Correcting Payroll Errors

Correcting Payroll Errors using Full Payment Submission (FPS)

If a mistake has been made with an employee’s pay or deductions it can corrected by using your next Full Payment Submission (FPS) to update your year-to-date figures.

Correcting Payroll Errors using an Additional Full Payment Submission (FPS)

An additional FPS can also be sent to correct year-to-date figures providing it is sent before your next FPS is due. In the case of an additional FPS the same pay date should be used.

If an employee has been underpaid you can either send an additional FPS, on or before you pay your employee the additional amount or by the 19th of the tax month after you sent your original FPS. HMRC will include the correction in that month’s PAYE bill.

Correcting errors in an employee’s National Insurance deductions

Both FPS’s and additional FPS’s can be used to correct mistakes to National Insurance deductions.

If an employee has underpaid their national insurance in a particular month, only the equivalent of their following month’s national insurance liability can be taken from them the following month. The remainder must be recovered in another month. Pay any underpayment to HMRC straight away.

Example: Your employee underpaid by €80 in January. In February the employee’s national insurance is €60. This means you can only recover up to €60 towards their underpayment that month. The remainder will need to be recovered the following month.

If the underpayment was in a previous tax year

An Earlier Year Update (EYU) should be sent to HMRC stating the difference between what you originally deducted and the correct amount. The EYU will inform HMRC if you’ve deducted or repaid the difference to the employee. Once more if you have deducted too little you can’t recover more than the National Insurance due that month.

Correcting an employee’s student loan repayments

Both FPS’s and additional FPS’s can be used to correct mistakes once the difference has been repaid or deducted to the employee. Once more if you have deducted too little you can’t recover more than the student loan deductions due that month. 

If the mistake was in a previous tax year

If you have deducted too little you do not need to do anything. The employee can contact the Student Loans Company to see how it affects them. If you have deducted too much refund your employee and you can correct your year-to-date figures using an FPS on or before 19th April otherwise use an EYU.

Posted byBrian O'KeeffeinPayroll SoftwareRTI

Automatic enrolment - Look out for a letter from The Pensions Regulator!

The Pensions Regulator will be issuing a one-off letter to all small and micro employers between the end of January and May 2015 to ensure they know when their new workplace pension duties start.

The letter will provide key information such as their PAYE reference number, the date the law applies to them and the process through which they can provide a nominated contact to the regulator to receive regular, useful and relevant information in the run up to the date at which they need to comply with their duties.

Approximately five million workers have already been automatically enrolled by nearly 43,000 employers. In the coming months and years, another 4 million workers will be automatically enrolled by small employers across the country. Small employers are those with fewer than 50 workers.

You can find out your staging date at any time by simply entering your PAYE reference into the Pension Regulator’s staging date calculator.

Posted byVictoria ClarkeinAuto Enrolment

Auto enrolment - DWP research on opt ins and opt outs

DWP research* (January-July 2014 stagers)

•Opt-ins 1%

•Average opt-out rate of 12% in 1st month after staging (range 5 - 15%)

•Ceasing active membership months 2 and 3 - 2%

•Average scheme participation rose from 43% to 73%

•Most likely to opt-out +50 yrs and part-time workers - opt-out reasons:

–lack of affordability (typically £20-£30k earners)
–some other form of saving and/or pension in place (50% of these earned less £30k)
–insufficient time to save enough (typically over 50 yrs)
–not planning to stay with employer and didn’t want small pot
–a few wary of pensions as a savings vehicle.

* 50 employers and 100 workers who ‘opted-out’ were interviewed. PAYE size range 62-499.

(Information source - The Pensions Regulator)

Posted byPaul ByrneinAuto Enrolment

Calculating Holiday Pay – Updated Guidance

In light of a number of recent court judgements and the resulting changes to regulations, Acas has updated their holiday pay guidance to assist employers in calculating holiday pay.

Several key points that employers should be aware of:

• Guaranteed and normal non-guaranteed overtime should be considered when calculating a worker's statutory holiday pay entitlement but there is currently no definitive case law that suggests voluntary overtime needs to be taken into account.
• Commission should be factored into statutory holiday pay calculations.
• A worker's entitlement to holiday pay will continue to accrue during sick leave (both paid and unpaid). If a worker is unable to take their annual leave in their current leave year because of sickness, they should be allowed to carry that annual leave over until they are able to take it, or they may choose to specify a period where they are sick but still wish to be paid annual leave at their usual annual leave rate.
• There are different rules for calculating holiday pay depending on the working patterns involved:   (a) For workers with fixed working hours - If a worker's working hours do not vary, holiday pay would be a week's normal remuneration. (b) For workers with no normal working hours - If a worker has no normal working hours then their holiday pay would still be a week's normal remuneration but the week's pay is usually calculated by working out the average pay received over the previous 12 weeks in which they were paid. (c) For shift workers - If a worker works shifts then a week's holiday pay is usually calculated by working out the average number of hours worked in the previous 12 weeks at their average hourly rate.
• Workers must take their statutory paid annual leave allowance and can only be 'paid in lieu' for this when their employment ends. While workers are in employment, 5.6 weeks of their annual leave (this is the amount all UK workers are statutorily entitled to) must be taken and cannot be 'paid off'. Anything above the statutory allowance may be paid in lieu but this would depend on the terms of the contract. When a worker's employment is terminated, all outstanding holiday pay that has been accrued but not taken (including the statutory allowance) must be paid.
• Work-related travel may need to be factored into statutory holiday pay calculations.

The Government has also introduced regulations to take effect from 1 July 2015 to limit and clarify the maximum amount of back-dated holiday pay that can be claimed. The change will mean that when making claims for a series of backdated deductions from wages, including any shortfall in holiday pay, the period that the claim can cover will be limited to a maximum of 2 years.

Further information in addition to the above can be found on the ACAS website at holiday pay guidance.

Posted byVictoria ClarkeinPayroll

HMRC simplifies end of year payroll submissions

Under RTI employers running payroll are required to report their employees’ pay and deductions to HMRC in regular Full Payment Submissions (FPS) through the year. A final end of year FPS (or EPS) must be submitted by 19 April.

Employers will no longer be required to answer extra questions on the payroll submissions they make to HMRC at the end of the tax year.

The seven extra questions, which are only included on the final FPS of the year, were inherited from the old P35 form, which had a submission deadline of 19 May. This gave employers and agents much more time to ascertain the correct answers to the questions, such as whether any special payments have been received in the year from third parties.

Removing the requirement to submit this information at year end will significantly reduce burdens on employers but will most definitely reduce burdens on agents and bureaux, and make a busy time of the year just a little less frantic by removing the mandatory need for the employer (client) to provide confirmation to the answers to seven questions.

The change is expected to take effect from 6 March 2015, avoiding the need to complete the checklist for the 2014/15 tax year.

From 6 March 2015 HMRC will accept a final FPS or EPS for 2014/15 and 2015/16 with or without a completed checklist, but employers should still report the Final Submission for Year indicator.

Posted byCaoimhe ByrneinHMRCPayroll SoftwareRTI