As the festive season draws near, employers are busy with holiday planning, end-of-year tasks, and ensuring staff are paid correctly and on time. If you’re considering paying employees early this December, there are specific payroll reporting rules you must follow to stay compliant and avoid unintended consequences.
Reporting early Christmas payments
Paying your employees earlier than usual may seem like a festive gesture, but it comes with important obligations. The key is to report the original contractual payday on your Full Payment Submission (FPS), even if you’ve advanced the payment date.
For example, if your usual payday is 31 December but you decide to pay your staff on 15 December, the FPS should still show the payment date as 31 December. The submission itself must also be made on or before this original payday, in line with standard HMRC reporting requirements.
Why is this so important?
Getting this right isn’t just about ticking compliance boxes – it helps protect your employees’ financial well-being. If you accidentally report the early payment date, such as 15 December, rather than the usual payday of 31 December, it could impact your employees’ eligibility for benefits like Universal Credit.
Universal Credit calculations are based on when income is reported. Reporting an early payment could lead to two paydays being counted in one assessment period, potentially reducing or even cancelling their entitlement. To avoid this, stick to the contractual payday in your FPS reporting, regardless of when you actually pay your staff.
Practical steps to ensure compliance
To make the process smoother, here are some tips for managing Christmas payroll:
- Plan ahead: If you’re considering early payments, communicate your plans to your payroll team or provider well in advance. This ensures they have time to make the necessary adjustments.
- Check your systems: Ensure your payroll software is set to report the correct contractual payday, even if you’re processing payments earlier.
- Communicate with employees: Let your staff know when they’ll receive their pay and reassure them that this won’t affect their official payday or any benefits they claim.
- Stay on schedule: Submit your FPS on or before the contractual payday, not the actual early payment date.
Additional considerations for December payroll
Beyond the FPS reporting, there are other areas to be mindful of during the festive season:
- Holiday pay calculations: With many employees taking annual leave in December, make sure you calculate holiday pay correctly, particularly for those with irregular hours or overtime.
- Seasonal bonuses: If you’re awarding Christmas bonuses, remember these are subject to tax and National Insurance. Ensure they’re correctly processed through payroll and reported to HMRC.
- Statutory payments: If employees are on sick leave, maternity leave, or other statutory leave, ensure these payments are accounted for accurately.
Expert support for a stress-free season
Payroll can be complex at the best of times, and the added pressures of the holiday season make it even more crucial to get things right.
For expert payroll guidance and support, contact Payroll Services Director Marc Taylor, to ensure compliance with all payroll requirements this festive season.
