Redundancy Wages

A-Vic

Doing my first redundancy payroll just wanted to clairfy this is correct:-

1. Any redundancy is Tax and NI free ?
2. All Holidays due in full
3. Any ourstanding Hours and notice in full on last payslip
4. P45 as normal ?

Thanks in advance


Vic

jilt

Redundancy pay is tax free but only on the first £30,000.

Don't include the redundancy pay in the pay to date figure on the P45, I did that once and the tax office wrote to us saying not enough tax had been deducted from the employees pay for his tax code. Oops!

A-Vic

Great thanks Jill - its a hard one and just wanted to get it right first time

payrollpro

Not all redundancy is tax free and the £30k limit only applies to qualifying terminal payments. You should read the guidance at EIM 13830 in the HMRC website and all the subsequent pages.

The only law which applies to holidays is on the statutory portion of 5.6 weeks, capped at 28 days. Any unused portion of statutory entitlement to the date of temrination must be paid for but anything above that, the additional contractual entitlement depends on the terms of the contract and any termination agreement.

I agree that outstanding pay needs to be paid and any notice payment as well. Does your employer understand fully the law regarding notice? Any period of notice must be worked and paid for, so if the redundant employee is absent on nil pay they immediately revert to full pay for the period of notice. If termination occurs before the notice expires then payment in lieu is due. Tax treatment depends on the circumstances.

As Jill mentions, any tax exempt payments must not be included on the P45 but you have to consider making a report to HMRc within 30 days of the exempt payments depending on the circumstances.


Good luck with it.

Payrollpro

A-Vic

payrollpro wrote: »

Not all redundancy is tax free and the £30k limit only applies to qualifying terminal payments. You should read the guidance at EIM 13830 in the HMRC website and all the subsequent pages.

The only law which applies to holidays is on the statutory portion of 5.6 weeks, capped at 28 days. Any unused portion of statutory entitlement to the date of temrination must be paid for but anything above that, the additional contractual entitlement depends on the terms of the contract and any termination agreement.

I agree that outstanding pay needs to be paid and any notice payment as well. Does your employer understand fully the law regarding notice? Any period of notice must be worked and paid for, so if the redundant employee is absent on nil pay they immediately revert to full pay for the period of notice. If termination occurs before the notice expires then payment in lieu is due. Tax treatment depends on the circumstances.

As Jill mentions, any tax exempt payments must not be included on the P45 but you have to consider making a report to HMRc within 30 days of the exempt payments depending on the circumstances.


Good luck with it.

Payrollpro

Thanks for this - the site was extreamly handy and the employer and employee agreed to 6 weeks notice period, holidays to the end of this year and redundency pay luckly we use a really good payroll software programme that genarates the P45 for you and the redundency (under 30k) had already been separated.

Thanks Jill and PP for input