This article was provided by our sister site, LawZone.
By Linda Pullan, Technical Editor of Payroll World
One of the most common payroll procedures is the processing of new starters on to the payroll however; this is where some of the most frequent errors occur.
• Check that the employee is eligible to work in this country under the Asylum and Immigration Act by ensuring that the employee produces a suitable document e.g. passport.
• Ideally a new employee should give you a P45 and his NI number on his first day of employment.
• It is not illegal for an employer to employ someone without a NI number but employees are obliged by law to give the employer the NI number.
• Use the NI tracing form CA 6855 after eight weeks if NI is still missing.
• If you receive part 1A of the P45 return it to the employee.
• The P45 should not have been altered in any way e.g. figures.
• Before the P45 details are entered on to the payroll calculate the tax due according to the gross pay, tax code and tax period on the form using the tax tables. If the tax on the form disagrees with the table figure enter the correct amount on to the payroll and inform the Inland Revenue in item 13 of part 3 of the P45. Where the amount differs considerably, contact your tax office.
• Ensure that part 3 of the P45 is completed and sent to the Inland Revenue immediately. If part 3 of the P45 is missing, take a photocopy of part 3 for your records and send part 2 with a letter covering part 3’s details to the tax office.
• If the tax code letter is missing on the P45 use the letter ‘T’ however don’t forget the missing letter could be ‘K’! This will be reflected in the difference in the tax due according to the tax tables against the tax shown on the form.
• If the P45 is not submitted, issue form P46 (if they work one week or more) and allocate the tax code according to the statement they signed – statement A 461L from 6 April; statement B 461L week 1/month 1; statement C BR. Where the employee does not sign allocate BR. Page 2 of the P46 is sent to the National Insurance Office (NICO) who will trace missing NI numbers and advise employers providing page 2 has been completed with the employer’s details.
• If the employee pays reduced rate NI (categories B, E and G) ensure that the certificate is valid by checking that any dates in boxes A or B are in the future and that she has paid NI at some point in the last two tax years. Ensure that she is aware that she must advise you in writing if her circumstances change which will affect the right to pay reduced rate NI.
• Where the employee earns at least the LEL of £75 per week he must be on the payroll. This also applies if the employee pays tax, a student loan through the payroll or is in receipt of SSP, SMP or tax credits.
• For tax purposes, use the normal earnings period for tax allowances. If the employee submits a P45 for the same tax period as they join the company, e.g. leaves 15th of the month and joins the new company on 18th of the same month, they will be heavily taxed. This is because they have had the benefit of their allowances with possibly for the whole tax month, with the previous employer.
• For NI purposes, use the normal earnings period to calculate the NI, even if they joined the company towards the end of the month and will be monthly paid. It does not matter that they may have already paid maximum NI for the month with the previous employer.
• If the new employee is issued with a salary advance, ensure that when the advance is entered on to the payroll, that the NI is calculated for each pay period separately and that the employer is authorised to deduct the advance by getting the employee to sign an authorisation (ERA 1996).