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christmas piggy bank | accountingweb | Make sure that early December pay date doesn’t bring unintended consequences with it
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Early December pay can be a problem for employees

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Paying employees early in the month of December is seen as a gesture of goodwill, but make sure it doesn’t bring unintended consequences.

6th Dec 2023
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Now that it’s December we’re allowed to start talking about Christmas! As we all know though, Christmas brings a busy period for payroll professionals. Even busier for payroll software professionals this year, who are implementing and testing for another mid-year National Insurance (NI) change.

The Chartered Institute of Payroll Professionals (CIPP) knows that many employers bring their pay date forward over the Christmas period. It avoids the bank holidays and allows for that last-minute dash to finish off the Christmas shopping. But this seems to be an area of concern for some payrollers. Our research has shown an increase in non-compliance in this area, increasing from 19% to 26.5% in 2023. HMRC is also reminding employers about this area of non-compliance.

Contractual date or payment date?

“What’s this non-compliance and am I doing it right?” I hear you ask. Well, what date are you recording on your full payment submission (FPS) if you pay early around Christmas? If you put the date they receive payment, then you may be part of that 26.5%.

The payment date on the FPS should always be the contractual pay date, regardless of the date the money landed in employee bank accounts.

Our Payslip Statistics Report, which is arguably our flagship piece of research, and has been running since 2008, allows us to compare payslip trends over the years.

There’s a staple bank of questions we ask each year, but we also throw in more topical ones. In the past two years, we’ve specifically asked about the date reported on the FPS for early pay days, and this will continue to feature as a yearly staple question.

Issues for employees

If the pay day is brought forward because it falls on a weekend or bank holiday, or if pay is made early at Christmas and New Year, the FPS should continue to show the normal, contractual pay date. This is because reporting the incorrect date on the FPS could result in issues for employees who are in receipt of universal credit (UC).

For example:

  • contractual pay date is 25th of the month
  • Christmas pay date is 20th of the month
  • FPS payment date is 25th of the month – in line with contractual pay date.

If this isn’t completed as shown, for UC calculation purposes, it may look like workers have received more than expected in a given assessment period. This may reduce the amount of UC they’re entitled to receive or remove the entitlement completely for a pay period in some scenarios. That wouldn’t be a very good way to say merry Christmas to your staff.

This easement was introduced in 2019, and quite a lot of other payroll changes happened shortly after this, so we’ll excuse some who may have missed the memo. But now, consider yourself informed and you won’t cause issues for anyone within your business or in your clients’ businesses.

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Replies (12)

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the sea otter
By memyself-eye
06th Dec 2023 17:54

Issues?
Really?
The only issue is that January pay day becomes 5 weeks away, and many employees have run out of money by then. That's their problem.
In these days of instant payments, why would any employer pay their staff before the due payroll date?
Don't do it.
Bah Humbug!
Ebanezer.

Thanks (4)
Replying to memyself-eye:
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By Open all hours
06th Dec 2023 22:04

Absolutely agree. We seem to have a workforce full of children who we constantly have to indulge.
The future doesn’t look particularly bright.

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Replying to Open all hours:
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By AndyTaylor
07th Dec 2023 11:33

Carry on scrooging both of you. In this competitive market place I want to keep anything that distinguishes my business as one that is seen as happy to help employees when appropriate. Especially when the cost is negligible.

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Replying to Open all hours:
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By Postingcomments
07th Dec 2023 12:24

Employees have been that way since time began. It isn't a "Millennial" or "Gen Z" issue as grumpy old people like you might like to think. Back to the Daily Mail with you!

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Replying to Postingcomments:
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By accountaholic
07th Dec 2023 13:18

It's definitely a nice thing to do and doesn't cost much. How else are the employees going get some cash to pop in to the petrol station on the way home after the pub on Christmas Eve and buy their partners a present.

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Replying to accountaholic:
the sea otter
By memyself-eye
08th Dec 2023 16:28

Buy them a pressie on line at 11:59 pm on crimbo eve: I do.
err (did)
Wonder why she ran off with the milkman.....

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Replying to memyself-eye:
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By FactChecker
08th Dec 2023 23:40

'cos he delivered?

Thanks (2)
Replying to Postingcomments:
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By Open all hours
07th Dec 2023 15:01

Yet the Mail is only the 5th newspaper I open each day. In order, Times, Grauniad, Torygraph, local rag all rate above.

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By FactChecker
06th Dec 2023 19:22

You're being very generous, Matthew, when you say "This easement was introduced in 2019."

A: HMRC were warned of this problem (the 4-weekly pattern of DWP's UC vs the monthly pattern of HMRC's PAYE - exacerbated by the UC schedules being different for different individuals as they are dependent on the date first claimed) *before* RTI went live ... by developers and by DWP!
These warnings (to ever more senior staff) were repeated several times pa for the next 6+ years - and duly ignored!

B: Only after a lengthy tripartite investigation (into the wider issue of unreconciled differences between HMRC's figures and the subset sent on to DWP for processing within UC) did various 'causes' become impossible to deny ... one of which was the lack of agreement (even within HMRC let alone when compared to DWP) as to what 'Payment Date' actually meant!

C: For the next 4-5 years, HMRC's 'guidance' (aka Employer Bulletin) has flip-flopped around this issue ... leading to multiple revisions as different teams over-rode other teams' definitions.

D: Currently the guidance for software developers says: "If the payment date falls on a 'non-banking day' show the payment as having been made on the regular payday" ... but makes no specific mention of when an employer chooses to pay early (as per the article's example re Christmas).

E: When I last looked there were still conflicting variants across official guidance (from general GOV.UK to in-house HMRC manuals and the regular Agents/Employer Bulletins).

How we can still be in this quagmire'ish land of uncertainty after over a decade of the problem being identified says a *lot* about HMRC's attitude to (I nearly said contempt for) their 'customers' and the poor old people at the end of the food-chain ... employees who need UC because of poor pay.

Thanks (5)
Cherry
By cherrytelevision
07th Dec 2023 11:17

Thank you Mathew, great article.

Thanks (1)
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By AdamJones82
12th Dec 2023 10:28

Everyone knows when Christmas is coming, it's not an unexpected cost. If employees can't budget for it, that's their issue

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Replying to AdamJones82:
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By FactChecker
12th Dec 2023 11:21

from Ebbe and Easer (policy advisers to DWP)?

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