The world of wages is full of specialist payroll terminology and acronyms that payroll managers need to be aware of before they can begin to administration employee wages.
Below we explain a proportion of these phrases and terms in an easy to understand manner.
PAYE – Pay As You Earn
PAYE is the method of paying income tax and national insurance contributions. Employers deduct tax and national insurance contributions from employees wages or pension (depending on the pension) before paying you your wages or pension.
NI – National Insurance
Employees pay NI contributions to build up entitlement to certain state benefits, including the State Pension. Employers also pay NIC as well. The contributions you pay depend on how
much you earn and whether you’re employed or self-employed. You stop paying National Insurance contributions when you reach State Pension age.
YTD – Year to Date
A Year to Date figure is a figure that is the total figure up to this point of the tax year.
Real Time Information
RTI – Real Time Information
The term used to describe the changes to Payroll from April 2013. HMRC collect PAYE information as it happens in real time instead of at the end of the tax year. You can submit RTI submission through our payroll software.
FPS – Full Payment Submission
An RTI FPS is what should be sent every time employees are paid and closed, so every month for monthly, every week for weekly, every 2 weeks for 2 weekly etc. This should be sent to HMRC either on or before the day you pay the employee
EAS – Employer Alignment Submission
Used to align data with HMRC at the start of a tax year. It would only be submitted for employers with 250+ employees. If you have less than 250 employees then the EAS is submitted automatically in your first FPS of the tax year.
EPS – Employer Payment Summary
If you have any recovery from statutory payments like SMP, OSPP, SSP etc or CIS deductions suffered then you would submit an EPS each month/quarter (depending on how you pay
HMRC) to inform HMRC of a reduction in liabilities.
PoI – Period of Inactivity
A Period of Inactivity EPS would be submitted if you have not paid any employees in a tax period, so that HMRC do not expect any payment from you. If you do not pay any employees, then you wouldn’t submit an FPS and instead submit an EPS Period of Inactivity.
Irregular Payment Indicator
For any casual or occasional workers, particularly those who may not work for 13 weeks or more-This informs HMRC that the individual is still employed.
SMP – Statutory Maternity Pay
SMP means Statutory Maternity Pay is where a mother can take time of work to look after the baby. They can currently have up to 39 weeks of paid leave if they qualify for SMP.
MAT B1 – Medical Reference for SMP
The MAT B1 is designed for the purpose of enabling a pregnant woman to claim SMP. It also confirms the actual date of birth for use when setting up SMP against employees in QTAC.
SSP – Statutory Sick Pay
SSP stands for Statutory Sick Pay–when an employee is off sick from work they can be entitled to claim SSP.
OSPP – Ordinary Statutory Paternity Pay
OSPP stands for Ordinary Statutory Paternity Pay. A father can take time of work to help look after the baby. They can currently have up to 2 weeks of paid leave if they qualify for OSPP. The term OSPP replaces the old SPP (Statutory Paternity Pay).
SC3 Form – Medical reference for OSPP
You would use form SC3 to request paternity leave and/or Ordinary Statutory Paternity Pay (OSPP) if you’re a baby’s biological father or the mother’s husband or partner-including female partner in a same-sex couple.
ASPP – Additional Statutory Paternity Pay
ASPP stands for Additional Statutory Paternity Pay, which is where a father can take some of the mother’s maternity leave (even when they work in another company).SC7–Forms for use with ASPP An employee uses this form to apply for Additional Statutory Paternity Pay (ASPP) and/or additional paternity leave. Only use if you’re the baby’s biological father or the mother’s husband or partner-including female partner in same-sex couples.
SAP – Statutory Adoption Pay
SAP stands for Statutory Adoption Pay. If an employee is adopting a child with a partner, one of them may be entitled to SAP and the other may be entitled to Ordinary Statutory Paternity Pay (OSPP).SAP usually follows the same basis as SMP in terms of amounts of length of time.
SER – Small Employer Relief
An employer qualifies for SER if, in the previous tax year, the company paid less than £45,000 in total gross Class 1 NICs. Small employers who qualify for SER recover 100% of the SMP/SAP/OSPP/ ASPP paid to their employees and also 3% compensation on NIC’s. Non-small employers would only receive 92% recovery on the SMP/SAP/OSPP/ ASPP paid to their employees. You would need to mark your company as being a small employer in QTAC by going into‘Company > Company Maintenance > Tax and NI and ticking the ‘Calculate Small Employer Relief….’ tick box.
SRP – Statutory Redundancy Payment
Redundancy pay can be paid out to employees in certain conditions and will be tax and NI free on certain amounts. Amounts for redundancy pay are based on an employee’s age and length of service.
The P45 form is given employees when they leave an employment. It is entitled ‘Details of employee leaving work’. A P45 is issued by the employer when an employee leaves the company and shows how much tax the employee has paid on their salary so far in the tax year (6 April to 5 April).A P45 has 4 parts – Part1, Part 1A, Part 2 and Part 3:
P45 Part 1:
Employers electronically send Part 1 to HMRC– QTAC does this for you when you set an employee to be a leaver and then submit your next RTI submission.
45 Part 1A:
The Employee should keep Part 1A for their records.
P45 Part 2 and 3:
Part 2 and 3 are given to the employee who then should give them to the new employer (or to Jobcentre Plus if not working) By law employers must give employees a P45.
The ‘Starter Checklist’ replaces the P46 but it similar in its design. Before RTI came into being, employees that joined a company without a P45 would have to fill out a P46. Under RTI, the P46 is replaced with the ‘Starter Checklist’, which is similar to the P46. But now, under RTI, even when an employee provides a P45, a starter declaration must be filled out as well.
A P60 is an End of Year Certificate, it’s a statement issued to taxpayers at the end of a tax year. Employees should keep and not destroy the P60 forms, as they form a vital part/proof that tax has been paid by them. Because P60’s are a statement of totals for employees at the end of the tax year, they shouldn’t be given to employees who left during the tax year but only to employees who are still actively employed at the end of the tax year.
P11d: Form P11D (Expenses and Benefits)
A P11d is a tax form filed by employers for each director and employee earning over £8500 per year. They should be sent to HMRC. P11Ds are used to report benefits provided and expense payments made to employees by employers that are not put through the payroll. The employees are also given a copy, should they need it for a self-assessment tax return. This is not to be confused with form P11(Deductions Working Sheet), which is for tracking deductions made by PAYE. QTAC does not report or produce P11D’s as it is handled outside of the payroll software.
Auto Enrolment is the term used to describe the pensions that the government are bringing in to help people contribute to their pensions earlier in life. People are living longer and many more people are reaching retirement age, the scheme was started to get people saving for retirement earlier.
The main concept of auto enrolment is that when the employee pays into the pension fund the employer pays as well. For more information and a guide to the percentages at which the contributions are taken see ‘Auto Enrolment: Contributions and Terminology.’
BACS – originally Bankers Automated Clearing Services
BACS is for the electronic processing of financial transactions, which can be made using a BACS system. BACS payments usually take three working days to clear. See your bank for more details.