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Payroll procesing date when paying in arrears

Payroll procesing date when paying in arrears

Hi everyone

I was searching all over the net trying to find info what date should I use in our Sage Payroll but coud not find an answer and will very much appreciate if anyone could help me with this please. I spend many many hours of searching different sites and forums and still am not sure how to do it right. PLEASE HELP.

We're a small business (registered as a self-employed, and not a ltd yet) and operating as a domestic service provider. We pay our employees on a weekly basis, but 1 week in arrears, normally on Friday next week. It is rather inconvenient to use a tax week, which will change the paydate every year, so we would like to stick to Friday. I am using both Sage Instant Accounts and Sage50 Payroll for our accounting. Our tax year end date is 31 March. Payroll tax year end is 05 Aprill for all employers. The work week is Mon - Sun (we provide service on Sundays ocasionally upon request).

I am confused about the payroll processing date, which must be set in Sage when processing payroll: should it be the date of Sunday of the week I am paying for, OR the date of the following Friday I am paying wages on. (i.e work dates 1 to 7, paydate - Fri, 12). Until now I always was using the actual date of the payroll processing - (FRI), but the problem is that the journals are also posted to Sage Accounts automatically with that date, which distorts the cost in the Accounts for the current tax year. So, on Friday, 30 Mar 2012 (which falls into tax week 52) we paid for the week ending Sunday 25/03/2012. The processing date was set to 30/03/2012. Sage payroll posted journals with the same date - 30/03/2012. Our financial year end was Sat 31/03/2012.

Now, next payroll processing date should be Friday, 06 April 2012 (which is a new tax year for the payroll [tw-01] and is in our new financial tax year), but it is going to be for the week ending 31 Mar 2012.

The question is:

  1. What date indeed should be used in Sage Payroll when processing the payroll: actual date or the last date of the week the payroll is calculated???, or
  2. shall we use the actual processing date in sage payroll, but post journals manualy into Sage Accounts with the date of the last day of the week pay was calculated? ( i.e.:  processing payroll on Friday 06 Apr 2012, but posting into Sage Accounts as Saturday 31 March 2012 because it is actually for the week ending 31 March 2012)??????? 


So Sosldkmlkmlk



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By alattax
11th Apr 2012 00:45

One of my clients is a local hotel where we prepare weekly accounts and wages.

Their trading week ends on a Sunday.

The wages are prepared on the Monday for payment by BACS on Friday.

I have always treated the day for processing paye/nic calculation as the Sunday, and the wages are accrued in the accounts for that Sunday week just finished.

Some people will say that you should use the actual payment date, but I take the view that the wages are due on the Sunday and this provides a more convenient result for bookkeeping.This is especially the case for you as you have automatic transfer of data.   

I would add that the hotel wages payments were formerly made by cheque with the cheque dated on the Sunday which I suppose was a better fit with the processing date. 


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to taxwriter
11th Apr 2012 01:45

Thank you ofr such prompt reply.

I think you're right. This is I always believed how it should be done, but was confused by someone a year or so ago that it should be processed on the payday.

I am very keen to switch to your way. Does it mean I now have to process (in Sage Payroll) wages for the week ending 31/03/2012 by setting the date as 31/03/2012 and not 06/04/2012 (the wages was paid) . This will   actually mean two payroll runs in a row: 30/03/12 and 31/03/12. I understand that is going to be just once to correct the issue and then it will be OK. Next payroll

Actually, the cut-off date is still the case. I said 31/03 because we did not have any work this week on Sunday, but the week actually ends on Sunday, 01/04/2012.

I can preocess it in the Sage Payroll as 01/04/2012, no problem. However, would I still need to post this to previous (2011-12) fin year or into current (2012-13)???

My understanding is that if we had work on 01/04/12 then I would need to split this week into two parts and post them into differnt fin years. Right?


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11th Apr 2012 06:58

Don't split

There's no need to split them into two parts. If the wages week ends on a Sunday put the processing date on a Sunday.

Why don't you phone Sage technical support? They will deal with all your concerns.

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to stepurhan
11th Apr 2012 09:53

Thanks Peter. I didn't mean to split the processing in Sage Payroll, but only when posting journals manually into Sage Accounts, if we had worked on Sunday, 01 April (which is in our new financial year). But you're right I will call Sage to ensure that all done corectly.

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By alattax
11th Apr 2012 09:40

I have used Sage previously and therefore don't/won't use it now, so I will not accurately be able to tell you the actual steps you need to take.

But processing an additional week at the year end should mean that the system generates a week 53 which means your employees will have another weeks worth of allowances.

You are also correct that the wages should be reflected in the accounts up to 31/3/2012. Had you worked on the Sunday you or your accountants would have to judge if it is significant enough to treat that one day as a prepayment in finalising the year end accounts. So if the transfer of wages is made automatically best set the processing date to the 31st.

But as Peter says speak to Sage themselves.       




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11th Apr 2012 10:10


If you are posting one week's wages that spans the year end but the entry will be in the new year then you need to enter an accrual in the old year.

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11th Apr 2012 12:08

Sorry! I don't agree

PAYE is due when the payment is made, not when the wages were earned.  If payday is Friday, you have a requirement to account for PAYE on wages paid on Friday, 6th April, which is in the new tax year, 2012/13, with uplifted PAYE codes.

Convenience for book-keeping is a red herring.  Surely everyone can manage to accrue the gross pay for the week in arrears from the payroll paid on 6th April if they are preparing accounts to 31st March.  You should not accrue for the employer's NIC on the payroll paid on 6th April because the wages payment which gave rise to the Er's NIC did not occur until after 31st March.

