All payroll clerks, financial directors and HR professionals who work with firms involved in the construction industry in Ireland should take note of a judgement which has changed the way the law is interpreted with respect to sick pay contributions. The judgement followed a hearing that was brought before the Labour Court in June and took effect from July 2024. Therefore, all sick pay awards that are made from July this year onward will need to take into account new rates of pay. This will affect everyone who is involved in calculating pay at companies that are registered as part of the Construction Workers Pension Scheme, or CWPS.
Of course, customers of Snow Technology are fully supported by using Snow’s state of the art digital payroll system, Quantum payroll, and updates are adjusted in line with legislative changes to ensure compliance with CWPS guidlelines. Construction sector firms without the benefit of Quantum Payroll, however, will need to be aware of the finer details if they are to avoid the potential for challenges from incorrectly paid workers and penalties. What are the key facts to take on board?
What Is the Construction Workers Pension Scheme?
CWPS is an industry-led pension scheme which is separate from the main auto-enrolment scheme that the Irish government began rolling out across all industry sectors in the coming months. In short, CWPS is a pension scheme designed for workers in the building industry, one that traditionally sees a workforce with varying rates of pay. It is a multi-employer occupational pension that was set up to provide pensions for workers not only in the construction sector but related industrial sectors as well. It was conceived to operate at a low cost to its members – construction workers who pay into the scheme – as well as employers who typically make deductions from their construction workers’ pay packets when they pay into it.
In Ireland, there are about 60,000 active members who pay into a CWPS pension plus many more who may have left the industry and have pensions in the scheme but who are no longer paying into it. Overall, there are some 7,500 construction firms that are registered within the scheme as employers, too. It is worth noting that the CWPS is not government-run but a private scheme. Indeed, it is among the largest private sector pension schemes of any type that is in operation in Ireland today.
Furthermore, membership of the scheme also means that the specific conditions of the current Sectoral Employment Orders (Construction Sectors 2023) are met. Not only does this relate to pension requirements in law but also so-called death in service benefits. All workers registered within the scheme should be entitled to this benefit as well as sick pay. Not that it is in this final area, sick pay, that the recent judgement was reached.
What Has Changed With Respect to CWPS Sick Pay?
Due to the Labour Court’s decision, a recommendation to the Construction Workers Sick Pay Trust was made. This needed to be pushed onto the CWPS Trustee Board to ratify. Because of the court’s recommendation, the board’s decision to ratify the court’s judgement was, for some, a rubber stamp exercise but, in theory, the board could have chosen to challenge the decision. In the end, the board decided that it would simply accept the wisdom of the court and a rate increase to the employer’s sick pay contribution to the CWPS was agreed. Importantly, the board also took the decision to ratify the operational changes which were needed to bring the recommended rate rise to fruition.
As of now, the new rate of sick pay for members of the pension scheme will be paid at a rate of €125 per day. This will cover the initial five days of a successful sick pay claimant’s pay, a total of €625 in any given calendar year. That’s a significant shift upwards given that the old rate was €50 per day for SWPS sick pay. Importantly, the CWPS will still operate an exclusion period on all new claims for sick pay as used to be the case. This is a three-day period for when no sick pay can be claimed under the scheme so anyone who processes payroll in the sector needs to be aware that this rule is still in place. Furthermore, another part of the old CWPS sick pay scheme will also continue despite the five-day rate uplift. On the sixth day of a claimant being awarded sick pay, and every day thereafter, the rate of sick pay will be €50 per day. As before, there is a limit on the total number of sick pay days that can be claimed under the scheme which is a maximum of 50 working days per calendar year. In other words, weekends and national holidays are not included or counted.
These sick pay changes were approved on Friday 28th June. They became effective from Monday 1st July 2024. Therefore, any successful sick pay claimant will be entitled to the higher rate of CWPS sick pay in their July pay packet.
Planning for the Future: Scheduled Changes to Contributions
Along with the newly approved rates of construction worker sick pay, some changes to the way contributions will be made to the pension scheme have also come into force. As of 1st July 2024, the pension contribution will be €49.65 with €29.78 coming from the employer and €19.87 from the employee. The corresponding death in service contributions will be €2.34 split equally between the employer and the employee. In both cases, the employees’ contributions are PAYE allowable.
It will be important to note the sick pay contribution payments will shift to €2.37 for the employer and remain at €0.63 for the employee, making a total of €3.00 none of which is PAYE allowable. These change in rates reflects the new costs involved with paying the higher rates of sick pay that are expected in future. Consequently, the total contributions for membership of the scheme are €54.99 effective from July.
Please bear in mind that there is also an increase that payroll professionals and accountants may already be aware of under the scheme. This shift relates to the main pension contribution only. Therefore, the death in service and sick pay contributions will remain the same. As of 5th August 2024, the pension contribution element of the scheme will increase to €30.82 for the employer and €20.57 (PAYE allowable) for the employee. Therefore, the contribution total from August will be €56.73.
Key Takeaways for Employers in the Construction Sector
Updating payroll processes to take account of the contribution deductions under the industry pension scheme needs to occur immediately if it is to come into effect at the proper time. Moreover, further changes to the payroll of employees enrolled on the scheme will be needed to comply with the further contribution changes in August. If an employee is sick for three days or more in a given month, then their new rate of sick pay will be €125 per day up to a maximum of five days before the old rate of €50 – previously €48 – per day kicks in. Other than those changes, the scheme operates much as it did before.
If you would like to find out more about how Quantum Payroll can streamline your firm’s payroll functions, with clear compliance with the Revenue Online System (ROS) and various payroll schemes, both private and public, built into its design, then why not book a demo? With error-free calculations for overtime, bonuses and payroll deductions, such as pension scheme contributions, Quantum Payroll can make a huge difference to the smooth running of construction industry companies by gearing them up for the demands of the modern Irish economy.