by David Lowe, mInstTA
Page 51
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IN ADDITION to the difficulties of converting some existing hourly wage rates for payment in decimal amounts (part 3 CM October 16) overtime, bonus and piecework rates which in many cases involve percentages or proportions of hourly rates will cause even further complications in calculations.
Weekly wages rates are usually of amounts ending in Is or at the least bd so conversion is easy, but in the latter case if you have decided not to use the fp a rounding off will have to be made.
Annual salaries paid on a monthly basis may appear to be a simpler case of conversion. But as the new value is 100p to the El instead of 240d and the former is not readily divisible by 12, only salaries which are multiples of £3 will divide equally. In other cases rounding to the nearest whole penny will be necessary.
In all these cases—hourly, weekly and annual wages—a review of the situation is obviously necessary to establish a more suitable basis for decimal calculation. With annual salaries a change from an annual figure to a monthly rate may prove the most simple expedient. Also in all cases, unless a convenient decimal sum is arrived at, percentage wage increases in the future will cause further complication.
Besides calculating his employees' wages, the employer has to make statutory deductions and, in some cases, voluntary deductions from their pay.
The statutory deductions which have to be made are income tax (PAYE) and National Insurance contributions. Decimal rates will apply for both these items from D-day (February 15, 1971).
Income tax The Inland Revenue has already designed PAYE deduction cards to accept decimal entries. Employers can, therefore, convert entries to decimal amounts at any time from now and those who do will be able to use the Ltd tax tables in conjunction with a conversion table. From D-day, PAYE tax tables in both £sd and ip will be available for the changeover period. The conversion table and the decimal tax tables will show two decimal places.
Employers who use their own PAYE deduction cards in preference to the official cards should consult with the tax office before the next tax year begins.
Form P45 which has to be completed by the employer when an employee leaves, showing his total earnings in the tax year to date and the total tax deductions made by the employer, is also now in dual-currency form so that, prior to D-day, entries can be made in fsd (they should be made in fsd in case the next employer is not yet using decimal accounting). After D-day, the amounts can be shown in either fsd or fp for the duration of the changeover period.
National Insurance Two levels of National Insurance contributions are affected. In the case of graduated contributions, employers should make the change to decimals at the same time as changing the PAYE deductions to decimals. Contribution tables expressed to two decimal places are currently available. Employers who prefer to calculate their graduated contributions direct from the appropriate percentages can calculate the decimal rates by using the same percentages but the figure must be rounded to the nearest second decimal place. After D-day, employers still using isd will be able to continue using the £sd graduated contribution rates during the changeover period.
The other level of contribution is the flat rate. From D-day. new flat-rate contribution stamps in £p are planned. These will be exact or near equivalents of existing rates but new halfpennies will not be used. The new stamps will not be available until D-day and the existing isd stamps will not be issued after D-day. This means that although Ltd accounting and wage payments may still be used after D-day, National Insurance stamps will have to be purchased in decimal amounts.
Employers who pay flat-rate contributions direct to the Department of Health and Social Security by invoice or by schedule or where contribution cards are block-staniped, will have to use Ltd rates until D-day and the new decimal rates after D-day.
Pay deductions Many employees agree to having sports and social club subscriptions, contributions to hospital and welfare funds and, sometimes, even union subscriptions deducted from their pay and, sometimes, employees make deductions for voluntary saving schemes. All these items will be affected by decimalization and as in most cases they arc very small amounts (sometimes only Id or 2d per week) they will not be directly convertible into an equivalent decimal amount.
While it generally may be simple to change the amounts to be deducted, nevertheless, planning for the change should be started in plenty of time to ensure that all concerned are aware of any slight changes in the amount payable. In some instances, such as with constitutionally established bodies, special meetings of members may have to be called officially to amend the dues payable and this should, of course, be done well ahead. Some of the national welfare funds, such as the Hospital Savings Association, have already announced alternative £p contribution rates.
Two points concerning the payment of wages and salaries must be remembered: if the change to decimals is made before D-day and wage records are kept in decimals, employees will still have to be paid in Isd. If the change takes place after D-day, for the period between D-day and the change although the wage records are kept in Ltd employees must, if they are paid by cheque. be given cheques made out in decimal amounts.
Having discussed accounting and pay-rolling procedures, there are two more subjects of importance to the transport operator to be examined.
Haulage rates The first one is haulage rates. This was mentioned briefly in part 2 (CM October 9) but is worth further attention. Once the decision to change to decimals is made, the rates schedule should be converted and all rates calculated or quoted after the change should, in the best interests of both operator and customer, be given in isd and fp. Ideally, the figure should be one that converts exactly.
It is worth remembering at this point that it was the Government's declared intention at the time of introducing the Decimal Currency Act I967—and it has been maintained since then—that prices should not rise purely as a result of decimal conversion. Therefore, if it is the intention to increase rates, the justification and the amount of the increases should be stated to customers and not hidden in a block conversion of £sd rates to decimals.
The other item of interest to the transport operator is his costing system. It is logical to change this to decimals at the time of changing the general accounting system.
In anticipation of operators' requirements in this respect, the 1970 edition of the Commercial Motor Tables of Operating Costs was expanded to show costs in both fsd and ip. Copies are obtainable, price I Is post paid, from Sales Dept, IPC Business Press (Sales and Distribution) Ltd., 40 Bowling Green Lane, London, EC I.
Net week: staff training.