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Processing Redundancy pay

Article ID
Article Name
Processing Redundancy pay
Created Date
6th April 2017
IRIS Payroll Professional, Earnie

How to process redundancy pay.

For redundancy pay legislation information check here.


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 payments.

To set up the First £30,000

  • Go to “Company” > “Alter Payments / Deductions
  • Click “Add new
  • Click “No” to the wizard message.
  • You will need to type in a name for the payment. This is how the item is shown on the payslip.
  • Set the Category to “Apply After Tax & NI Calculation
  • Set + or – to “Payment
  • Set Type to “Value
  • Set range check to “None
  • Set report group to “None
  • Set clear to-date totals to “Annually
  • Click “OK” to save the payment:

You can now use this paycode to pay a tax and NI free amount to employees

To set up amount over £30,000

  • Set up another new payment exactly as above EXCEPT:
  • et the Category to “Apply after NI Calc but Before Tax Calc
  • Use this code to pay employees a value that will be taxed but will not affect the NI calculation.
  • Enter the remaining value of 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.

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