How to process redundancy pay

Article ID

11370

Article Name

How to process redundancy pay

Created Date

30th October 2019

Product

IRIS PAYE-Master

Problem

I need to pay redundancy for an employee. How can I process this in the system?

For redundancy pay legislation information check www.gov.uk here.

Resolution

Redundancy payments under £30,000 are normally tax and NI free. Any amounts above this figure will normally be subject to Tax deductions only – if the payment is over £30,000 you will need to set up two additions.

To set up the First £30,000 (Tax & NI free)

• Go to “Company” >  “Details” > “Additions/Deductions“
• Find the first “Unused” in the list.
• Delete the word unused and type in what they want to show on payslip e.g. Redundancy
• Set as Payment (Pay)
• Remove ticks in Tax and NI

• “Save” and “close“

• Go to variations

• Select the “Redundancy” pay code

• Enter the figure:

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To set up amount over £30,000 (Tax deduction only)

• Go to “Company” >  “Details” > “Additions/Deductions“
• Find the first “Unused” in the list.
• Delete the word unused and type in what they want to show on payslip e.g. Redun Taxable
• Set as Payment (Pay)
• Leave tick in Tax but REMOVE from NI:

• “Save” and “close“
• Go to variations
• Select the “Redundancy” pay code and enter the first £30,000
• Select the “Redun Taxable” pay code
• Enter the remaining value or any redundancy over the £30,000 level:

Please Note: HMRC plans to make termination payments in excess of £30,000 subject to employer national insurance contributions has been delayed for a second time and will now take effect from April 2020.

For further details on redundancy pay legislation check www.gov.uk here