What are wages?
Employers have to collect and account for tax and National Insurance contributions (NIC) on their employee’s pay. This page looks further at what payments count as ‘pay’ for tax and National Insurance purposes
The main things that count as pay for tax purposes are wages, salary, overtime payment, bonuses and tips. It is important when thinking about this to remember that you must pay your personal assistant at least the National Minimum Wage or National Living Wage.
Other payments which you may need to make and which are also taxable as normal pay are:
- Holiday pay – most workers are legally entitled to a minimum of 5.6 weeks paid holiday per year (known as statutory leave entitlement or annual leave). For part-time workers this is apportioned per their hours worked.
- Statutory Sick Pay – you may or may not pay your employee as normal, during any periods of sickness absences depending on how you feel about such matters, but you will need to be aware of the legal minimum requirements.
- Employers are also required to pay things like Statutory Maternity Pay, Statutory Paternity Pay and Statutory Adoption Pay where the relevant conditions are satisfied (although you will be able to claim reimbursement from the Government for most of it).
Follow the links above for more information about these elements.
Pay for the purpose of NIC is broadly the same as pay for tax. The elements mentioned above, e.g. holiday pay, statutory sick pay and statutory parental pay are all subject to NIC as well as tax.
As well as regular pay, you may provide other benefits or expenses to your employee, such as accommodation, a mobile phone, or travel expenses.
Sometimes these can be treated as additional income for an employee, however they are reported to HMRC differently and tax is paid to HMRC by the employee separately. Class 1A NIC may be payable by the employer on these amounts, payable at a rate of 13.8%.
Before 6 April 2016, the position sometimes depended on whether your employee was a 'lower-paid employee' – that is, whether they earned at a rate of £8,500 or less, per year. The rules were more generous for these lower-paid employees, who were often part-time workers. With effect from 6 April 2016 the lower paid employee category is abolished, all employees are treated in the same way.
It is important to understand the rules on benefits and expenses and there is a basic outline on GOV.UK. We provide more detail and look closely at the treatment for some specific benefits and expenses that are common for carers in our dedicated benefits and expenses section.
Your employee may need to be absent from work for other reasons, such as Jury service. You do not have to pay employees for time off for public duties, and you can find some further information on these and other absences in our employment law section.