Getting RTI right when paying staff early over Christmas

The background

Lots of employers routinely pay employees earlier than their contractual payment date in the month of December. Unless they are aware of how their payroll software populates this change of date in the full payment submission (FPS) this can cause problems for monthly paid employees who are in receipt of Universal Credit (UC) and have an award period end date close to their contractual payment date.

Case study

An employee is normally paid on 25^th of the month, so clearly cannot be paid on Christmas Day as this is a bank holiday. It is the employer’s custom and practice to bring forward payday to mid-December, so employees will be paid on the 18^th. If the employer uses the earlier pay date of the 18^th in Field 43 of the FPS, it is quite likely that a number of employees will have earnings data for both November and December reported to the Department for Work and Pensions (DWP) for the same UC award period, which will lead to a significant reduction in their benefit payment.

Permanent easement

To solve this problem HMRC introduced a permanent easement for PAYE reporting in 2019 that applies to the month of December only. In the above case study it is vital that the employer is aware how to populate Field 43 in their FPS with the normal contractual payment date of 25 December, not the actual payment date of 18 December. For the month of December only the FPS reporting deadline is also the contractual payment date of the 25^th. For the remainder of the year the FPS must be reported by midnight on the actual payment date, even though the date in Field 43 must always be the contractual payment date, even if payment is brought forward due to the contractual date falling at a weekend or bank holiday.

Following a Court of Appeal judgment the UC legislation was amended in November 2020 to require the DWP to reallocate earnings from an incorrectly brought forward payment date to the award period that the earnings should have been in respect of.