Wrapping Up the Year: A Guide to Christmas Pay Dates – As December approaches, many employers are already thinking about Christmas payroll arrangements. For many, the festive period involves early pay dates. But adjusting payroll for Christmas can affect employees in unexpected ways, particularly if it impacts their Universal Credit. To keep everything on track, you need to follow HMRC’s Full Payment Submission (FPS) guidelines carefully. This guide will help you navigate Christmas payroll, protect employees’ entitlements, and ensure compliance.
Why FPS Reporting Matters
The FPS is the key report you submit to HMRC every time you run payroll. It tells HMRC the payment date, pay amount, and deductions for each employee. Even if you plan to pay employees early for Christmas, you must report payroll using the normal contractual payment date on the FPS.
Submitting your FPS with the regular payment date is not just a festive guideline. It’s essential throughout the year. Reporting the usual payment date protects employees’ eligibility for Universal Credit, as these benefits depend on the timing of income. Submitting an early payment date on the FPS may unintentionally push two payments into one Universal Credit assessment period, creating financial challenges for your employees.
Early Payments and Universal Credit
Universal Credit supports people with low earnings or those out of work, helping with living costs. To assess eligibility, HMRC uses the dates provided on the FPS. If employees receive two pay periods within one Universal Credit assessment period, this could reduce their entitlement or even disqualify them temporarily.
Let’s break it down. Say an employee is normally paid on 31st December, but you decide to pay them on 20th December instead. If you report 20th December as the pay date, it may cause issues. It could show two payments in December’s Universal Credit assessment period and none in January. For employees relying on Universal Credit, this could lead to temporary benefit reductions or gaps, causing financial strain.
How to Handle Christmas Pay Dates
If you decide to pay early in December, remember to report the payment as if it was made on the regular date. For example, if the regular pay date is 31st December, report 31st December on the FPS even if you pay on the 20th. Submit the FPS on or before 31st December, as usual.
This rule applies throughout the year, not just at Christmas. Suppose an employee is normally paid on the 25th of each month, but the 25th falls on a Saturday in January. In this case, you might pay on 24th January. Still, you should report 25th January on the FPS.
Common Scenarios for Christmas Payroll
Different businesses handle Christmas payroll differently, but the key rule remains the same: always report the regular pay date. Here are some common scenarios:
1. Weekly Payrolls: Weekly payrolls can be tricky around Christmas, especially when bank holidays and weekends disrupt schedules. Even if you pay employees earlier than usual, report the payment as if it were made on the normal pay date.
2. Monthly Payrolls: For monthly pay, early December payments are common. However, you must still use the usual contractual date on the FPS to avoid issues with Universal Credit.
By sticking to the regular payment date, you protect your employees’ finances and simplify compliance with HMRC.
The Impact of Incorrect FPS Reporting
The consequences of incorrect FPS reporting can be significant. Not only does it affect employees’ Universal Credit, but it can also lead to compliance issues with HMRC. An incorrect FPS may:
- Cause employees to lose out on Universal Credit.
- Lead to confusion about the correct pay dates.
- Create additional work for payroll teams to amend submissions.
If HMRC identifies inaccuracies, they may require you to correct and resubmit your FPS, which can be a time-consuming process. Getting it right the first time helps avoid unnecessary work and maintains employee trust in payroll accuracy.
Planning Ahead for Christmas Payroll
Early payroll planning makes a difference during the Christmas period. Begin by confirming regular pay dates with employees and clearly communicating any early payment plans. Clear communication reduces confusion and ensures employees understand how early payments will be reported to HMRC.
When setting early pay dates, factor in bank holidays and weekends. Many businesses avoid Christmas Day and Boxing Day by paying a few days earlier. Just remember, even if you pay early, always use the normal contractual date on your FPS. For example, if the regular pay date falls on 25th December (a holiday), and you pay on 23rd December, report 25th December on your FPS submission.
Avoiding Payroll Pitfalls
Christmas payroll changes can lead to accidental mistakes, especially if the payroll team faces tight deadlines. To keep everything running smoothly, follow these tips:
- Double-check Dates: Before submitting the FPS, ensure you use the correct contractual date rather than the actual payment date.
- Communicate with Employees: Let employees know that the reported pay date on HMRC records may differ from their actual payment date.
- Plan Submissions Early: Schedule your FPS submissions to ensure they meet HMRC’s deadline, especially if offices close during the holidays.
- Remember, this process is not just for Christmas. Using the correct payment date on your FPS is a good practice for every payroll period. It ensures consistency, protects employees’ benefits, and keeps payroll running smoothly.
Payroll and Compliance Throughout the Year
Christmas payroll brings extra attention to FPS reporting, but it’s just as crucial to follow these rules throughout the year. Public holidays, weekends, and other events can lead to changes in payroll schedules. By consistently reporting the regular payment date, you’ll ensure payroll accuracy year-round.
For example, if an employee is usually paid on the last day of each month, but it falls on a non-banking day, simply adjust the payment date for convenience. However, always report the regular pay date on your FPS. This consistency maintains compliance and simplifies payroll management, no matter what the calendar looks like.
Looking After Employee Welfare
Ultimately, correct FPS reporting supports employees’ welfare by protecting their entitlements. Employees who rely on Universal Credit or other income-based benefits appreciate accurate reporting that doesn’t disrupt their eligibility. Ensuring payroll follows the correct process isn’t just a legal requirement; it’s also part of fostering a supportive workplace.
Providing peace of mind for employees goes a long way, especially around Christmas. When payroll processes work seamlessly, employees feel confident and valued. They know that the organisation cares about their financial well-being.
In Summary: Christmas Payroll Best Practices
Christmas payroll doesn’t need to be a source of stress. By following HMRC guidelines and reporting with the regular pay date, you protect your employees and maintain compliance. Keep these best practices in mind:
1. Always Report the Regular Payment Date: No matter when you pay employees, report the payment on the FPS as if it were made on the normal pay date.
2. Communicate Clearly with Employees: Make sure employees understand that early payments are reflected as regular pay dates on HMRC records. This clarity avoids confusion and helps employees plan.
By planning ahead, double-checking dates, and following HMRC’s guidance, you’ll keep your payroll process smooth and compliant through the festive season. Accurate reporting doesn’t just fulfil legal requirements—it also demonstrates care for your employees’ financial stability.
If you have questions or need help navigating Christmas payroll, don’t hesitate to reach out to our team. We’re here to support you with every step, ensuring that both your business and your employees enjoy a peaceful, stress-free holiday season.
