With Christmas and New Year fast approaching, now is a great time to discuss what employers need to be aware of when running payroll over the festive period.
December is a busy month for payroll as many employers choose to change their payment date so that employees get paid before Christmas. Even if the employer keeps their same payment date, they may need to run their payroll early due to the festive period bank holidays.
In this blog, we’ll highlight some top tips for running your Christmas payroll.
Pros and cons of an early December pay date
December is an expensive month for a lot of people, with buying Christmas presents, festive social events, travel and family get togethers. It can be beneficial for employees to receive their wages early in the month to give their finances a boost at this busy time.
This does however mean a longer wait between December and January pay dates, which could result in minor financial issues if an employee hasn’t budgeted correctly.
Paying staff early
When paying employees early in the month, it’s important to use the normal payment date when submitting your Full Payment Submission (FPS) to HMRC, as changing this date can affect the processing of Universal Credit. This means the pay day and payment date will be different, but it ensures there are no negative impacts to an employee’s Universal Credit entitlement.
For example, if your normal payment date was the 28th of each month but you decided to pay employees on the 20th December, the date to use for the pay run would still be 28th December 2024.
Employers have until the normal payment date (the date set for the pay run) to submit the FPS, and until the 19th of the following month (January 2025) to send an Employer Payment Summary (EPS) to HMRC.
Communicating to staff
It is important to ensure your employees are notified in advance of their early payment date, so they can budget accordingly.
Bank holidays and Bacs dates
Christmas Day, Boxing Day, and New Year’s Day are all bank holidays this festive season. This affects all employers who pay via bank transfer, but particularly affects employers who pay via BACS (Bankers’ Automated Clearing System) as payments need to be sent two working days prior to the payment date.
For example, for a pay date of 27th December the payments would need to be sent to BACS on 23rd of December to account for the bank holidays that week. Employers who usually pay staff on the 25th or 26th of the month will need to send their payments to BACS on 20th December to ensure funds reach the employees on the 24th.
Christmas bonuses and gifts
Any Christmas bonuses given are considered as earnings. They should always be run through the payroll because they’re subject to tax and national insurance.
Any gifts given need to meet the ‘trivial benefit’ criteria outlined by HMRC:
- The gift should cost £50 or less
- It isn’t cash or a cash voucher
- It isn’t a reward for their work or performance
- It isn’t in the terms of their contract
Tax must be applied on any benefits that do not meet these criteria
For more information about tax exemptions available to employers throughout the festive period, read our blog here.
Our payroll team are always happy to help with any queries on running your Christmas payroll so please get in touch at payroll@ct.me
