In this section:
- Trainees, young employees and New Deal participants
Trainees, young employees and New Deal participants
There are special PAYE (Pay As You Earn) procedures to follow if you take on a worker who is receiving a Youth Training (YT) allowance or who is a participant in the New Deal scheme. This guide explains how to make sure you work out and deduct the correct amounts of PAYE tax and National Insurance contributions (NICs) from these employees.
PAYE tax and NICs for recipients of a YT allowance
The steps you need to take differ depending on whether you take the individual on as an employee or as a trainee.
Taking on a YT allowance recipient as an employee
Everything the employee receives must be included in their gross pay when you are calculating PAYE tax and NICs. That includes their YT allowance as well as any top-up payments you make.
If you are not responsible for paying the YT allowance directly to the employee, but you make top-up payments to them, you should take the following actions to ensure you account correctly for PAYE tax and NICs:
- add together the YT allowance and your top-up payment
- calculate the PAYE tax and NICs due on the combined total
- work out the employee's net pay, by deducting the PAYE tax and NICs from the combined total of their allowance and top-up
- deduct the amount of the YT allowance from their net pay
- the result is the net amount of your top-up payment - this is what you should pay to the employee
Taking on a YT allowance recipient as a trainee but not as an employee
If the trainee only receives their YT allowance, then you do not need to worry about working out or deducting PAYE tax and NICs, as their allowance doesn't count as gross pay for these purposes.
However, if you consider paying the trainee anything on top of their allowance, you should contact us for advice about how to treat your top-up payments for PAYE tax and NICs purposes. You can call our Employer Helpline on Tel 08457 143 143, open from 8.00 am to 8.00 pm Monday to Friday and from 8.00 am to 5.00 pm on Saturday and Sunday.
PAYE tax and NICs for New Deal participants
New Deal is the name of a range of government programmes that help unemployed people into work. If you employ someone under New Deal, the PAYE tax and NICs procedures you must follow depend on how the employee is paid.
If you pay a wage to a New Deal participant
Any wages you pay to a New Deal participant are subject to PAYE tax and NICs in the same way as for any other employee. Calculate, record and deduct the PAYE tax and NICs due as usual.
New Deal participants receiving a training allowance
If you take on someone who is on a full-time education and training placement, or on an allowance-based Environment Task Force or Voluntary Sector placement, you do not have to pay them a wage. This is because they will be receiving a training allowance. No PAYE tax or NICs are due on these allowances, so you do not need to make any deductions.
Participants in New Deal 50 Plus
Participants in the New Deal 50 Plus programme receive employment credits. No PAYE tax or NICs are due on these credits.
