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, use the tax code 0T on a ‘Week 1/ Month 1’ basis
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 if the employee leaves before completing a starter declaration then this could result in the employee not paying the correct amount of tax due.
Since the introduction of RTI, gone is the 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. However, their pay is still taxable income and these employees will be required to pay any tax that is due.
If you have any queries on payrolling casual workers, or want to find out more about Sagars’ dedicated payroll service, get in touch with Karen Thomson, Leander Wainwright, or your usual Sagars contact.
Find out more about our Payroll offering or meet our Payroll team.