Death Of An Employee
DEATH OF AN EMPLOYEE Following the death of an employee the employer must ensure that all payments due, and outstanding, are correctly calculated and remitted to the appropriate payee. The employer will immediately require details of the date, time and place of death and, at the earliest opportunity, next of kin, executors or administrators. The first responsibility is to ensure that no further payments are made in the name, or to the account of the deceased employee. Any outstanding payment will normally be paid to either: • the Executor(s) of the employee’s estate if there is a will, or • the Administrator(s) of the employee’s estate if there is no will. COPYRIGHT © 2021 THE CHARTERED INS ITUTE OF PAYROLL PROFESSIONALS Payments are usually made by cheque to facilitate immediate release of any outstanding pay once a third party’s entitlement has been established. In circumstances where death occurs after payment, but before the end of the pay period, an employer should establish whether or not to recover any part of that payment which relates to the period following death. Technically an overpayment has occurred. Prior to April 2006 this could be resolved by making any balance tax-free paid as an ex-gratia payment but HMRC amended the rules in this regard from that date (see below). Any policy will need to provide a clear guideline about whether it is appropriate to attempt to recover any overpayment. The following principles should be applied to any payments currently being, or recently, processed: Income Tax Employment ends with the death of the employee so a P45 needs to be issued. All earnings paid after death and within the same tax year, but before a leaving date has been sent to HMRC, are taxed using the deceased’s final tax code. The P45 is sent to HMRC only and not sent to the persons executor or representative. A summary of the final pay and tax position should be sent to this person on a standard letter. Payments made after the submission of a leaving date or in a subsequent tax year are taxed at code 0T on a non-cumulative basis and details recorded on a new payroll record in the name of the deceased employee. No printing, copying or reproduction permitted. Any tax rebates being withheld due to industrial action (strike) become payable. If one partner dies where a joint wage or salary is paid to a husband and wife, the following should apply: • divide wages between them when calculating both PAYE and NICs • ask HMRC to supply individual tax codes • prepare separate payroll records for both husband and wife/civil partners. National Insurance Contributions NICs are not due on the earnings of an employee who dies before payment is made, irrespective of the period for which the payment is due.
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