Holiday pay is an important aspect of employment law in the United Kingdom. It is therefore important for employers to understand how to calculate it correctly. So, we figured we would take a look at how to calculate holiday pay correctly in a nut shell. Here goes!

Knowing the entitlement

Employees are entitled to a minimum of 5.6 weeks of paid annual leave per year. This leave must be paid at their normal rate of pay. So, to calculate holiday pay, you first need to determine the employee’s normal rate of pay. This is their average pay over the previous 12 weeks, excluding any weeks in which they did not work. Once you have determined this, you then need to calculate the holiday pay for each week of leave. For a standard working week, this will be the employee’s normal rate of pay. However, if the employee works overtime, receives bonuses or commission, or has other allowances, these must also be included in the calculation of holiday pay.

A working example of how to calculate holiday pay

Let’s assume that an employee, John, works 40 hours per week and earns a basic rate of £10 per hour. In the previous 12 weeks, John has worked 40 hours per week and has not taken any leave. To calculate John’s holiday pay, we first need to determine his normal rate of pay, which is calculated as follows:

£10 per hour x 40 hours per week = £400 per week

So, John’s normal rate of pay is £400 per week.

Now that we know John’s normal rate of pay, we can calculate his holiday pay for one week of leave as follows:

£400 per week = £400 holiday pay per week

What if my staff also receive tips, commission or overtime?

It is important to note that if your staff receive overtime, bonuses or commission, these must also be taken into account when you calculate holiday pay. So, continuing with our example above of John, if he received £50 in overtime in the previous 12 weeks, his holiday pay would be calculated as follows:

£400 per week + £50 per week = £450 holiday pay per week

What else do you need to know when calculating holiday pay?

Finally, it is worth mentioning that the calculation of holiday pay is subject to change. The UK government reviews the rules and regulations surrounding holiday pay on a regular basis, and employers must ensure that they are up to date with the latest information. In conclusion, calculating holiday pay can be a complex process, but it is important for employers to get it right.

By taking the time to understand the rules and regulations surrounding holiday pay, you can ensure that your employees receive the correct pay for their leave, and that you are compliant with UK employment law. Alternatively, you can have experts in the field do this for you! Qualified professionals like ourselves are more than happy to take the hassle out of calculating holiday pay for you.

Please do get in touch to see how we can help on 01243 782 423, or email us from our contact page and someone will be in touch! We also update our YouTube Channel regularly with new content, see here: Lewis Brownlee YouTube channel

It’s important for businesses to stay up-to-date on current employment regulations and laws. And, that’s especially true when it comes to minimum wage rates. The National Minimum Wage (NMW) and the National Living Wage (NLW) are two important terms for employers to understand. So, if you’re not familiar with them – this post is for you!  

What is the National Minimum Wage (NMW)?

The National Minimum Wage is the minimum amount per hour that most workers are entitled to receive for their work. This includes employees, apprentices, and those working through agency arrangements. The current National Minimum Wage rates vary based on the worker’s age, with workers aged 23 and over receiving the National Living Wage.

What is the National Living Wage (NLW)?

The NLW is a higher minimum wage rate that was introduced in April 2016, which only applies to those aged 23 and over. It’s important to note that these rates are reviewed annually by the government and are subject to change. The National Living Wage rates change on 1 April every year along with the National Minimum Wage rates.

What are the minimum wage rates from 1 April 2023?

The NLW has increased to £10.42 per hour from £10.18. As the NMW rates vary based on age, workers aged 21-22 will receive £10.18 per hour, with workers aged 18-20 receiving £7.49 per hour. . Employers must pay at least the National Minimum Wage or National Living Wage to their employees, and failure to do so can result in financial penalties and damage to their reputation.

How can we help?

As accountants, we understand the importance of clients being aware of their obligations and paying their employees the minimum wage. Also, we can advise on ways to manage payroll costs and ensure compliance with employment regulations. So, if you are struggling to stay informed and up-to-date on current minimum wage rates, do give us a call! We’re always happy to help employers ensure that they’re meeting their legal obligations and providing fair pay to their employees.

