Have you, or do you ever, employ casual workers for a short period?
If the answer is yes then you need to take extra care when processing their pay.
In the current climate, the obligations placed on employers are more than ever before. Irrespective of size or resources, employers are expected to ensure that employees are paid at the correct rates, provide workplace pensions and apply the correct PAYE Tax and NIC deductions via payroll. An error leading to not enough tax and NIC being deducted from an employee could result in the employer having to pay the outstanding amount to HM Revenue & Customs (“HMRC”), which, in our experience, often turns out to be costly.
As far as HMRC are concerned, all casual workers should be treated through the payroll in the same way that you would treat a permanent worker. Whether you are employing a worker for a few days or weeks, there is the possibility that they do not have a P45. To ensure the correct tax code is applied, the employer should provide the worker with a “Starter Checklist” which should be completed on their first day of employment. If no P45 or completed starter checklist is received, then a BR tax code should be applied and not the emergency code as using the emergency code could result in an underpayment of tax, which HMRC will expect the employer to suffer.
Paying casual workers cash in hand should always be avoided as this could result in unexpected additional costs to the employer in the face of any enquiry. HMRC may look to gross up the payments to ensure that the correct Tax and NIC has been accounted for as well as potential apply penalties for compliance failures and interest on late payments.
For example: The employer agrees to pay a casual worker £50 per day in their hand, however the employee leaves before completing a started declaration which means that the employer is to action a BR tax code. For the employee to receive £50 in their hand and using the BR code this means that it has cost the employer £73 per day. Had the employee completed the starter declaration then the emergency tax code would have been applied and the cost to the employer would have been £58 per day.
It is clear then that since the introduction of RTI, gone is that relaxed approach HMRC would take towards casual workers where they were employed for a week or less. Currently, the only concession for casual workers is for short-term harvest workers and beaters for shoots where broadly speaking, if you employ them for 2 weeks or less, then you can pay them without deduction of PAYE tax or NI.
If you have any queries on payrolling casual workers, or want to find out more about AAB’s award winning payroll service, then please contact Samantha Downie (Samantha.Downie@aab.uk) or your usual AAB contact.