Advance holiday pay for apprentice & NI contributions

(9 Posts)
LegstarPegstar Thu 17-Mar-16 19:29:23

My parents own a small hairdressing salon (and have done for many years). They pay their staff in cash every saturday. When their staff take holiday they pay them cash in advance, so it's usually the week they've worked plus the two weeks in advance. In terms of tax this means that sometimes the employee is taxed more on the "lump sum" because of the amount, but then because they haven't worked / earned for two weeks by the time they are next paid the tax is lower than usual so it balances out. However, in terms of the NI contributions, receiving a lump sum sometimes pushes the employee over the threshold of paying contributions so they have that amount taken out of their holiday pay and it is never repaid / balanced out. This effectively means they are penalised for having that money in advance. One of the staff have questioned this and me and my parents have been trying to work out if there is any way around this. Can anyone help out here?

Lonecatwithkitten Thu 17-Mar-16 22:17:13

I had this situation the long on short of it was if they wished to be paid weekly it had to be in arrears so they got their holiday pay when they returned.
Alternative weekly by BACS transfer.
It is worth considering that your parents will have to create a workplace pension I the next few years and the charges are higher for weekly payments.
Now might be time to gradually move to monthly payments by BACS which is what I did. I offered a gradually movement over six month period actually all of the staff choose to be paid fortnightly for 1 month and then go to monthly.

LegstarPegstar Fri 18-Mar-16 08:02:01

Thanks for the reply. They're (hopefully) close to retirement so I'm trying to find a short term solution that doesn't mean too much change to what they do already. Really appreciate your input.

ceeveebee Fri 18-Mar-16 08:13:24

Can you not just 'loan' the money as a salary advance to the employees? Then do their payslips on the normal date and show the repayment as a deduction from net pay?

StereophonicallyChallenged Fri 18-Mar-16 08:18:20

You can simply advance it properly, means that tax/ni are both correct.

Do they do their own payroll? Are the weekly paymentrs usually quite low. ie under NI threshold? If so it's simple enough to properly advance and not incur NI.

Work it out as a week by week basis, as you would normally and then do one FPS for each week, but in advance iyswim? Simplest way for them I should think.

PM with figures if you want actual figures OP, am working at home today smile

LegstarPegstar Fri 18-Mar-16 10:17:19

Thanks again all, this really is so helpful. My parents have an accountant and they tell her how many hours each person works per week and she tells them how much to pay (based on tax and contributions deductions) and they then write a check for each employee. Apprentices earn different amounts but currently they have one person on 3.30 (gbp) per hr and one on 6.70 per hr and they each do 36 hours.

My parents have spoken to their accountant yesterday but she was less than helpful, suggesting they should pay when they get back from holiday but when you're on such low wages it's kind of impossible to take a holiday without some advance on wages.

Thanks

LegstarPegstar Fri 18-Mar-16 10:18:52

And the accountant submits the relevant info to hmrc as my parents don't deal with that. Not sure if that's relevant!

StereophonicallyChallenged Fri 18-Mar-16 11:29:34

It is definitely relevant OP! I wonderd if your parents were doing it themselves, and sometimes it can be confusing for non payroll-y types grin

The accountant should be doing this as routine! There is no reason to not advance wages correctly. Perhaps they need to insist ask that the accountant does it, or find one who will process their payroll correctly.
Fwiw, with the advent od FPS there should never be a 'sub' at all. All payshould be reported on of before the date the employee receives it.

There is really no reason - no extra work/caclculations at all smile

LegstarPegstar Sat 19-Mar-16 20:01:01

Thanks again. Have suggested they try again with the accountant, armed with a bit more confidence that this is something she should be able to help with.

Btw - First time posting on mumsnet and surprised that it actually works. People take time out of their day to help complete strangers - how lovely!

Hope you're having a lovely weekend.

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