Personal Finance - Starting work Introduction In this unit you will study the following things you need to know when starting work full time or part time work.
Contracts and rights at work
Pay and tax (Income Tax and National Insurance Contributions)
Rules for young workers
Trade unions, discrimination, redundancy and health & safety
Pensions and retirement
Assessment At the end of this unit are six multiple choice questions. You need to get four out of six correct to pass this unit.
Starting work Your employer will give you a P46 form to fill in. This will be used by the employer to work out your tax etc.
Employment contract If you’ve been working for more than two months your employer should provide you with your job details.
By word or on paper Job contracts can be by word or on paper. They should include the following information:
Wages
Job title
Holidays
Sick pay
Hours of work
Pension scheme – this is covered in the unit on income and expenditure
Dismissal and disciplinary procedures
Personal Finance
Page 1
Unit 1: Starting Work
Working Hours You cannot be made to work more than 48 hours in a week. However you can choose to do more if you wish. Under 18’s cannot be made to work more than 40 hours in a week. However for some jobs, for example, police, doctors, armed forces, these rules do not apply.
Sickness How to report you’re sick. Make sure you know the rules about being absent whilst sick in your workplace. You need to know who to ring and say that you are too ill towork.
A bad start It’s not the best start to a job if the employer finds you are off ill straightaway.
Did you know? If there are people being made redundant at your works then the amount of time off sick can be one reason among others in deciding who is to be made redundant.
Sickness and money When you are too ill to go to work you should get Sick Pay from your employer. It’s called SSP (Statutory Sick Pay).
The basic rules of claiming
Earn at least £95 a week (November 2009)
Off ill for more than 4 days
It's not paid for the first three days of illness.
Other benefits If you do not get SSP you can possibly claim incapacity benefit or income support.
Personal Finance
Page 2
Unit 1: Starting Work
Holidays By law you will get some PAID holiday once you start work.
How much? This depends on how many days you work a week. Working days per week
Normal working days on holiday
Bank holidays (Christmas, Easter etc)
5
20
8
28
2.5
10
4
14
Total
Flexible working If you have a young child you can ask for flexible working. This is not a right but your employer should think about it carefully.
What it means Flexible working is where your work fits in with your life better. It might mean a job share or working part time; it could be working school hours only or working shifts.
A carer This can also be requested if you are a carer for a disabled person.
Activity 1 You cannot be made to work more than 48 hours in a working week unless you are in the armed forces, police force etc. True False
Personal Finance
Page 3
Unit 1: Starting Work
Time off work You have the right to paid time off for certain activities by law. These include duties as a health and safety representative, looking for work if being made redundant, receiving antenatal care and duties as a union official.
A carer You also have the right to time off without pay to care for your children. If you have worked for an employer for more than one year you are entitled to 13 weeks unpaid leave before your child is five. Parents of disabled children get 18 weeks.
Statutory Maternity Pay The basic rules:
You work for the same employer for 26 weeks minimum
You tell your employer you’re pregnant 15 weeks before the birth of the baby
How much You can claim for a maximum of 39 weeks (9 months) maternity pay.
Start You can claim anytime from the 11th week before your baby is born (29th week of pregnancy). You can claim for 39 weeks within 52 weeks (1 year). Number of weeks of claim. Total = 39 weeks First 6 weeks
How much money do you get?
Next 33 weeks
£124 or 90% of your gross wages whichever is smaller
90% of your gross wages
Statutory Paternity Leave It’s important that men get involved with their baby as soon as possible.
Two weeks paid leave You can take two weeks off to look after the baby.
Personal Finance
Page 4
Unit 1: Starting Work
How much You get £124 a week or 90% of your average gross week’s wage whichever is the smaller.
Rules There are several rules but basically men get this if they earn £97 or more a week and they have a proper job contract.
Full details These are on the DirectGov website or Google – “Paternity pay UK”.
Pay and Tax Salary or wages Salary = how much you earn in a month or a year. Wages = an amount of money paid for a fixed quantity of work done; usually a fixed amount per hour, per day or per week.
Tax and National Insurance Income tax = The Government will take some of your money if you earn enough. National Insurance = You pay some money towards your pension and other benefits, for example, health and unemployment benefits (job seekers’ allowance).