If you would like to find out more about how we can help, please call us on 01243 782423. Alternatively, email us from our contact page and we will get in touch! We also update our YouTube Channel regularly with new content, see here: Lewis Brownlee YouTube channel

Employee bonuses are a common way for businesses to reward their employees for their hard work and performance. In the UK, bonuses are considered as taxable income. So, they are subject to the same tax rules as regular wages and salaries.

How are employee bonuses paid?

The first step in paying and taxing these bonuses is to determine the amount of the bonus. This can be done in a number of ways. It can be done as a fixed amount, a percentage of the employee’s salary, or a combination of the two. Once the amount of the bonus has been determined, it should be included in the employee’s total taxable earnings for the tax year.

When it comes to paying the bonus, there are a few options for employers to consider. One option is to include the bonus in the employee’s regular pay. This means it will be taxed as part of their normal salary. Another option is to pay the bonus as a separate payment, either through a cheque or direct deposit. In this case, the bonus payment will be subject to tax and National Insurance Contributions (NICs) in the same way as regular wages.

How are they taxed?

In terms of taxation, employee bonuses are subject to Income Tax. This is deducted at source by the employer. The rate of Income Tax that is applied to bonuses will depend on the employee’s total taxable income, including their salary and any other taxable benefits. For example, if the employee’s total taxable income is below the Personal Allowance for the tax year, their bonus will be taxed at the basic rate of 20%. If their total taxable income is above the Personal Allowance, their bonus will be taxed at the higher 40% rate.

We should also note that employee bonuses are subject to NICs, which are calculated and deducted by the employer. The rate of NICs applied to bonuses will depend on the employee’s earnings. So, higher earners will pay a higher rate.

Overview

In conclusion, employee bonuses are considered as taxable income in the UK and are subject to Income Tax and NICs. Employers have a number of options for paying employee bonuses, and the tax implications will depend on the amount of the bonus and the employee’s total taxable income. By understanding the rules around employee bonuses and how they are taxed, employers can ensure that they are paying and taxing bonuses correctly and in accordance with the law.

Our in-house payroll team can help ensure you’re processing any bonuses correctly, so if you’d like any assistance with this, please do call us on 01243 782 423. Alternatively, email us from our contact page and someone will be in touch!

We also update our YouTube Channel regularly with new content, see here: Lewis Brownlee YouTube channel

We get asked this a lot! Everyone understands the principle of still getting paid when they are sick. But, getting to grips with the ins and the outs of different situations often causes confusion. So, here’s our take on the rules around Statutory Sick pay.

First things first – what is Statutory Sick Pay?

Statutory Sick Pay (SSP) is a government-run scheme in the UK.  It is designed to provide financial support to employees who are unable to work due to illness or injury. It is a legal requirement for employers to pay SSP to eligible employees. The rules around it are designed to ensure that workers receive the support they need during periods of ill health.

What are the immediate rules of Statutory Sick Pay?

The eligibility criteria for SSP are as follows:

• Employees must be classed as ‘employed earners’, meaning they are entitled to receive earnings from their employer.
• They must have been off work for four or more consecutive days, including weekends.
• They must earn an average of at least £120 per week.
• They must have informed their employer of their absence within the required time frame.

Once an employee has met these criteria, they are entitled to receive SSP at the rate of £109.40 per week, for up to 28 weeks. Please note that this amount is subject to change each year, so it is important to check the current rate.

How SSP works

Employers are responsible for keeping records of SSP payments, and must inform HM Revenue & Customs of any payments made. They should do this through their end-of-year payroll submissions. Employers are also responsible for claiming back SSP payments from the government. They can do this through the ‘Statutory Sick Pay Rebate Scheme.’

One of the key rules around SSP is that it is only paid to employees who are unable to work due to illness or injury. It is not paid in the event of absence due to other circumstances, such as strike action or quarantine. In addition, employees who receive SSP are not entitled to receive other types of statutory pay, such as Statutory Maternity Pay or Statutory Paternity Pay.

In short…

The rules around Statutory Sick Pay are designed to ensure that employees receive the financial support they need during periods of ill health. It is a legal requirement for employers to pay SSP to eligible employees, and employers must also keep records of these payments and inform HM Revenue & Customs of any payments made. By following these rules, employees can be confident that they will receive the support they need during periods of absence from work.

Please do get in touch to see how we can help you with your payroll needs on 01243 782 423. Alternatively email us from our contact page and someone will be in touch!

