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Payroll Tip: SSP and the percentage threshold scheme


These questions are being answered by Learn HR, a market leader in the provision of HR and payroll training and nationally-recognised professional qualifications.

Payroll tip: The PTS is intended to help employers when there is an abnormally high level of sickness. Eligibility is determined in each tax month by comparing the total amount of SSP actually paid in that period with the total employer and employee Class 1 NICs liability for that period. If the amount of SSP exceeds 13% of the NICs, the difference between the two may be reclaimed from the total NICs paid to the Collector.

In the following examples, a tax month is the period from the 6th of one month to the 5th of the next. For example, the tax month of May starts on 6 May and ends on 5 June.

Example: An employer pays out £3,000 in SSP in a tax month and 13% of the Class 1 NICs due for that month is £2,500. The employer can recover the £500 difference.

The test must be performed for each tax month, even if payments are made to the Collector quarterly; eligibility in one tax month does not mean that SSP can be reclaimed in another tax month.

Example: A small employer, who pays the Collector quarterly, finds that the 13% threshold is exceeded in the tax month of May, but not in the tax months of April and June. The payment made to the Collector by 19 July may only be reduced by the excess of SSP that was paid to employees in the May tax month.

The scheme applies to all payments of SSP paid by an employer. Therefore, if an employer has two or more PAYE schemes, the total of the SSP payments for all of the schemes is compared with the total of the Class 1 NICs paid to the Collector for all of the schemes.

There are special rules to prevent an employer from saving up payments of SSP and paying them all in a single tax month in order to exceed the threshold.

Example: To be included in the total SSP for the tax month of September, the only payments that may be included are payments in respect of periods of incapacity for work that are reported during the tax month of September and that are paid

  • during the tax month of September, or
  • during the tax month of October, if it was impractical for the payments to have been made in the tax month of September

In practice, the Inland Revenue’s instructions state that is only necessary to use the total of the SSP payments that were paid in a particular tax month. These special rules are intended to prevent abuse of the scheme but it is possible that their use could also work in an employee’s favour.

Although the PTS is intended to help small employers, some larger employers with many part-time employees earning below or just above the National Insurance lower earnings limit could also benefit. In particular, agents providing payroll services for clients, such as accountants and payroll bureaux, should check each pay period to see if the threshold has been exceeded for each employer.

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Annie Hayes


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