Tax allowance You pay no tax on the first £125 a week (£6,475 a year) of your wages. From April 2011 it’s £145 per week or £7,475 per year. This is called your tax allowance. Answer to Activity 1 Correct answer: True You cannot be made to work more than 48 hours in a working week unless you are in the armed forces, police force etc.
Personal Finance
Page 5
Unit 1: Starting Work
National Insurance allowance (NI) You pay NO National Insurance (NI) on the first £110 of your wages a week. Above £110 a week you pay 11% of your wages. The numbers 1 - 3 in brackets on the columns refer to explanations below. Income tax
National Insurance (NI)
Earnings a week
£280
Earnings a week
£280
Income tax allowance
£125
National Insurance allowance (2)
£110
Taxable pay (1)
£155
Taxable (NI)
£170
National insurance at 11%
£18.70
Tax at 20%
Total tax (3) Summary
£31 Gross weekly
£280
Total tax (tax + NI) Net wages
£49.70 £231.30
1)
Taxable pay £155 –You only pay tax on this amount of money (£155) not your whole gross pay. It’s your gross pay (£280) minus your income tax allowance (£125).
2)
National Insurance allowance £110 – This is the amount of money that you can earn per week BEFORE you start to pay any NI.
3)
Total tax (Income tax + NI) £49.70 – This is the total tax you pay and is made up of £31 income tax plus £18.70 National Insurance (NI).
Personal Finance
Page 6
Unit 1: Starting Work
With any luck With any luck, after a week or a month, you will get your first payslip. It will look something like this. As before, the numbers 1 - 5 in brackets on the columns refer to explanations below. 1)
Employee number Large companies usually give each person a number.
Name
John Smith
Employee Number (1)
34567
Bank account (2)
20-37-43 XXXX5678
Payment date
17 March 2011
Period (3)
Week 49
National Insurance number (4)
YZ 234789D
Tax code (5)
M647
2)
Bank account You need to give your bank sort code and account number to your employer so they can pay your wages straight in to your bank account.
3)
Period A tax year is from 6th April this year – 5th April next year (52 weeks). So week 49 will be in late March.
4)
National Insurance number This is your unique number given to you when you start work. It’s important for all sorts of tax, banking and other stuff.
5)
Tax code This looks like a random number. It’s not of course. If you multiply the number by 10, that’s what you can earn before you pay tax. Ignore any letters. M647 = 647 x 10 = £6,470.
Personal Finance
Page 7
Unit 1: Starting Work
Definitions Here’s an explanation of the terms used on your payslip. Click on the 3 hotspots to find out what they mean. As before the numbers 1 - 3 in brackets on the columns refer to explanations below.
Payslip Gross pay = £330 (1) Income tax allowance
£125
National Insurance (NI) allowance
£110
Taxable pay
£205
National Insurance (NI) Taxable pay
£220
Tax at 20%
£41
NI at 11%
£24.20
Total deductions = £65.20 (2) Tax credits = Nil Net pay = £264.80 (3) 1)
Gross pay Your full wages before anything (tax etc) has been taken away (deducted).
2)
Total deductions The amount that has been taken off / taken away from your wages in such things as income tax, national insurance (NI) etc.
3)
Net pay What you have left. The money that goes in to your bank etc from your employer.
Personal Finance
Page 8
Unit 1: Starting Work
Activity 2 Working out income tax This is just about understanding how much income tax Shalma will pay. How much tax will she pay at 20% tax? Select ONE figure only. (The answer’s on page 10.) Gross pay
£12,470
Tax allowance
£6,470
Taxable pay
£6,000
How much tax will she pay @ 20% tax £600 £1,000 £1,100 £1,200
Important documents but boring The following documents are pretty boring. But if you lose them you will cause yourself a load of hassle and problems and are likely to end up paying more tax.
System Get a system for all your important documents. It will be well worth it. Put all your work and financial stuff together and keep it safe. It’s a real pain if you lose any of them.
