December is here, and the festive season is just around the corner. It’s a busy month for most, and many companies choose to run their payroll a little early due to the high number of bank holidays and to ensure employees get paid in time before Christmas. So what are the main points to consider when you run payroll early this December?
We’ve noted everything you need to keep in mind for your December payroll, whether you’re planning to pay employees early or not.
Paying employees early at Christmas
It is absolutely fine to pay your employees early this month as payday often falls on a bank holiday during this time, but make sure that your employees are not paid late.
What you need to consider when paying your employees early:
- Full Payment Submissions (FPS) can be sent on or before the usual payday, so if your employees are usually paid on 30th December but will now get paid on 20th December, you’ll have up to and including 30th December to report to the HMRC for your December payroll.
- Keeping the reported pay date the same will protect employees on Universal Credit.
- Think of when you need to generate your Bacs file ahead of an early payday if you’re paying salaries by Bacs payment.
Annual leave - how many days can be carried over?
Christmas and Boxing Day fall over a weekend this year, so we get bank holidays on the 27th and 28th December as a substitute.
Employers should encourage all employees to take their annual leave before the end of the annual leave year, and if they require employees to take annual leave, they need to give double the length of notice to the required leave.
In the past two years, your employees may not have taken all their annual leave as the pandemic has led people to postpone holidays and limit their travels. The annual leave rules have temporarily changed, but it’s essential to keep informed of the latest regulations.
As per the temporary changes in 2020 to the holiday carry forward rules, employees can carry forward up to 4 weeks of unused annual leave for one more year where leave could not be taken due to the COVID-19 pandemic.
Under exceptional circumstances, you could pay your employees for untaken leave during the leave year if they have been unable to take their annual leave due to reasons such as being on a period of extended absence- however this is not something that employees have a legal obligation to receive and employers should encourage their employees to take their annual leave during the year where possible, or carry forward. If you want to learn more about payment in lieu of holiday, please get in touch with our team of product experts, as that's something PayFit payroll software can help you with.
Gifts and vouchers for employees at Christmas - are they taxable?
Christmas is the season of giving, and many companies give their employees Christmas presents or bonuses.
Christmas bonuses in the form of money are subject to tax and National Insurance through the payroll, so gifts and vouchers may have tax and National Insurance obligations if they are not “trivial.”
In order for vouchers or gifts to be trivial, they need to be all of the following:
- £50 or less
- Isn’t cash or a cash voucher
- Isn’t work or performance-related
- Isn’t part of the employee’s contract or terms and conditions
Christmas parties - are they taxable?
‘Tis the season to be jolly, and when providing social events such as Christmas parties, it can have tax and National Insurance implications, so before you start the festivities, it’s essential to know what is and isn’t exempt from tax and National Insurance.
For a party or event to be exempt from tax and National Insurance, it must be:
- Available to all employees of the company
- Be annual
- Cost less than £150 per head
We hope you found this information helpful and that your December payroll will run smoothly.
The information contained in this document is purely informative. It is not a substitute for legal advice from a legal professional.
PayFit does not guarantee the accuracy or completeness of this information and therefore cannot be held liable for any damages arising from your reading or use of this information. Remember to check the date of the last update.