PAYROLL INSIGHT
Starters and leavers
Jill Smith MCIPPdip, CIPP policy manager, covers general basic payroll procedures from a payroll point of view
Y ou may be wondering whether we need such an article, as basic procedures are part and parcel of everyday payroll duties. Well, even basic procedures change quickly in our world of ever-evolving legislation and procedural updates and even the best of us can struggle to keep up. It never hurts to have a refresher of the basics, and the processing of starters and leavers demands precise data and careful attention to detail. Starter notification When someone new joins, you need to set up a new employee record. The details of the new employee are then included in the full payment submission (FPS) under real time information (RTI). In most organisations (unless it is a small company) notification of a new starter will usually come from the human resources (HR) or personnel department. This will either be a copy of the contract of employment or a pro-forma notification. The notification should be authorised by a delegated person within the HR department and show the following information: ● full name and title ● gender ● employee reference number ● address ● date of birth ● date of start ● payment frequency/method and bank account details, if appropriate ● contractual hours: number of hours
the figures of previous employment earnings and tax are ignored and are not to be entered onto the current tax year. (Remember this is just basic payroll procedures as form P45 can be used for tax code purposes if it crosses over the tax year 6 April and it is before 24 May; see https://goo.gl/4jtTTH.) If a new employee does not provide a form P45, the employer must ask the employee to complete a starter checklist to collect the information that will be sent to HM Revenue & Customs (HMRC) in the first FPS when the employee is first paid. ● Using the starter checklist – HMRC has made available an online form starter checklist – https://goo.gl/EHsxbC – to collect the relevant data. Employers can use these or design and use their own checklists instead if they collect the relevant data and contain the same wording for the employee declaration statements. There are two essential sections in the starter checklist: the employee declaration; and the student loan questions. Under RTI rules the starter checklist should be retained by the employer. The tax code to be used will depend upon which employee statement in the declaration is selected, as shown in the table on the opposite page. If no statement has been ticked or the form has not been signed, then code 0T is to be operated on the non-cumulative basis. The various student loan questions are used by the employer to determine
● basic pay, annual salary, hourly rate ● other contractual allowances ● job title/description and department ● location/place of work address or code ● pension details ● details of any other emoluments (benefits in kind) ● cost centre/cost allocation code. All the above information should be entered into the payroll system. ...demands precise data and careful attention to detail Starter forms and certificates Where possible the starter notice should be accompanied by the employee’s recent form P45 or starter checklist. There are several forms and certificates that a new starter will either bring with them or will have to complete. ● Form P45 – A starter will often bring a form P45 from their previous employment. Only parts 2 and 3 of form P45 are applicable to the new employer, with part 1A retained by the employee. If the new employee provides a form P45 there are certain checks that need to be carried out by the payroll section. Does it relate to the current tax year? If so then the information on the P45 total pay to date, total tax to date, date of the last payment, existing tax code, student loan deduction status and National Insurance (NI) number can be used. If the P45 is for a previous tax year
| Professional in Payroll, Pensions and Reward | June 2018 | Issue 41 20
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