POLICY HUB
Reclaiming overpaid statutory maternity pay (SMP) Q: Due to a communication error, a maternity start date was processed earlier than it should have been. As a result, and in line with the March year-end process, we had to revert the payroll and resubmit the FPS and employer payment summary for March. The system now reflects the correct maternity start date, but the employee has been overpaid by £708 in net pay in March, so we would like to propose a repayment plan to recover this amount. Upon review, we found that a deduction could be made from future SMP payments, provided the employee agrees to this approach, at https://ow.ly/ CCBp50W3c0t. However, we would like to understand how to reflect this on the payslip. Assuming we obtain the employee’s formal written consent, can we process the net deduction as an ‘advanced payment’? Would it be appropriate to include an additional line on the payslip indicating the monthly deductions, bearing in mind that these deductions will be taken solely from SMP over the next seven months? A: The net amount is the most accurate method to use to recover an overpayment, and this is the value you should ask the employee to repay. Follow the company policies around naming pay elements used to recover a wages overpayment. You’ve identified the correct manual, and SMP is replacement of earnings so an overpayment of wages can be deducted from it. As confirmed in the Statutory Payments Manual, all statutory payments are a replacement of earnings, and you can make deductions from them. Although an employer should consider whether it will cause financial hardship, it will also depend on what’s stated in the employee’s contract of employment regarding the recovery of overpayments. If an employer takes a deduction without consent or without it being detailed in the contract of the employment, it’s classed as an unlawful deduction under Employment Rights Act 1996. I would suggest agreeing a repayment plan in writing. This CIPP article is very useful in confirming the steps to take when employees are overpaid: https://ow.ly/74XE50W3c59 https:// ow.ly/74XE50W3c59. n
payment submission (FPS), you can carry forward the amount that hasn’t been payrolled to the next tax year. So, you add the amount still to be payrolled to the first wage payment in the next tax year. Be mindful that Class 1A National Insurance contributions payable on the benefit cannot be carried forward to the next tax year. These are payable by 19 July after the tax year end. So, if an employee has left but there’s still part of a benefit to be taxed, you have two options, but HMRC will contact the employee for the unpaid tax whichever option you choose. Option 1: include the balance in your FPS – report the taxable amount in taxable pay to date in your FPS and notify HMRC that the employee has left if you haven’t already done so. Option 2: include the balance on form P11D – include the untaxed balance on form P11D for the period that the employee had the benefit that wasn’t included in payroll.
Are there any NMW considerations when recovering an overpayment?
Can you deduct an overpayment from SMP?
Pay as you earn (PAYE) references Q: We currently have five different company entities all with different PAYE references – one per entity where each of the separate company contracts are paid. Within one of the companies, we want to split the staff into different pay groups, all still employed by the same company. Can each of these groups have their own PAYE reference and can one employer have more than one PAYE reference? If so, how do we apply for new PAYE references? A: It’s possible to have separate PAYE schemes. This may be done for different payroll frequencies or to group different employees together as in your example. A formal election must be made to HMRC prior to the start of the tax month that it is to take effect. The following link contains further information: https://ow.ly/ actE50W3bfS.
9
| Professional in Payroll, Pensions and Reward |
Issue 112 | July-August 2025
Made with FlippingBook - Online magazine maker