Early December pay can be a problem for employeesby
Paying employees early in the month of December is seen as a gesture of goodwill, but make sure it doesn’t bring unintended consequences.
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).
- 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.
You might also be interested in
With a background in accounting and delivering outsourced payroll to the NHS, Mathew is now a member of the CIPP Policy and Research Team. He strives to educate and represent the payroll industry and raise its profile in the business world.