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Processing Redundancy Pay

Article ID
Article Name
Processing Redundancy Pay
Created Date
10th July 2018
IRIS Payroll Business, IRIS Bureau Payroll

How to set up and use pay code for redundancy payments


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” > “Payments & Deductions” > “Configure Payments & Deductions
• Click “Add new
• You will need to type in a name for the payment. This is how the item is shown on the payslip.
• Set the Type to “Payment
• Set Method to “Value
• Untick the “Taxable” and “NIable” options
• Click “OK” to save the payment:

configuring a pay element for non taxable redundancy pay

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:
• Tick the option “Taxable

• 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.

Using your pay codes

Now you’ve set up your new redundancy pay codes you can add them to the employees pay. 
• On the pay variations screen for the appropriate employees add the new code(s) into the “Pay/Ded” list towards the bottom.
• Click on a line with the description <None>. You will then be able to open a drop-down menu to choose the redundancy pay code.
• Enter the value you wish to pay under the “Temporary” column.
• Remember if you are paying over £30,000 you need to split the payment over your taxable and non-taxable pay codes:

adding redundancy pay to employee variations

For further details on redundancy payments please refer to the HMRC guidance:
Click Here

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