may be an additional fee for this.

• Pension contributions (where applicable)

Pension contributions are payroll deductions that again come out of an employee’s gross pay. But this money goes into a pension pot chosen and administered by the employer. It is separate to the UK state pension. For the last decade, the Government’s automatic enrolment programme has meant that employees are auto-enrolled into workplace pension schemes. Employees do not have to explicitly opt in.

• Calculate annual leave payments

If any of your staff work irregular hours, they may be entitled to receive their annual leave as an additional payment.  This is calculated at 12.07% of their hourly rate.

• Make wage payments to your staff (can be an additional fee)

The Direct Payment Support Service also offers ongoing support and assistance updates on the various aspects of staff employment and the use of a direct payment.

It's important to recognise that even if you enlist a payroll service, you retain ultimate responsibility as the employer. But if you use care provider or self-employed staff, you are relieved of most direct employer responsibilities. Even so, it's important to conduct thorough checks when using care provider or self-employed staff. Certain circumstances may still attribute employer status to you or the employment arrangement may not be as straightforward as it appears.

Oncosts refer to additional costs associated with employing staff beyond their basic wages. These may include employer’s National Insurance contributions, pension contributions and other benefits. Here's what you need to know:

• Employer's National Insurance Contributions

In addition to paying your staff member's wages, you will see ‘Employer’s National Insurance’ or an abbreviation on their payslip. Employer’s National Insurance is simply National Insurance for Employers. Most employers can claim up to £5,000 per year from an Employers Allowance through their payroll provider. This means most employers do not need to contribute, unless their combined staff members' wages total £45,000 per year or more. Please contact your payroll provider to see if any extra costing is required if this applies to you.

The £5,000 per year Employers Allowance is per employer, not employee.

• Consider pension contributions

As an employer, you may need to enrol eligible employees into a workplace pension scheme and make contributions on their behalf. Auto-enrolment regulations apply, so ensure compliance to avoid penalties by communicating with your payroll provider.

The minimum contribution by law is 8% of your staff member’s earnings. As the employer, you must pay at least 3% of this. This 3% will be budgeted for within your Direct Payment. 

For auto-enrolment, the minimum amount of gross pay required is £520 a month, or £120 per week.

But even if your staff member earns less than £520 a month, they can still join the pension scheme if they want to. You, as the employer, can't refuse.

Also, if your staff member has more than one job but earns less than £10,000 a year in each of them, they'll need to actively request to opt in. That's because although their total income is more than the auto-enrolment threshold, they are assessed by each employer separately.

• Explore other benefits

Depending on your circumstances, you may need to provide other benefits such as holiday pay, sick pay or maternity/paternity pay. Familiarise yourself with your legal obligations and budget accordingly.

Despite careful planning, unforeseen circumstances can arise. This may lead to breakdowns in care arrangements or unexpected costs. Here are some strategies for mitigating risks:

• Build contingency plans

Anticipate potential disruptions in care provision and develop contingency plans to address them. This may involve having backup staff on standby, accessing alternative support services in emergencies or having a ‘snow plan’ in place.

• Budget for unforeseen expenses

Set aside funds in your budget when possible to cover unexpected costs. This could be for staff sickness or changes in care needs. Having a financial buffer can help you manage crises without undue stress. You are usually allowed to keep up to four weeks of your budget to cover contingencies and unforeseen circumstances.

• Stay informed and seek support

Keep abreast of changes in legislation and social care policies that may affect your Direct Payment. Don’t hesitate to seek advice from specialists to help navigate challenges, such as:

• the employers helpline through your insurance provider
• payroll service
• the Direct Payment Support Service (Email [email protected] or call 0370 779 1300).