Questions from our forumWednesday, October 20th, 2010
Each week we receive a number of payroll questions on our forum, and here are this week’s batch. Can you help with any answers?
We have an employee who is going on maternity leave shortly and the period of earnings that we need to look at to calculate her SMP is from 27/04/10 to 26/06/10.
During that period her annual salary was:
Basic salary £25,000
Area Allowance £750
On 01/08/10 she received an annual increment which increased her basic salary to £25,600 but we as a company stopped paying our area allowance so her total salary reduced to £25,600.
When I’m calculating her SMP do I use:
- The total payment figure of £25,750 that was received during the relevant period or
- Basic salary £25,600 (above figure + increase for Alabaster purposes) + £750 (area allowance) = £26,350
I’m hoping someone can clarify the tax calculation that should be invoked when an employee moves within a Group’s companies, resulting in a PAYE reference change.
I am working for a large employer which has more than one PAYE reference. All employees are paid on the 18th (calendar) day of the month and the payroll is monthly – each pay period running from 1st of month to last day of month.
My understanding is that if an employee moves from one PAYE reference to another, a P45 is to be issued (there lies another problem for another time!) and they are treated as if they are a new starter in the destinaiton PAYE reference. Our payroll product can handle this – we need to enter the P45 Taxable Pay and P45 Tax Paid year-to-date values from the ‘old’ PAYE reference and PAYE calculates correctly from the point they transfer to the new reference. Assume the payee is on a cumulative tax basis).
However… if the date of transfer is later than the payment date of 18th of the month but before the period end date, the PAYE calculation ignores the P45 year-to-date values resulting in the payee underpaying tax in the period of transfer because the free-pay-limit is applied twice.
Can someone please tell me if this is correct? Obviously, if the basis is cumulative PAYE will correct itself but what if the transfer is after pay day in Month 12, or the employee transfers and then leaves the day after?