Introduction to Income Tax and NICs Starters and Leavers
Starters and Leavers
The number of starters and leavers processed by a Payroll department will obviously vary from organisation to organisation. It will depend on the turnover of the workforce and the type of industry. Where seasonal employees are hired, this will result in peak times for recruitment and termination of employment. The processing of starters and leavers demands precise data and careful attention to detail. There are many procedures to follow, most of which are prescribed in the Pay As You Earn (PAYE) and National Insurance contributions (NICs) legislation. The first and final payment(s) made to a starter or leaver can have certain implications for apportionment of pay, timing of payment and calculation of PAYE income tax and NICs.
The following outlines the procedures and calculations to be followed.
7.1
Mistimed payments for starters and leavers
There are occasions when all the earnings due on a particular pay day have to be paid earlier or later than usual, often in a different pay week/month and sometimes in a d ifferent tax year altogether. In effect, this moves the employee’s normal pay day either backwards or forwards in time. These are called ‘mistimed’ payments and they can occur, for example, when new employees start work too late in the month to be paid on time so that pay for the month of starting is often carried over and paid in the following month.
Mistimed payments have implications for PAYE income tax and NICs.
7.1.1 NICs implications
Starters
The correct procedure is as follows.
• Do not add the early or late payment to any other payment in the pay period in which it is paid
• Calculate NICs separately on each payment
• Use the NICs rates and earnings limits in force at the time the payment is made .
page 56 of 60
Made with FlippingBook - Online magazine maker