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At the time of the Pre-Budget Report 2004, the government gave a commitment to consider the case for transferring payment of SMP, SPP and SAP from employers to HMRC and to set out its conclusions with this year's Pre-Budget Report.
The consultation involved representatives of large and small employers, payroll bureaux, software developers and representative bodies. The analysis indicates that the savings to employers from the scheme, in the format that was presented for discussion, would be around £;1.1 million, whereas the set-up costs would be £;75 million and the annual running costs £;50 million.
The scheme as put forward for discussion by HMRC was as follows:
"Direct Payment would involve HMRC acting as a temporary "payroller" for employees of (potentially) any employer in the country, calculating and paying their SMP net after the full range of payroll deductions. The employer would no longer be responsible for paying but would remain responsible for earnings-based (this would include SMP-based) employer contributions - like employer NICs, occupational pension contributions, or the large employer's 8% contribution to SMP. The employer would also retain responsibility for any periodical returns required, like the Employer's Annual Return."
The report explains the consequences of this approach:
- HMRC would develop a system capable of running the payroll for the employee for the period of payment
- a complex two-way information exchange would be needed between employers and HMRC
- HMRC's systems would have to handle a full range of payroll deductions to match the employer's pay rules and requirements, and make payments throughout the period of payment to meet the employer's contractual payment deadlines
- employers would have to provide the necessary information for HMRC to decide on entitlement and allow subsequent recalculations
- the payment made by HMRC would still have to be included on the employer's returns
- employers would have to deal with a (likely) high level of errors and queries
- HMRC's payroll data would have to be reincorporated into the employer's payroll system at the end of the payment period.
The report does not say whether or not any decision has been reached. HMRC's view is that the development involved would make it impossible to introduce the scheme before 2010.
This is clearly a case of a proposal being put up simply so that it could be knocked down. The concept of HMRC developing a "super-payroll", capable of handling the payroll calculations of every employer in the country, just to handle SMP, SPP and SAP payments is ludicrous. HMRC might as well take over paying everyone in the country.
The approach considered in this review is not the one that most employers would understand by the promise to consider "the case for transferring payment of SMP, SAP, SPP and MA from employers to Her Majesty's Revenue and Customs". Because most or all of the payments made by employers are recovered from the State, most employers view these statutory payments as state payments. They are looking, therefore, for the government to take back full responsibility for the payments, just as HMRC is now doing with tax credit payments, not for HMRC to make the payments on behalf of employers.
...back to 8 December 2005
Source:
The costs and benefits of direct payment of Statutory Maternity Pay
Choice for parents, the best start for children: a ten year strategy for childcare
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For Payroll and Human Resource Professionals