Thanks (3)
11th Apr 2012 13:35

It all has to be done on date paid

Euan is right. Deductions are done on the date paid. You should run 30 March as Wk 52 2011-12 and 6 April as Wk1 2012-13.In the 31 March accounts accrue gross for Wk1 plus Sunday of Wk 2

Thanks (1)
11th Apr 2012 14:10

Sorry I don't agree with Euan

You need to use the accruals concept. Even though the NICs are not payable until the payment is made it is still a cost associated with the wages that have been incurred before the year end.

Thanks (1)
11th Apr 2012 15:55

Euan and Peter,

I think you're both right but on different points. Euan had a good point saying that the PAYE tax must be calculated on a pay day, because from 06 April it should be calculated with uplifted codes. But how in practice it is possible??? If for e.g. I have a monthly employees and normally paying them on 08 date of the following month, that would mean that I should run SagePayroll with the processing date "08" rather than 30 or 31st. I am fine with accruing wages at the year end, but if the tax codes or even percentage of income tax or NIC changes from new tax year, how would I know how much NIC to accrue in SageAccounts in the previous financial year, if the payroll will be done with new taxcodes????

  I agree with Peter, that we have to use the accrual concept, because the wages which we paid on Friday relates to the week ending 31 March (01 April to be precise).

Would it be right if I run Payroll (for the work week ending 01/04)  with the date of 05 Aprill  (tax week-53) instead of Fri 06 Apr (to ensure it falls into 2011-12 tax year for reporting to the HMRC), and also accrue in Sage Accounts the cost of this week wages, Employer's NIC and PAYE in  the year ending 31 March 2012 ???

or am I missing the point????


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11th Apr 2012 16:16

I think you are missing the point

I didn't say that "the PAYE tax must be calculated on a pay day, because from 06 April it should be calculated with uplifted codes".  It should be calculated on the pay day.  Full stop.  If you pay on Friday, 6th April, you must not calculate the PAYE due on 5th April in the 2011/12 tax year.  Yes - if you have staff paid monthly in arrears on the 8th, you should calculate PAYE on the 8th.  I have a client who pays on (the first working day after) the 6th for the current month (roughly, a week in arrears and 3 weeks in advance) - his PAYE is calculated on the 6th.

New PAYE codes do not affect the NIC due and you are not concerned with any tax or NI deductions from the employees' gross pay.  You just accrue the gross pay.  I have another client with staff who are paid on the last day of the month for the hours worked up to a cut-off of the 24th.  The payroll date is the last day of the month and we have to wait until the next month's payroll to work out the accrual for the 25th - 31st of the previous month.  As I have said, I disagree with Peter about accruing the employer's NIC paid in the following month.

You do not use the accruals concept with regard to processing the payroll or calculating the PAYE due.  You use the accruals concept for accounting purposes.

Thanks (1)
11th Apr 2012 16:26

Payment date

Euan is right that it is the payment date that matters. Luckily, for all my clients they are on monthly/yearly payroll and they make payment before the sixth of the next month.

I tend to date the payroll at the last day of the pay period but if I had a weekly or fortnightly payroll that had a pay period end and payment date with a 5th of the month in between I would date the processing date using the payment date.

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11th Apr 2012 16:36

Accruals concept


The OP said: “Now, next payroll processing date should be Friday, 06 April 2012 (which is a new tax year for the payroll [tw-01] and is in our new financial tax year), but it is going to be for the week ending 31 Mar 2012.”

Euan said: “You should not accrue for the employer's NIC on the payroll paid on 6th April because the wages payment which gave rise to the Er's NIC did not occur until after 31st March.”

From the above OP statement I would accrue the employer’s NIC because the work was performed in the old accounting year. This is for accounting purposes.

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By alattax
11th Apr 2012 17:06

Ah well, it looks like my system is sunk.

I suppose my only justification is that I maintained the weekly pay period when the payment method changed from cheques drawn on a Sunday to BACS paid on the following Friday.

I had better get it straight before RTI comes in!




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11th Apr 2012 17:27

So it looks like we have 2 slightly different points of view. I am really glad I asked this question as I think I am not alone who have doubts in this particular area of taxation and accounting and all your answers and contributions to this post are really valuable for people (at least for beginners).

This is what I've learned:  (and please do correct me if I am wrong)

    1. Running a Payroll (either in Sage or other software or manually) is an independent procedure and it must be run with the date (not necessarily on the day), but with the DATE set when the actual payment of wages will be made. We normally pay on Friday, week after job was done, therefore PAYROLL RUN DATE MUST BE FRIDAY accordingly.  This will ensure all PAYE and NI will be calculated and deducted correctly and up todate with the income tax law.   

    { there is also an issue with this ( i.e. what if for any reason the wages was not paid on Friday, but a few days later (i.e. short of funds, or employee doesn't have a bank account yet and couldn't come on Friday to be paid by cash,  etc.) , but it will be a different question and I am not sure if it is a good idea to mix it with my original question.}

   2. When posting journals from SagePayroll into SageAccounts  THE DATE OF POSTING SHOULD BE THE LAST DATE OF THE PERIOD THE WAGES WAS CALCULATED in order to maintain an ACCRUAL CONCEPT for accounting purposes.

(In my case, the wages (incl PAYE and NIC) calculated and paid on Fri 06 Apr for the week ending Sun 01 Apr :  the sums will be posted into previous financial year ending 31 March 2012 in our Accounts. If there were amounts related to the day of 01 April, then the sums for that day (01 April only)  will be posted into new financial year staring 01 April.  








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