By Jason Collins, Founder of CollSoft Payroll
One of the key requirements of PAYE Modernisation is that employers must report all payments to Revenue on or before the date that the payment is made to the employee, which can be challenging during the Christmas holiday period.
Christmas 2020 poses some particular challenges for a couple of reasons:
- Christmas and New Years day both fall on a Friday, the most common payday; and
- 2020 is a Leap Year and, therefore, payments on both Wednesday 30 and Thursday 31 December may qualify as a Week 53 payroll.
Under PAYE Modernisation rules, when a payment date falls on a public holiday, the employer must still report the payment as having being made on that date to Revenue. However, they can make the payment available to the employee on the previous banking day.
For example, if an employer typically pays their employees on a Friday, payroll for Friday 25 December will be reported to Revenue as the 25 December but can be paid to the employees on Thursday 24 December.
Likewise, the payment which would fall on Friday 1 January 2021 will be reported to Revenue as a 2021 payment on 1 January, but the employer can make the payment on 31 December.
Many employers will make the mistake of actually moving their payment date back to 31 December in their payroll software. If you do this, the payment will be reported as a 2020 payment, and the employer may end up processing a Week 53 payroll of which he is not entitled.
Week 53 payroll
A Week 53 payroll will arise for an employer where their normal payroll cycle results in a payment being made on either 30 or 31 December 2020. In such cases, the employer is allowed to allocate an additional week of tax credits, and PAYE/USC cut off points to the payroll calculation on a Week 1 basis.
However, this concession is not available to any employers who have changed their payroll calendar, for whatever reasons, during 2020 or 2019. If an employer has moved their normal payday, then they should not allocate any additional tax credits of PAYE/USC cut off points in their payroll calculations.
You can expect Revenue to be keeping a close eye on an employer who operates a Week 53 in 2020!
Your first 2021 payroll
For many, the first day back to work after the Christmas break will be Monday 4 January 2021. Employers will aim to process their first 2021 payroll on Friday 8 January. Such employers should take note of the fact that the 8 January 2021 is the first day of Week 2 in the Revenue payroll calendar and it must be processed as such in payroll software. The Week 1 payment should be reported on 1 January 2021, even if allowed to be paid to employees on 31 December 2020.
(Sponsored by CollSoft. Please note that although the information above is correct at the time of writing, circumstances may change. It is, therefore, advisable to seek professional advice on such issues.)