Non-standard paydays or moving paydays
In this section:
- Employee payday falls on a non-banking day
- Changing the interval between paydays
- Moving payday to a different day of the week/month
- Extra payments on a day other than the usual payday
- Dealing with 'week 53' payments
Extra payments on a day other than the usual payday
If you make an extra payment – such as a bonus, overtime or commission payment – on a day that isn’t an employee’s usual payday, you must take the steps outlined below to work out the PAYE (Pay As You Earn) tax and National Insurance contributions (NICs) due on the payment.
Working out the NICs due on extra payments
The basic rule for NICs purposes is that you should treat extra payments as part of your employee’s total gross pay for the earnings period in which the extra payment is made, providing the employee is normally paid at regular intervals.
This means adding together the amounts of your normal and extra payments to the employee and calculating the NICs owed for the earnings period using this total.
For example, consider what happens if you normally pay your employee £500 each week on a Friday, but one week you make an extra payment of £400 on the preceding Thursday. In this case, you would calculate the NICs due for that week on the combined total of £900 that you paid to the employee in that week.
Recording extra payments on the employee’s form P11
Unfortunately you can't currently use the integrated P11 Calculator tool on our Employer CD-Rom to deal with extra payments made on a different day from the usual payday. Many commercial payroll software packages will allow you to do this, but otherwise you will need to record the details on a paper form P11.
If your extra payment comes after the usual payday and you have already updated the employee’s form P11 for the pay period, you will need to revise the figures by taking the following steps:
- write the amount of the extra payment in column 2 of form P11, and bracket the two amounts together to the left of the column
- draw a line through the figures you've already entered in columns 1a to 1e so that they can still be read
- insert the correct figures in columns 1a to 1e – the figures reflecting the combined totals of the usual and extra payments
More about completing form P11 using paper based methods
Working out the PAYE tax due on extra payments
In general, the procedures for working out the PAYE tax due on extra payments are the same as outlined above for NICs – you add the amounts together and calculate the tax to be deducted using this combined total.
However, there are special procedures you must follow if all three of these conditions apply:
- you normally pay your employee at regular intervals of at least a week
- your extra payment to the employee is made before their regular payday for the pay period
- the employee’s tax code operates on a cumulative rather than a week 1/month 1 basis
If all of the above apply, there are different P11 steps you must take. What you must do depends on whether your employee’s tax code is a suffix code or a K code. You can read more about tax codes in another of our guides – you’ll find a link to it at the bottom of this guide.
For employees with suffix codes
You should enter the extra payment on form P11 in the ‘pay for the week or month’ column next to the week or month in which you pay it. Then calculate the tax due in the usual way using the tables you would use for the employee’s next normal payment.
If this calculation shows there is tax to be deducted from the payment, then deduct it as normal. But if the calculation shows that there is tax to be repaid:
- do not repay the tax when you make the extra payment
- cross out the figure in column 7 of form P11
- add the repayment to the total tax due in column 6 of form P11
- use this total as your starting point when you next pay the employee
When you then give the employee their usual payment for the pay period, take the following steps:
- enter the payment on form P11 in the pay for the week or month column next to the week or month in which you pay it
- calculate the tax due in the normal way, using the same figure of free pay as you used for the extra payment
For employees with K codes
You should enter the extra payment on form P11 in the ‘pay for the week or month‘ column next to the week or month in which you pay it. Add the employee’s additional pay figure and work out the tax due on this combined total.
When you give the employee their usual payment for the pay period, calculate the tax due without adding the additional pay for the week or month. Add the amount of the employee’s usual payment to the total taxable pay you used when the last payment was made and enter that amount in column 5 of form P11.
