It’s nearly Christmas and many employees are looking forward to a well-earned rest. However, managing the December payroll can present pay and payroll processing issues for employers.
Because the Christmas break has become so prolonged over recent years and many staff may be facing greater demands on their bank account in the run-up to Christmas, some employers bring the normal pay date forward by a day or two, or at least offer staff the option.
If your business operates on a weekly payroll basis, then you might need to pay employees in advance to cover any days of business shut down over the Christmas period.
You must let your payroll team know in advance what the arrangements are so they can put the necessary procedures in place. Your payroll processing timetable may also need to be brought forward for December to pay everyone on time. Some of your payroll team may be taking holiday too, so try to manage everything in a way that avoids problems both for your own business or for them.
Don’t forget to make sure your staff know what’s happening, so they don’t think they’re just getting extra wages. Make sure any employees who are leaving between pay day and the end of the month are paid accordingly; you do not want the annoyance of having to get the money back from them.
Full Payment Submission (FPS) and Employer Payroll Summary (EPS) changes
Even if your company pay day is brought forward in December, remember that the pay date on the FPS submission should still show the normal contractual (regular) pay date. Submission of the EPS should be sent by the 19th of January. HMRC may impose penalties for late or inaccurate returns.
Christmas bonuses and gifts
You need to declare any Christmas bonuses or gifts you give to your employees and pay tax and national insurance on them, unless the gift meets the conditions to be “a trivial benefit”, that is:
- It costs you £50 or less to provide the gift or bonus
- It is not cash or a voucher
- It is not a reward for their work or performance
- It is not something their contract entitles them to
Beyond a trivial benefit you should distinguish between cash or cheque presents or physical goods.
Cash or cheque bonus
Cash or cheque Christmas bonuses count as earnings so they will need to be put through payroll as normal, with PAYE tax and Class 1 NI deductions.
If you give goods as gifts to employees, you will need to report if:
- They can be resold for cash
- They are given to employees who earn more than £8,500 a year
Finally, don’t forget to make arrangements for paying employees who work during this period and inform payroll of who these will be and when to expect payment.
If you have any questions about your Christmas payroll, please contact Brian Palmer using the details below.
This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article.