With nearly 6 million people now in receipt of Universal Credit, 40% of them actively working, it is important for employers to remember the December RTI (Real Time Information) easement when planning to pay staff early for Christmas i.e. before their contractual payment date.

Within the RTI Full Payment Submission (FPS), field 43 must be left as the normal contractual payment date. This means that if you normally pay your staff on 25 December and you are going to be paying them, for example, on 18 December, the payment date must remain as 25 December 2023.

Most software platforms will allow you to override the payment date, strictly for BACS purposes, although you must ensure that this is reviewed prior to submission. Failure to review will result in the cessation of Universal Credit payments for those currently in receipt and may cause serious financial problems over the festive period.

Further to this reminder, employers do have some flexibility on their RTI filings. For December, you are permitted to file the FPS on, or before, the contractual payment date rather than the actual payment date (which is the normal rule).

I pay my staff electronically, what are my deadlines?

If you are paying via Faster Payment via Online Banking, payments can be initiated 24/7 (subject to your specific bank or building society). Please be mindful that your employees may bank with an alternative institution, who are not processing faster payments on non-banking days, so you may wish to initiate payments a day earlier to ensure funds are received promptly.

The following days are non-banking days over the festive period and no BACS payments can be initiated via Johnston Carmichael.

• Monday 25 December 2023
• Tuesday 26 December 2023
• Wednesday 27 December 2023 (Northern Ireland only)*
• Monday 1 January 2024

See below payment deadlines to ensure all payroll related payments reach your employees on time.

Christmas bonuses and gifts

Businesses may choose to offer gifts to their employees or to host a Christmas party in December. Whilst applauded, it can create additional workload, not just for processing but also because each different element will have associated tax and NICs implications, which need to be observed and implemented correctly to avoid penalties and fines.

Staff reward and taxation

As an employer, the end of the year represents an opportune time to reward your employees for their loyalty and persistence. Christmas and some festive cheer can be a great way to do this, be it in person, or remotely, depending on the circumstances.

Whatever your plans, expenditure related to your staff needs to be correctly classified for you to determine the appropriate treatment for income tax and national insurance. This is something that you must take advice on to avoid facing significant penalties from HM Revenue & Customs.

When you provide any form of cash, gifts and benefits to staff that aren't included in their wages or salary, this is classified by HMRC in several different ways. There are specific areas of guidance regarding benefits to employees, so you need to make sure you don't go over particular limits or there will be a tax liability. If you breach the threshold, then such expenditure will need to be reported on form P11D which attracts both an income tax and employer national insurance charge.

The easiest way to deal with this issue is to use something called the trivial benefits rules. Doing this ensures you don’t have to pay tax or a benefit for your employee. HMRC tend not to publish examples of these although do state some guidelines. The exemption applies where all these conditions are met:

• The benefit is not cash or a cash voucher. This means that a cash bonus would not qualify.
• The employee is not entitled to the benefit as part of any contractual obligation.
• The gift is not provided in recognition of services performed by the employee as part of their employment duties (or in anticipation of such services).
• The cost of providing the benefit does not exceed £50 (including VAT and delivery).

Where all these conditions are met, there are no tax or NIC liabilities for either the employer or the employee. Where one or all the conditions are not met for a seasonal gift, the gift will be taxable and liable to NIC. You can read more here about the taxation on trivial benefits.

Care should be taken around trivial benefits with directors as you do have other areas to consider.

This is an extremely complex area and great care should be taken when assessing your employer costs around rewarding staff with gifts. It might cost more than you think!

Absences and annual leave

Another challenge presented over the festive period is absence and holidays. Absences tend to be higher during the winter months, with the seasonal flu doing the rounds. It is vital that your payroll team checks that employees who are absent because of sickness qualify for Statutory Sick Pay (SSP).

Contacting the Payroll Services team throughout the festive season

As usual, we will be operating a skeleton staff throughout the festive period to ensure critical payroll runs are fully managed. For urgent assistance, please email payroll@jcca.co.uk instead of your usual Payroll Specialist.

We're here to help

If you would like to discuss this further, please do not hesitate to get in touch with myself, a member of our Payroll Services team or your usual Johnston Carmichael adviser.

Download our BACS Payment Schedule for 2024, here.