Tips

Payroll

Process redundancy pay

Redundancy pay is normally free of tax and national insurance (NI) up to the value of £30,000.

To process this you will need to set up a post-tax and NI payment up to the value of £30,000.  If the payment is above £30,000 you will also need to set up a payment subject to Class 1A national insurance.  For example if your employee receives a £35,000 redundancy payment, you should pay £30,000 against the post-tax and NI Payment and £5,000 against payment subject to Class 1A national insurance.

You will also need to check if the payment is subject to pension or attachment of earnings order deduction(s).

Process redundancy pay up to the value of £30,000

Set up a post-tax and post NI redundancy payment:

1. Click Company then Pay Elements then click New.
2. Enter the required description then clear the PAYE and National Insurance check boxes.
3. Clear or select any relevant check boxes as appropriate.
4. Click OK the click Close.

Assign the payment to an employee:

1. Double click the required employee.
2. Click the Employment tab then click Pay Elements.
3. On a new line beneath the last payment on the list, click the finder button.
4. From the drop-down list choose the required description, click OK.
5. Enter the relevant hours and the rate then click Save.
6. Click Save then click Close.

To assign the payment to several employees at the same time, use the Global Changes option.

Process redundancy pay in excess of £30,000

Set up a post-tax and post NI redundancy payment:

1. Click Company then Pay Elements then click New.
2. Enter the required description then clear the PAYE and National Insurance check boxes.
3. Clear or select any relevant check boxes as appropriate.
4. Click OK the click Close.

Set up a termination payment subject to Class 1A national insurance:

1. Click Company then Pay Elements then click New.
2. Enter the required description then select Termination Payment Class 1A check box.
3. Click OK the click Close.

Assign the payments to an employee:

1. Double click the required employee.
2. Click the Employment tab then click Pay Elements.
3. On a new line beneath the last payment on the list, click the finder button.
4. From the drop-down list choose the required description, click OK.
5. Enter the relevant hours and the rate then click Save.
6. Repeat steps 3 to 5 for the next payment.
7. Click Save then click Close.

To assign the payment to several employees at the same time, use the Global Changes option.

Once you process the redundancy payment, finish processing your payroll and submit the FPS as normal, you should mark the employee as a leaver.

If you would like help processing redundancy payments or making employees leavers etc. need any other help or advice with your payroll please contact us