Personal Finance
Page 9
Unit 1: Starting Work
P60 – end of year document All the money you have earned and all the income tax you have paid in that financial year (April 6th this year to April 5th next year) is on a P60. It is important to keep this as you may need it:
to claim back tax
as proof of paying tax
to apply for tax credits.
P45 – leaving your job When you leave a job you will be given a P45 from your employer. You will need to give this to your next employer. It has all your details on it and sometimes you cannot start a new job without it.
By the way Have I said, “Keep your P45 and P60 safe”?
What can I expect to be paid? The Government has some rules which anyone who employs you must obey. These are the very least you should get. Age
21+
18 - 20
16 - 17
All apprentices under 19 and first year apprentices 19+
Minimum wage per hour
£5.93
£4.92
£3.64
£2.50
(October 2010 rates) For up to date rates visit http://www.direct.gov.uk/en/ Employment/Employees/TheNationalMinimumWage Answer to Activity 2 Correct answer Box 4 = £1,200 To find how much tax she pays you work out 20% of her taxable pay (20% of £6,000) = £ 1,200. (It’s easier to work out 10% and then double it.)
Personal Finance
Page 10
Unit 1: Starting Work
Working — under 16 If you’re under 16 and working check out these rules. There are even more restrictions on under 14 and under 13’s. Children’s hours per day and per week for School terms and School holidays Age
Hours
14 & 15
2 hours
Saturdays
14
5 hours
12 hours per week
Saturdays
15
8 hours
12 hours per week
Weekdays & Saturdays
14
5 hours
25 hours per week
Weekdays & Saturdays
15
8 hours
35 hours per week
14 & 15
2 hours
See above
School terms Weekdays + Sundays
Maximum hours per week
School holidays
Sundays
Activity 3 A person’s gross pay is £330 per week. Their tax allowance is £130 per week. What is their taxable pay (the amount of money they pay tax on)? Select ONE only. (The answer’s on page 14.) £130 £200 £230 £260
Activity 4 Use the answer from Activity 3 above to do this question. They pay tax at 20%. How much tax do they pay each week? Select ONE only. (The answer’s on page 14.) £13 £20 £26 £40
Personal Finance
Page 11
Unit 1: Starting Work
Losing your job, discrimination and other things about work Losing your job There are two ways in which your employer can ask you to leave. They are quite different. Redundancy – The job you are doing has physically gone and hence you are no longer needed. Dismissal – Your employer does not want you. Your employer has to give you a proper reason and notice. If you’ve done something wrong such as stealing you can be dismissed straightaway (without notice). This has the technical term, “Gross misconduct”.
Notice period – statutory (legal) minimum This is the amount of time or pay your employer has to give you before you leave your job. Your contract with your employer may have better rules than the statutory (legal) minimum, so check. It’s the same whether it’s dismissal or redundancy Length of continuous employment
Dismissal and / or redundancy notice
Up to 1 month
0
More than 1 month but less than 2 years
1 week
2 years +
2 weeks
Each full year
Add 1 week
12 years +
12 weeks maximum
Dismissal You employer can only dismiss you if it is “reasonable” to do so.
Unfair dismissal This means that your employer has NOT a proper or valid reason for asking you to leave.
Personal Finance
Page 12
Unit 1: Starting Work
Court You can take your case to an “Employment Tribunal” which is a special court for this purpose. You need advice if this happens preferably from the Citizens Advice Bureau or your union.
Redundancy - selecting people for redundancy If an employer is making people redundant they should do it in a fair way. They should not discriminate against anyone. Fair ways could be any or a combination of the following:
Length of employment Experience and capability Qualifications Disciplinary record.
Discrimination at work You cannot be treated less favourably at work or paid less because of any of the following:
Sex Race Religion or belief Sexual identity Disability Age Sexuality.
Harassment You should also be protected from being harassed (suggestive remarks, nasty comments and unwanted physical contact) by other employees because of these or other reasons.
Bullying This is also not permitted and your employer has a duty to protect you from it.
Personal Finance
Page 13
Unit 1: Starting Work
Activity 5 What is your net pay? Select ONE only. (The answer’s on page 15.) The amount of money in your bank account The amount of wages you get from your employer The amount of tax you pay The amount of wages you have left after all taxes etc are taken off
It’s not fair If you have a problem or grievance then talk with your supervisor or employer first. If, however, this doesn’t work then you have to go through a proper grievance procedure which all employers should follow.
