Benefits of Being an Employee on PAYE
Your National Insurance Contributions entitle you to certain state benefits.
Protection Against Unfair Dismissal
If you have been in continuous employment (i.e. working for the same employer) for at least one year you are automatically protected against unfair dismissal.
Statutory Sick Pay (SSP)
As an employee you are entitled to SSP if you are sick for three days or more.
- Normally the three waiting days do not include non-working days (weekends or days not normally worked).
- Working days lost prior to SSP commencing are paid at your employer’s discretion.
- The current rate of SSP (tax year 2006/2007) is £72.55 per week and can be paid instead of or as part of the normal rate of pay. You are entitled to 28 weeks SSP per annum.
- Your employer may be able to reclaim some of the costs from the state.
Statutory Maternity Pay (SMP)
If you are pregnant and have been working for the same employer for at least nine months prior to the baby’s due date your employer is obliged to administer SMP on your behalf.
- For the first 6 weeks of the maternity pay period you are entitled to 90% of your gross wage (tax year 2007/2008).
- For the subsequent 33 weeks you are entitled to £112.75 gross per week (tax year 2007/2008).
- If you choose to resume your employment following your maternity leave you are fully entitled to do so, with the same terms and conditions as before.
- In most cases your employer can reclaim all costs of operating and paying SMP from HMRC.
Statutory Adoption Pay (SAP)
If your are adopting a child you have a right to 26 weeks Statutory Adoption Pay (SAP), providing you have been in continuous employment (working for the same employer) for at least 26 weeks by the date the adoption is approved. The current rate of SAP is £112.75 per week, or 90% of your employee’s average weekly earnings, whichever is the lowest.
Statutory Paternity Pay (SPP)
Effective April 2003 new fathers are entitled to two weeks' Statutory Paternity Pay (SPP), with a right to a further 13 weeks of unpaid leave. In order to qualify you must have been in continuous employment (with the same employer) for at least 26 weeks (six months).
Redundancy Pay
You are entitled to redundancy pay if you have been in continuous employment for a minimum of two years, providing you are not on a fixed-term contract.
The minimum Statutory Redundancy pay requirements are as follows:
- Between ages 18-21 – you qualify for 1⁄2 week’s pay (or £165, whichever is lower) for every year worked.
- Between ages 22-40 – you qualify for 1 week’s pay (or £330, whichever is lower) for every year worked.
- Between ages 41 to retirement – you qualify for 1 1⁄2 week’s pay (or £495, whichever is lower) for every year worked.
Your employer is free to pay you more at their own discretion, however they cannot reclaim any part of the costs from the state.
State Pension Contributions
By paying NIC you also qualify for State Pension contributions. The State Pension is divided into two parts:
- The Basic State Pension
- The State Second Pension
For more information you can either speak to an Independent Financial Advisor or contact the Pensions Helpline on 0845 3000 168.
Holiday Pay
Up until recently all employees in the UK were entitled by law to 4 weeks paid leave every year. New holiday legislation has now been introduced and as of 1st October 2007 all employers are required to give at least 4 bank holidays as paid leave in addition to the 4 weeks. That means that all employees will now be entitled to 4.8 weeks holiday per year.
If you work on a part-time basis and you want to know how many days you are entitled to, simply multiply the number of days you work each week with 4.8.
BEWARE: You Could Lose Out If Your Employer Cuts Corners!
If your employer does not register for PAYE or if they register but only declare part of your salary in order to save themselves money it will directly affect your full entitlement to the above and other state benefits. Also, remember that you will need evidence of declared income in the form of payslips to get a personal loan, mortgage or provide a financial reference to a landlord.
It is never in your interest to agree to any illegal tax-saving arrangement with your employer!