We also update our YouTube Channel regularly with new content, see here: Lewis Brownlee YouTube channel

As a business owner in the UK, at some point or other you will ask yourself ‘should I run a payroll?’ In fact, if you’ve found this blog, then the chances are you might have even keyed that exact question into Google. If so, good news! There are several factors to consider when making this decision, and in this blog, we will be discussing the key benefits and responsibilities of running a payroll.

Legal Obligations

If you have employees, you are legally obliged to run a payroll. This means deducting income tax and National Insurance contributions from their pay and paying these contributions to HM Revenue & Customs (HMRC).

Increased Credibility

Running a payroll shows that your business is professional and credible, which can help to attract and retain employees. This is especially important if you want to grow your business and build a strong reputation.

Improved Record Keeping

Running a payroll requires you to keep accurate records of your employees’ pay and taxes. This not only helps you comply with legal requirements, but it also makes it easier for you to manage your finances and budget.

Better Financial Planning

Having a clear and accurate picture of your payroll expenses can help you plan your finances more effectively. This will give you a better understanding of your cash flow and allow you to make informed business decisions.

Employee Satisfaction

Employees appreciate being paid on time and accurately, and running a payroll can help you to do this. By paying your employees the right amount, on time, you can help to improve their satisfaction and motivation.

Professional Responsibility

Running a payroll involves taking professional responsibility for the financial management of your business. This includes ensuring that your employees are paid correctly, that all taxes are paid on time, and that your payroll records are accurate and up to date.

Should I run a payroll – the definitive answer!

Running a payroll is a legal obligation for businesses with employees, and it offers several benefits including improved credibility, record keeping, financial planning, employee satisfaction, and professional responsibility. If you are considering running a payroll, it is important to seek professional advice to ensure that you are complying with all legal requirements and to avoid any potential penalties. We can help you there!

As professional accountants, we offer a host of services to ensure you and your business run smoothly. So, if you would like to speak to us about payroll, please do get in touch!

Please do get in touch to see how we can help on 01243 782 423, or email us from our contact page and a member of our expert team will be in touch!

We also update our YouTube Channel regularly with new content, see here: Lewis Brownlee YouTube channel

As a new payroll year begins, it is important for business owners to plan ahead and ensure they are prepared for the changes and challenges that come with it. In this blog, we will be sharing some planning tips that can help you navigate the change of year with ease. So, without much further ado, here goes!

Review Your Payroll System

The first step in planning for the next year is to review your current payroll system. Make sure your payroll software is up-to-date and compliant with the latest legislation. If you need to make any changes, now is the time to do so.

Check Your Employee Information

Before the new year starts, it is important to verify that all employee information is accurate and up-to-date. This includes their name, address, tax code, and national insurance number. This will ensure that you are able to process their payroll correctly and avoid any potential penalties. Keep an eye out on your HMRC PAYE account for your “P9” notices, these are the early tax code notices generated for the new tax year and will apply to staff who will not be on the standard tax code for the year. HMRC usually email these by 6th of March and post by the 19th of March.

Plan for Pay Increases

If you are planning to increase your employees’ pay, make sure to factor this into your payroll budget. You may also need to make adjustments to your payroll software to ensure that it accurately calculates the new pay rates.

Prepare for New Taxes and Contributions

Every year, there are new taxes and contributions that come into effect. Make sure to research and understand the changes so you can plan accordingly. This may include updating your payroll software or seeking professional advice.

Consider Automation

Automating your payroll process can save you time, reduce the risk of errors, and increase efficiency. If you haven’t already, now is a great time to consider automating your payroll process.

Plan for Holidays and Absences

Make sure to factor in employee holidays and absences when planning your payroll for the new year. This will help you ensure that you have adequate coverage and that your payroll budget is accurate.

In conclusion…

Planning ahead can help you avoid potential pitfalls and ensure that your business runs smoothly. Take the time to review your payroll system, check your employee information, plan for pay increases and new taxes, consider automation, and plan for holidays and absences. By doing so, you will be well on your way to a successful new payroll year.

As always, if you would like to speak to us about payroll and how we can help please call us on 01243 782 423. Alternatively, you can email us from our contact page, and we’ll get in touch!

We also update our YouTube Channel regularly with new content, see here: Lewis Brownlee YouTube channel