The life of the bookkeeper can be fraught with queries from staff, managers and clients, and no time to research the answers.
This is particularly so with payroll. There are many little complications that need to be investigated, and the bookkeeper must somehow try and find the time to do this. In this first of two articles the aim is to provide answers for some of the more typical queries.
Statutory Sick Pay (SSP)
Statutory sick pay can often be one of those areas where, without time to study the intricacies of the legislation, calculations can go wrong. Below are some typical queries that may arise.
Part-time employees can pose a problem as the SSP has to be pro-rated, and only paid for the days that the employee works.
Example: An employee works Monday – Thursday, four days a week. They have been sick for eight calendar days (Monday to the Tuesday of the following week). How much sick pay are they due?
The first three days, Monday, Tuesday and Wednesday are waiting days. The Friday is a non-working day so should not be included in the calculation, and the weekend counts as non-qualifying days, so the employee would be paid SSP for the Thursday of the first week and the Monday of the second week. The employee is back to work on the Tuesday.
The calculation for the above is to divide the SSP (2017-18 rate is £89.35) by 4 then multiply by 2 days as there are 3 waiting days and 2 non-qualifying days (remember, Friday is not a work day so should not be included). The calculation would be as follows:
£89.35 ÷ 4 = £22.3375 per day, multiplied by the two qualifying days = £44.68 (to the nearest penny)
Small employer’s relief
This relief is no longer available, and the cost is now borne by the employer. However, records of absence due to sickness still need to be kept, as after 28 weeks of receiving SSP the employee is no longer eligible for the benefit. After 28 weeks an SSP1 form will need to be issued to the employee.
Statutory maternity pay (SMP)
Another area where calculations and information on entitlements can go wrong is with SMP.
Keeping In Touch (KIT) days
KIT days should be simple to calculate as there are simply 10 days available for the employee to use. However, what is not so well understood is that just one hour at work will be classed as a KIT day. It is employee being at work that is important, not the amount of time spent at work.
SMP or other pay
For bookkeepers who work as agents to small businesses it is often the case that the information needed to work out accurate payroll calculations is delivered after the pay has been processed. What should be done then?
For eligible employees SMP is paid for up to 39 weeks. For the first 6 weeks of their leave the employee should receive 90% of their average weekly earnings (AWE) before tax. and for the remaining 33 weeks: £140.98 or 90% of their AWE (whichever is lower).
Because of the finite amount of time for which the SMP is paid, if previous pay made was incorrect (for example, holiday pay or SSP amounts was processed instead of SMP) then the pay has to be recalculated and the records amended. It is a requirement by HMRC that statutory pay be calculated and paid correctly and for the requisite time.
A situation may arise where an employee takes holiday leave to look after a sick relative who unfortunately dies during the sickness period. Then, some weeks after returning to work, the employee produces a fit note that is back-dated to the holiday period above. Should the pay be reclassified and processed as SSP thereby reinstating the previously taken holiday leave?
This situation requires sensitive handling. Key is if the employee notified the employer of the illness promptly (within the organisation’s time limits if there are any) and whether there was a good reason for not notifying the employer in the first place. If it transpires that the employer decides to redefine the pay and allow the employee the re-instated holiday time, then more information may be gained from the GOV.UK website. The document to consult is the Statutory Payments Manual (https://www.gov.uk/hmrc-internal-manuals/statutory-payments-manual/spm110300) as this is designed to supply all the answers needed.
Calculate correctly and pay on time
HMRC and the government require the payments of statutory pay to be accurate and on time. Failure to correctly calculate and pay the amounts due can lead to penalties, and, in some ways worse than that, an investigation or compliance visit. Above are some of the more usual sticking points when it comes to payroll processing. It is hoped that this will go a little way to making the work life of the hard working, time-poor bookkeeper a little easier.
Julie Hodgskin is a fellow member of AAT, runs a licensed accounting practice and is a technical materials author for CIPP.