Holiday pay is unique to each company because each firm has their own rules on how many holiday days’ employees get, whether it has to be accrued before being taken and how many days a week their employees work; it all depends on what is written in the contract of employment. Whether or not an employee works bank holidays also affects the way holiday pay is calculated.
There are various tax implications to consider on gifts and parties that you may be providing to your employees at this time of year. The most common situations that arise are as follows:
Cash Gifts or Bonuses
These are treated as normal pay and subject to PAYE and Class 1 NIC in the normal way. The important point here is that this also applies to vouchers that can be exchanged for cash.
In a disturbing development for employers last year the House of Lords ruled in HMRC v Stringer that employees could claim accrued but untaken annual leave going back a number of years.
Announced in the budget there is to be a three-year Employers NI holiday scheme. The scheme itself starts on the 6th September and applies to new businesses starting after 22 June 2010.
It is available to qualifying businesses, exempting new employees from the up to £5,000 of Employers NI for the first 10 employees. HMRC have now issued further guidance in their Technical Note.
As administrators of payroll services are aware, all employees are legally entitled to a number of fully-paid days off work. These are the Statutory Bank Holidays, as defined by the Government and varied occasionally. Not everyone takes a holiday on Christmas Day - hospitals and emergency services, for example, must carry on, but employees agreeing to work on these days are entitled to time off in lieu.
Efficient payroll processing services keep a lot of plates in the air, whether its NICS contributions or student loan repayments. However, perhaps the most ubiquitous issue that arises when processing payroll are holiday considerations, which can be especially taxing. There are simple payroll solutions to these holiday pay issues; one being Dataplan Payroll.
From 1st April 2009 the minimum amount of annual leave which an employer must provide to a full time worker increased from 24 days per annum to 28 days per annum.
Statutory bank holidays can still be counted as part of the additional entitlement i.e. 20 days holiday plus 8 days statutory holiday making the 28 days per annum.