Wow, there's a lot to look at here!
I won't be splitting the pay over 12 months as the nanny has asked to be paid for the weeks she is working.
Thanks to the European Court, it is no longer lawful to pay rolled-up holiday pay in this way - although many employers (including some household names) continue to do it because many employees with irregular work patterns prefer it. It is also much simpler to calculate and you don't have to go through the calculations in this thread - just add 12.07% to her pay each week and call it 'holiday pay' (you must show this separately on the payslip).
Assuming she earns at least £182 for each week she works she will pay £219 additional NI (and you will pay £246 more) over 39 weeks than you would if you paid over 52.1 weeks/12 months.
A Question... payment for statutory annual leave should be made at the time when leave is taken - least that's how I understand it
Correct, that was the judgement of the European Court I referred to above.
- so if pay is split over 12 months, then is that still Ok given that payment for the leave is not being made at the time but could be being paid later?
That's not clear. The law only applies to statutory annual leave (of 5.6 weeks) so firstly a court would need to decide which part of their non-working time was statutory annual leave. Then you would need to consider how much pay is actually due during the SAL - is it the same amount as is being paid anyway, is it 52/39 of that amount, or 52/44 - there are arguments for each of these answers. But because both employees and employers are better off with 52 week/12 month payments, nobody is going to go to court for this to be decided.
Splitting pay over 12 months can be good, though creates a problem if someone leaves part-way through an academic year. You need to pay them for work done.
Not necessarily. The contract may be written so that the pay is £x per month whether you work all, part or none of the month. All you then need to do is pay for any SAL that has been accrued but not taken, which will generally only be the case (with school years) if you leave in the first half of the Autumn term.
Someone leaving part way through the year can also cause complications on holiday entitlement - this is where the 12.07% thing may work out better to use.
As above, in most cases people will have had more than their 12.07% statutory entitlement when they leave so there is nothing to pay.
If someone leaves at the end of Summer term (so say in late June/early July) and are paid split over 12 months (Sept to Sept), they still get paid in July and August, so won't have a P45 until the August payroll run. Not a big issue, as new employer can use a P46 and the tax office can look at overall income over the financial year, should there be any overpayment (or underpayment) of employee tax/ni. P60 would need to be generated the following April/May for end of financial year.
This is not a big problem - tax will always be underpaid in this situation so the employee is (temporarily) better off. P60s are not given to employees who leave before 6th April.
Notice period - when would you be wanting them to let you know that they were leaving, or how much notice would you want to give them that the agreement was ending? Is 4 weeks notice enough? I gave a terms notice, which we have verbally agreed at the outset though 4 weeks was written in the contract.
Very good point. Unless there are special arrangements for holiday pay (rather than the 12.07% statutory accrual) you should always have at least until the day before the start of the next term otherwise you could lose out on the long holiday that you have accepted a lower annual salary for. And a verbal agreement is not enough, if 4 weeks is written in the contract then it is going to be difficult to win a claim that you should receive more.