Christmas Payroll

Paying Early this Christmas?

Jingle bells….Jingle bells…..Jingles all the way….Santa clause is coming…

Christmas is coming closer…..its almost at your doorsteps. With the season’s biggest festival approaching, everyone has their plans….going for a family holiday… preparing for parties….buying gifts for your near and dear ones and much more.

And we all know that no secret Santa is coming to fulfill our wishes.

So to make their big day special, there are high chances that people go into debt over the Christmas period.

But an early pay can definitely work like Santa’s present to help the employees accomplish their Christmas wishes.

So most of the employers change the payday for December giving their employees the money to cover Christmas expenses. This is partly because banks cannot process payments if at the end of December you have a payday on one of the banking holidays.

Since Christmas Day occurs on a Wednesday this year, employers are likely to pay their employees on 23 or 24 December.

This brings quite a bit of challenge for HR and payroll professionals before they can gear up for the Christmas celebrations.

Pay Dates

The practice of paying employees early in December is quite usual. However, this must be maneuvered carefully. Calculating Christmas bonuses, holiday pay, incentives makes the payroll process even more complicated.

When pay dates are advanced, it is critical to take note of the rules and regulations by HMRC concerning early employee payment. Be careful, failing to adhere to these rules can result in financial penalties.

In December 2018, HMRC wrote to businesses to recommend a momentary easement on reporting PAYE information in real time as during Christmas time employees are paid early. HMRC has received consent to make this easement permanent following the feedback from employers and the Department for Work and Pensions (DWP).

According to HMRC guidelines, when you pay early during the Christmas period, inform the Full Payment Submission (FPS) of your regular (or contractual) payday on or before this date, and ensure that the FPS is provided on or before this date. For instance, if you are paying on Friday 20 December 2019 but normal pay date is Tuesday 31 December 2019, you should report your date for payment on the FPS as of 31 December and ensure that your documents are submitted on or before 31 December.

It will help protect your employees ‘ benefits for Universal Credit, as it could impact current and future entitlements if you record a payday as payment date. Such declaration shall not impact the underlying reporting requirement of the PAYE to employees and shall be remitted on or before the day on which the worker is compensated, i.e. the payday.

Calculating Christmas Bonuses

Cash, vouchers and wine bottles – all beautiful small benefits but under the HMRC rules all quite distinct. Cash bonuses must be registered on an employee’s income, and deductions must be made for PAYE and National Insurance Contributions (NIC). In the meantime, retail vouchers are treated as income and provide both the employee and the employer with NIC liability. The employer’s voucher costs shall be reported on the payslip of the employee and the NIC shall be paid on that amount. Gifts are ultimately deemed to be ‘ trivial benefits ‘ as long as they cost less than £ 50, meaning that they are not subject to fee or NIC.

Christmas Parties

As long as your parties fulfill certain rules, taxes and national insurance contributions are not applicable. It must be available to each of the staff and end up paying less than £ 150 a person – all that includes alcohol and services such as taxis at home. Companies may put distinct parties for various departments, provided that all staff can attend to one of them.

Christmas Leave

According to the Working Time Regulations, employers may require annual leave from their workers on a particular date, including the Christmas period. The employers aren’t legally obliged to give time off, even on religious grounds; and nor do they have to pay any extra, such as ‘time and a half’. It all depends on the individual contract terms.

Hope this post keeps you informed on all the legislative rules about Christmas pay and holidays.

Merry Christmas………

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