Taking on a new employee
When you take on a new employee you will need to gather some information from them and record it somewhere safe. You will also need to decide how often to pay them.
Setting up an employee record?
Where do I get the information about my employee?
What is a payroll number or identifier?
How often should I pay my new employee?
Week 53 payments
Employers typically keep a number of different employee records, or personnel files. Such a file may contain documents that fall into one of the following categories:
- Hiring documents
- Job performance and development
- Termination and post-employment information
We look at the type of documents that you may want to keep in your personnel file in more detail in our 'record keeping' section. In that section we also look at the information about your employee that you must keep by law for a certain amount of time – for example specific payroll records for HM Revenue & Customs (HMRC).
First things first though. When your employee starts, you will need to gather some basic information from them which will include their:
- start date
- forename(s) and surname
- date of birth
- National Insurance number (NINO)
- tax code
You may decide to hold other basic details in your personnel file too, such as details of any known disability or emergency contact details. See GOV.UK for information about other personal information you may want to keep on your employee, e.g. emergency contact details, details of any work relevant disability, qualifications and so on.
We look at two very important aspects of employee information in this section of the site. Click the links below to find out more:
A lot of basic information will be on the P45 that your personal assistant (PA) should bring with them from their previous job. This is a form that is given to an employee when they leave a job.
If they do not have one or did not work before starting with you, then you will have to collect the details separately and ask them about their employment situation before they joined you – this may be their first job since leaving school or they may have another job which they plan on keeping at the same time as working for you.
We explain more about this in our ‘starter procedure’ section.
If you have more than one PA, it may be useful for your records to use some kind of numbering system – such as your first employee would be “1” and a second one “2” and so on. This may help to assist with identifying your employee.
Often there will be a field for a ‘Payroll ID’ in your payroll software (form RT2, if you are a paper filer, also contains a field for such information). Where used, your employees payroll ID should appear on any ‘HMRC output’, i.e. P6s (tax coding notices), SL1s and SL2s (student loan start and stop notices). While it is not essential that you assign a payroll ID for your PA and/or complete such a field, where you do, the ID must be unique. So always use a different one each time, even if you re-employ someone, otherwise you could create a duplicate record within HMRC’s systems.
There are no hard and fast rules on choosing a pay period. Employers can essentially choose which pay period is most suitable for them.
Here are some options and associated considerations:
- Weekly. Many employees prefer getting paid weekly because it is the best alignment of work and earnings and can best match an employee’s cash flow needs. It is quite usual to find hourly workers paid weekly – usually on a Friday. On the other hand, as you will probably have to submit information to HMRC every time you pay your employee if you are an online filer, it could mean you spend a lot of time on payroll administration (and there are potentially more chances that an error might be made).
- Monthly. If you are an online filer, a monthly pay period means that you only have to run payroll and submit information to HMRC once per month. It is a simple system which helps everybody involved avoid problems with things like ‘week 53’ payments – see below. However, it can put a financial strain on employees, as they only get paid once per month (this will usually be on the last working day of the month).
- 4-weekly. As many direct payments are received on a 4 weekly basis, a 4 weekly pay period can help care and support employers manage their budget more easily. However it does not coincide with a calendar month, which can confuse employees.
If you pay your employees weekly or every 4 weeks, the way dates fall mean that sometimes you will end up making one more payment than usual to your employees towards the end of the tax year. If you pay your employees weekly this would be a 53rd weekly payment, if you pay them four-weekly it would be a 14th four-weekly payment.
These extra payments are known as 'week 53 payments' (or week 56 for four-weekly paid employees).
If you use payroll software, such as HMRC’s Basic PAYE Tools, week 53 payments are handled automatically. Otherwise, guidance is available in the CWG2 Employer Further Guide to PAYE and NICs, under ‘Week 53 payments’ (Ctrl F will open up a search box).
On these ‘week 53’ type occasions HMRC allow employers to give the employee an extra proportion of personal allowance so that the employees take home pay is not adversely affected. This means that over the tax year, the employee receives more tax free pay than the standard personal allowance for the year. Once the tax year ends, HMRC will take steps to recover the tax underpaid as a result of the extra personal allowance given to the employee and will send them a P800 calculation. The resulting underpayment of tax is then collected through an adjustment in the tax code allowing the underpayment to be collected in smaller, more manageable instalments across the tax year.
When this happens employees often complain to HMRC and the employer is accused of failing to operate PAYE correctly even though they have deducted tax in accordance with the PAYE regulations.
HMRC are working to come up with a solution to this long standing problem. In the meantime, if you expect that you will be making an extra ‘week 53’ type payment in the tax year it may be helpful if you explain the situation to your employees.