Mistimed Payments

Introduction

If an employee receives a payment for a previous pay period the HMRC allows for the national insurance contributions, student loan deductions and week1 month 1 tax calculations to be adjusted, so that they are calculated as if that payment was processed during the correct, previous pay period.

The purpose of this document is to describe how this feature is used within InPay. Further information is available in chapter 3 of the CWG2 document - https://www.gov.uk/government/publications/cwg2-further-guide-to-paye-and-national-insurance-contributions.

Mistimed payments can only be used in periods where the worker has no pay at all. Any payment, no matter how small, makes that period unavailable for mistimed payments

The 2 most common scenarios where the functionality will be used are as follows

A new starter receives their first payment for more than one period.
A worker submits their timesheet late through the InTime Timesheet application

The InTime integration functionality is enabled only after you have submitted a request to the support team.

Before you request this functionality to be enabled it is vitally important that you review your pay period and timesheet dates. You must ensure that your timesheet dates fall into the correct InPay pay period and that you take corrective action. Failure to do so will potentially cause calculation issues.

It should be noted that in some situations an employee may be worse off when mistimed payments are enabled.

SCENARIO 1

A new employee starts work on 15 June and is due to be paid monthly on the last day of each month. The earnings period is monthly and the first pay day is 31 July (mistimed payments). The employee receives £2,250 gross pay which is made up of: £750 for the period 15 June to 30 June and £1,500 for the period 1 July to 31 July.

Add the payment of £2250 to InPay as you would normally
Add £750 to the employee mistimed payments screen for month 3

Figure 1 shows the National Insurance and tax (as the worker is on week1\mth1 code) based on a monthly payment of £750.

Figure 2 Shows the resultant payslip.

Figure 3 - After generating the FPS file it shows that 2 Periods are covered.

SCENARIO 2

A worker submits their timesheet late through the InTime timesheet application. Two separate weeks’ wages for weeks ending 15 July and 22 July are paid on 29 July. InPay will add a row to the screen below for the period ending 15th July (period 201816). The 2 weeks pay will be calculated separately for NI, Student Loan and Tax (because it is a wk1\mth1 code) purposes.

Figure 5 – Mistimed payments automatically created with timesheet ticked

Figure 6 – Resultant payslip

Figure 7 – RTI FPS File with 2 periods covered

Where mistimed timesheets is enabled, InPay will recalculate the current period’s mistimed payments whenever a timesheet is added or deleted.

UMBRELLA WORKERS

InPay caters for the payment of workers where the worker pay’s employer’s NI, which results in a reduction to the worker’s taxable and niable pay. For example if the same timesheet was received as in Scenario 2. The following mistimed payments row would be created

Figure 7 – Mistimed timesheet (Umbrella Worker) shows that although the same input of £1000 pay for period 201816 was created, the resultant NI payments and levels are calculated on niable pay of 898.38 which is the £1000 - £101.62 Employer’s NI.

Figure 8 – Mistimed timesheet payslip (Umbrella Worker)

NI DETAILS screen

Once committed the mistimed payments row will show through the NI payments tab of the NI details screen and will be treated the same as any normal period

RESTRICTIONS

A mistimed payment cannot be entered for a director
A mistimed payment cannot be made where the period’s allowance has already been used (this could be from a normal payment, a mistimed payment in a previous period or due to its use in an advanced holiday period) It should be noted that a period can be used if the only payment made in that period was itself a mistimed payment.
A mistimed payment can be made from a previous tax year, however this uses the contribution rates and limits appropriate to the year in which the payment is actually made
The mistimed payment will be calculated against the NI letter that is applicable for the period the payment is made
Upon changing NI letter any mistimed payments to be paid in the current period will be recalculated
Where a mistimed payment is entered manually (rather than from a timesheet) it is the user’s responsibility to ensure that there is enough pay in the payment period to cover the mistimed payments.
A user will be required to delete any mistimed payments in a period prior to moving an employee onto a new payroll
When the out of step timesheets flag is ticked, InPay can only automatically allocate timesheets from InTime and pre-processed fees, into mistimed periods,. Any other payments will use the NI allowance of the period they are entered for. The result of this is that if at a later date a timesheet is received for the earlier period the allowance will already have been used and the worker will not receive the NI benefit. It is recommended therefore that all payments are sent from InTime,
Tax, National Insurance and Student Loans cannot be overridden in periods containing a mistimed payment. If a statutory override is required the mistimed payment(s) must be deleted from the Pay -> Mistimed Payments screen