What’s this? This means sending in a written statement stating your problem. Then you should meet with the employer and hopefully things will be sorted out. If things do not work out you need advice from your trade union or the Citizens Advice Bureau. Answer to Activity 3 Correct answer £200 Their taxable pay is their gross pay (£330) minus their tax allowance (£130). So their taxable pay is £330 - £130 = £200
Answer to Activity 4 Correct answer: £40 Their taxable pay is £200 per week. They pay 20% of their taxable pay (£200) in tax. So it's £40 that they pay in tax = £200 / 20% (20/100) = £40. (Or divide it by 10% and then double it = £200 /10% = £20 x 2 = £40.)
Personal Finance
Page 14
Unit 1: Starting Work
Trade Unions Anyone working for a company can join a trade union. You cannot be forced to join and you should not be treated differently if you are in one. The trade union movement was started to defend workers’ rights and to prevent workers from being exploited and to ensure their health and well being.
Health and safety Your employer should look after your health and safety by law.
At work They should make sure:
You have the correct protective clothing - free of charge the machinery you use is safe and provide training in its use you have a means of escape in a fire.
Dangers You should also be protected from fire, noise, dangerous chemicals and extreme temperatures.
Working conditions The employer should provide seating, washing facilities, toilets and drinking water.
Prosecution in a court If YOU or your employer act in an unsafe way you or your employer can be taken to court and fined or put in prison. Answer to Activity 5 Correct answer. The amount of wages you have left after all taxes etc are taken off (deducted).
Personal Finance
Page 15
Unit 1: Starting Work
Unit test Here are six questions about this unit. You need to get four out of six correct to pass.
Question 1) Your tax allowance is? Select ONE only. How much income tax you pay How much income tax and national insurance (NI) contributions you pay How much you earn BEFORE you pay any tax How much you earn AFTER the age of 21
Question 2) The word ―deductions‖ on your pay slip means: Select ONE only. The money that’s taken out in tax etc from your wages / salary The money that you’ve got left AFTER you’ve paid tax etc The money in your bank account The money you get in wages / salary from your employer
Question 3) Which word is missing Cross out the wrong word. A……….. is the amount of money you earn each year.
A……….. is the amount of money you earn each week.
Personal Finance
Page 16
Salary Wage Salary Wage
Unit 1: Starting Work
Question 4) Here’s some information about Shalma’s salary. How much will she pay in tax in a year? Gross salary = £6,000 Tax allowance = £5,000 Taxed at = 20%Select ONE only. £50 £100 £200 £1,000
Question 5) The main taxes taken out of your pay are: Select ONE only. National Insurance and Income tax Mortgage and rent tax Income tax and job seekers allowance All three
Question 6) If you work full time (5 days per week), how much PAID holiday (including bank holidays) should you get a year? Select ONE only. 7 days 14 days 21 days 28 days
Personal Finance
Page 17
Unit 1: Starting Work
Unit Test 1) Your tax allowance is:
How much income tax you pay How much income tax and national insurance (NI) contributions you pay How much you can earn BEFORE you pay any tax How much you earn AFTER the age of 21
2) The word ―deductions‖ on your pay slip means:
The money that’s taken out in tax etc from your wages / salary The money that you’ve got left AFTER you’ve paid tax etc The money in your bank account The money you get in wages / salary from your employer
3) Match up the words with their correct meaning. a) A Salary is the amount of money you earn each year. b) A Wage is the amount of money you earn each week. 4) Here’s some information about Shalma’s salary. How much will she pay in tax in a year? Gross salary = £6,000 Tax allowance = £5,000 Taxed at = 20%
£50 £100 £200 £1,000
5) The main taxes taken out of your pay are:
National Insurance and Income tax Mortgage and rent tax Income tax and job seekers’ allowance All three
Correct answer: National Insurance and Income tax 6) If you work full time (5 days per week), how much PAID holiday (including bank holidays) should you get a year?
7 days 14 days 21 days 28 days
Personal Finance
Page 18
Unit 1: Starting Work