Christmas seems to come earlier every year, but for payroll teams when a business wishes to pay staff earlier than usual, planning for December’s payroll needs to start now.
December is a busy month, made more so by the double bank holiday, seasonal bonuses and higher levels of holiday requests. For retailers and hospitality businesses, the influx of seasonal workers will add further pressures on payroll teams and even more so should a business decide to pay staff before the Christmas break.
To ensure everyone, including your payroll team, has the Christmas they wish for, here is our guide to paying staff early.
Payroll teams will typically work towards the month end, but if paying staff a little earlier in December, a new pay date will need to be agreed – and it is safe to assume that it will be a couple of days before Christmas Day.
It typically takes between two and three days to run a payroll and see money transferred to staff bank accountants, so a cut-off point date will need to be agreed. Whilst it might be easy to bring forward the pay date for salaried staff paid monthly, it does mean employers will need to estimate the hours to work to the month end for those paid hourly or on zero-hours contracts with possible corrections made in January.
Staff absences also tend to increase in December, meaning absence rates will need to be considered when paying staff early. A cut-off date for sick pay will need to be decided and consideration given to statutory sick pay.
Businesses will need also to consider the impact of any benefits staff receive and ensure they are protected. This is done by reporting the normal or contractual payday on the Full Payment Submission (FPS) and not the early date of pay.
Where seasonal staff are employed, the business will need to decide whether they too will be paid early or at month end. If paying regular staff early, the question of whether you then want to run a second payroll at the end of the month needs to be considered.
Commissions and bonuses will need to be agreed well in advance with a cut-off for commission payments agreed. Commissions for the remainder of the month may need to be estimated or carried over into January.
Cash flow
Businesses also need to consider whether it can actually afford to pay staff early and what impact that might have on cash flow. October and early November provide the ideal window to model or forecast that impact.
And finally, the impact on staff also needs to be considered. Whilst paying staff early in December will be welcomed, it does leave a long post-Christmas period until the next payday. Responsible employers may need to recognise that staff might then need to help staff through to the January pay date.
For more information on how Hillier Hopkins can help your business with its payroll requirements, contact Jacqui Reeves on jacqui.reeves@hhllp.co.uk
