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Accounting for compensation for truble and upset

Accounting for compensation for truble and upset

Can you please tell me how to account for on Sage for a compensation for 'trouble and upset' which business paid to an employee.

It was paid following stress which the employee had gone through (for over 2 months) following a very badly performed transfer of the employee from a liquidated company to the undertaking the business company. It involved many payroll errors, loads of wrong information given by the employer,...the list of the things which the employer has done very poorly and incorrectly, with lack of professional attitude is very long...The employee was very stressed and ended up on sick leave. The employer paid some cash compensation for that distress to the  employee.

Can you please tell me how to account for the payment on Sage?

Could you also confirm if the compensation needs to be reported to HMRC?

I've never dealt with compensation payments before.

Thank you in advance for your help.

 

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22nd Apr 2018 10:27

1) tell the employee to stop being a mardy a**e and get a grip
2) ask the employee why he should get paid time off and then get paid even more money
Seriously! Might go back to all the employers who have 'upset' me over the years.
So, is this payment subject to tax and NI? That is the first thing you need to check up on (I mean, as in should it be? Little research for you, call it CPD). That will help you re the entries.

Thanks (3)
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By Madi
to Cheshire
22nd Apr 2018 17:57

2) ask the employee why he should get paid time off and then get paid even more money

£92.05 SSP per week...that's not a lot...
Besides he wants to leave the job as far as I'm aware...the company needs him more than he needs them...

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to Cheshire
22nd Apr 2018 18:22

Cheshire wrote:

1) tell the employee to stop being a mardy a**e and get a grip
2) ask the employee why he should get paid time off and then get paid even more money

Why would they do that ?

They've already agreed to pay him the money. They must agree they're in the wrong.

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to Cheshire
26th Apr 2018 11:27

Cheshire wrote:

1) tell the employee to stop being a mardy a**e and get a grip
2) ask the employee why he should get paid time off and then get paid even more money
Seriously! Might go back to all the employers who have 'upset' me over the years.
So, is this payment subject to tax and NI? That is the first thing you need to check up on (I mean, as in should it be? Little research for you, call it CPD). That will help you re the entries.

This attitude is exactly why their is so much stigma still attached to mental health!!

If you've ever been in a redundancy situation and had to manage a team through it (and generally gave a damn about others) you would understand exactly why a payments like this should be made.

Why is it still so natural for others to criticise before helping!

Even I am doing now.......

Thanks (2)
to Cheshire
30th Apr 2018 14:06

MODERATOR POST

Guys, the question wasn't around the legitimacy of the upset or compensation. Please answer the question and keep it professional. If you wouldn't say it in the workplace, don't say it here.

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By zebaa
22nd Apr 2018 10:36

On the information you give I would treat it as 'additional pay' that is both taxable and requires NI deduction. Possibly, depending on his terms of employment and this agreement, it may require pension consideration too.

In my view if you are unsure of the detail you should seek direction from either your client's lawyer or your boss.

Thanks (2)
22nd Apr 2018 17:28

Not earnings, imho.

It's a settlement out of court for damages.

Thanks (1)
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By zebaa
22nd Apr 2018 18:18

@ Lion..But not all settlements are tax free, hence my comment about 'on the information supplied' and the client's lawyer.

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By Matrix
22nd Apr 2018 20:25

Is it SSP or a compensation payment? If it is actually SSP as your post at 17.57 states then you will need to put it through the RTI (EYU if necessary). SSP is subject to tax and NI in the same way as any other earnings. I assume that is what has been agreed, if you had agreed that this was the amount of cash the employee would get and have already paid it then you may need to gross it up.

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By Madi
to Matrix
23rd Apr 2018 10:25

Matrix wrote:

Is it SSP or a compensation payment? If it is actually SSP as your post at 17.57 states then you will need to put it through the RTI (EYU if necessary). SSP is subject to tax and NI in the same way as any other earnings. I assume that is what has been agreed, if you had agreed that this was the amount of cash the employee would get and have already paid it then you may need to gross it up.

It is compensation for distress. The employer really messed up to be honest. The SSP is a seperate pay which of course goes through a payroll.

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to Madi
23rd Apr 2018 10:37

I wouldn't charge tax on it.

Thanks (1)
By mrme89
23rd Apr 2018 09:03

You need to establish what the amount is for.

There may be different elements to this 'compensation', some of which is taxable and some of which is not.

Thanks (2)
to mrme89
23rd Apr 2018 11:22

Who awarded this "trouble and upset" compensatory payment? It sounds more like a financial ombudsman award rather than something an employment tribunal might ordain. Was it perchance for making a dog's breakfast of a pension transfer between old employer and new?

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By Madi
to I'msorryIhaven'taclue
26th Apr 2018 22:42

I'msorryIhaven'taclue wrote:

Who awarded this "trouble and upset" compensatory payment? It sounds more like a financial ombudsman award rather than something an employment tribunal might ordain. Was it perchance for making a dog's breakfast of a pension transfer between old employer and new?

The employer awarded the compensation. I assume they've wanted to make him stay at the job as his resignation would put the company in difficult situation.

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26th Apr 2018 11:30

My intital feelings would be that this would not be taxable and paic completely outside of payroll, but I would want to see the legal documentation around this to see how, who, and what decided this.

Some compensation payments can include PILON amounts which would be taxable. Probably not the case here as you've not mentioned they have left (although sounds likely they will) but always worth checking it out fully.

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26th Apr 2018 11:33

Sounds like an Ex Gratia payment to me, so tax exempt -- surely?

Thanks (1)
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By Madi
to Jack the Lad
26th Apr 2018 22:37

Jack the Lad wrote:

Sounds like an Ex Gratia payment to me, so tax exempt -- surely?

It was, indeed, employer's goodwill gesture, the employee didn't claim it.

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