Payroll reporting shake-up: Get ready for detailed hours tracking from April 2025
Attention UK employers! Major payroll changes are coming to how you report your employees’ hours worked. Starting in April 2025, get ready to provide HMRC with a much more in-depth look at your payroll data. Whilst these rules are subject to a consultation it is advisable to start making preparations now.
What’s changing?
Goodbye, broad strokes: Currently, you report hours worked in wide bands (e.g., 16-20 hours, 21-30 hours). From April 2025, you’ll need to provide the exact number of hours each employee works per pay period with complicated reporting obligations where pay consists of different elements such as bonus payments or benefits in kind and where pay is not dependant on hours worked
More than just hours: In addition to hours worked, you’ll also need to detail any absences (e.g. holidays, sick leave) with specific dates. This gives a clearer picture of work patterns.
Payroll systems under the microscope: Most likely, your current payroll software or processes will need an upgrade to handle this increased data collection and reporting.
Why is HMRC making this change?
There are two main reasons behind this shift:
- Minimum wage enforcement: Whilst HMRC have stated that it is not their intention to use this information for National Minimum Wage purposes, it is clear that by seeing the exact hours worked, HMRC can more easily spot any potential violations of the National Minimum Wage and National Living Wage regulations.
- Data-driven policymaking: This detailed data gives the government a better understanding of actual working hours in the UK. This helps them make more informed decisions about employment and economic policies.
What do employers need to do now?
Don’t wait until 2025 to act! Here’s your to-do list:
- Evaluate Your Payroll Setup: Review your current systems and processes. Can they handle the new reporting requirements, or do you need a payroll change?
- Plan for Upgrades: If your payroll software needs an update, start researching options and budgeting for potential costs now. The sooner you have the right tools in place, the smoother the transition will be.
- Talk to Your Employees: Transparency is key. Let your employees know about these changes and how their hours will be reported. This can help avoid any confusion or misunderstandings down the line.
The bottom line
These changes may seem inconvenient, but they’re designed to improve fairness, transparency, and ultimately, better working conditions for everyone. By preparing now, you can ensure your payroll processes are compliant and efficient when the new rules apply. If you’d like a no obligation call with our team to discuss these payroll changes in more detail, please get in touch.
