Changes to the data HMRC collects from employers via RTI payroll reporting

These changes include the requirement for employers to provide more detail on the total number of hours worked for each employee via Real Time Information (RTI) payroll reporting and are expected to come in to force from April 2025.

Employers currently report employee hours worked in the form of a band via their payroll and through RTI, as follows:

• Band A: up to 19.99 hours
• Band B: 16-23.99 hours
• Band C: 24-29.99 hours
• Band D: 30 hours or more
• Band E: Other

These bands were designed to assist with eligibility decisions for Working Tax Credits, or to distinguish payments made for pensions or annuities. However, they are not sufficient to support checks surrounding minimum wage underpayments, which is a continued area of enforcement for HMRC.

Employers will be required to report the total number of hours worked by each employee in respect of payments reported in the corresponding RTI return.

The reporting will depend on how an employee’s pay is determined:

• If the employee is paid based on an hourly rate, the employer must report the number of hours worked that determined the relevant payment
• If the employee is paid based on a number of hours specified in their employment contract, the employer must report the number of hours the contract required them to work in the relevant pay period
• If the payment to the employee is notdetermined by one of the above, the employer should report the number of relevant hours as nil and where relevant, specify one of the following descriptions of the payment:
• Statutory absence payments (for example statutory maternity pay)
• Payrolled benefits in kind (for example private medical and company car benefits)
• Termination payments
• Payments determined by a measure of output (for example piece work)
• Payments made to officeholders (for example directors without contractual terms that specify a number of working hours)
• If the employee’s contract specifies a number of hours for which their pay is based, but also works overtime, the employer will need to report the number of hours worked for the pay period plus the number of overtime hours paid as the total hours in the RTI return.

The background to the above changes is that as employers are already required to keep records of employee hours worked to satisfy National Minimum / Living Wage (NMW / NLW) regulations, this information should be readily available to report via RTI payroll returns. While this may be true within the organisation as a whole, this information may not be readily available or provided to the payroll team for the likes of salaried workers, who are paid based on their contractual hours.

These new requirements will see further obligations on employers for ensuring more accurate worked time reporting. Records will need to be more granular, distinguishing between worked time, paid time (for example holiday pay) and absence time of their employees.

Even for the most sophisticated larger employer there will likely be changes to the way their HR and Time and Attendance (T&A) systems integrate and feed information through to the payroll team. It is imperative the key stakeholders in the organisation; HR, finance and payroll teams liaise to discuss the current system reporting methods and data flow to identify potential areas that require change.

For the smaller employer this change represents another onerous task to ensure their employer compliance activities are maintained. This may involve additional manual recording and reporting of worked hours, contractual hours and descriptions of payments for employees through to the payroll system.

There is still time to prepare ahead of April 2025, however changes of this nature require forethought and planning. We can keep you updated ahead of the changes and support with change management, including:

• Facilitate internal stakeholder conversations on current system reporting and data gathering, to ensure all parties are aligned on their role and responsibilities
• Facilitate external vendor conversations to ensure HR, T&A and / or outsourced payroll provider are prepared for the upcoming reporting changes
• Where relevant, align RTI reporting changes with getting ready for Payrolling of Benefits to maximise the investment of stakeholder time
• Carry out a National Minimum Wage Review to highlight potential risk areas ahead of the RTI reporting changes coming in to place

If you would like to discuss this further, please reach out to Susan Elsdon or your usual Evelyn Partners contact.

Approval code: NTEH7052495