Introduction to Income Tax and NICs Earnings
Earnings
It will be obvious that in order to run a payroll we must know some basic facts about each employee’s earnings. On any given occasion , we need to know at least:
• What the e mployee’s earnings are , what kind of payments and/or allowances they should receive this pay day and
• How much they add up to in total (that is, the total gross earnings).
This assessment of gross pay is the very start of the process of pay calculation and it must be accurate. It should take into account all the elements that potentially constitute earnings before any appropriate deductions.
2.1
What counts as ‘earnings’
A comprehensive answer to the question “what counts as earnings?” would produce a very long list. It would include:
Basic pay: salaries and wages
•
Fees
•
Overtime
•
Bonuses
•
Commissions
•
Holiday pay
•
• Allowances (for example, for being the designated First Aid person)
Statutory payments
•
Benefits in kind.
•
This list is not exhaustive.
It is worth noting that some of these pay elements need to be calculated with particular care, usually with reference to the contract of employment or other terms and conditions of employment. There are also legal implications such as ensuring that workers are paid at least the statutory minimum wage rates, and that holiday pay calculations take overtime and other payments into account, where necessary.
page 8 of 60
Made with FlippingBook - Online magazine maker