Earnings
For redundancy purposes the leave period is treated as a period of normal employment. Where employers fail to agree a scheme with their employees, the model scheme, as defined by BEIS, will automatically apply. An employer’s scheme may be more generous than the model scheme. For the model scheme see ‘Maternity Leave and Parental Leave’. COPYRIGHT © 2021 THE CHARTERED INSTITUTE OF PAYROLL PROFESSIONALS EARNINGS Earnings are normally defined as total pay less statutory deductions - Income Tax, National Insurance (employee’s contribution), student loan repayments and pension fund contributions. Items defined as earnings include: • wages, salaries, honoraria, earnings, and stipends, overtime, bonuses, commission, and cash allowances, compensation for loss, or reductions in, the work force, Statutory Sick Pay and pensions or annuities in respect of past service. Some items not defined as earnings include: • advances of pay - include in gross pay in subsequent pay calculation • Disablement or Disability Allowance or pension • expenses reimbursed • Guaranteed Minimum Pension (or the GMP element of a pension) • payment for service in the armed forces • payments by a public department of a foreign country (including Northern Ireland) • Statutory Maternity Pay, Statutory Adoption Pay, Statutory Paternity Pay (note, however, these are included in qualifying earnings for auto-enrolment purposes) • State benefits or pensions. ELECTRONIC PAYMENT OF PAYE Since tax year 2005/2006, employers, starting with those with 250 or more employees in a PAYE scheme, have been required to pay their monthly remittances to HMRC electronically in full, and on time, or risk incurring a surcharge. From tax year 2010/11 a requirement was introduced for all PAYE schemes to pay their monthly or quarterly remittances in full and on time or face a surcharge at year end. All employers are now required to make payment electronically unless they are exempt. Surcharges are levied for any remittances that are not paid in full and on time after one un-penalised default.
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The surcharge is calculated as follows: •
1-3 defaults 1% of the total of the defaults 4-6 defaults 2% of the total of the defaults 7-9 defaults 3% of the total of the defaults
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• 10 or more defaults 4% of the total of the defaults, plus • tax unpaid after 6 months - additional 5% of unpaid tax • tax unpaid after 12 months - further 5% of unpaid tax.
From tax year 2010/11 schemes had to make an assessment on 31st October each year whether they will be classed as’ large’ for the following tax year, HMRC ceased to inform them by letter. Remittances are classed as tax, NICs, construction industry and student loan deductions and
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