Christmas payroll – paying staff early

The festive season is just around the corner, and whilst it might be a little early to put up the decorations, now is the time to plan ahead for the December payroll if you wish to pay staff before the Christmas break.

December will naturally be a busy time for many employers and even more so for retail and hospitality businesses. Payroll teams, usually working towards the month end, may want to bring forward their work even if the payroll date remains unchanged.

But, if an employer wishes to pay staff before the Christmas break, perhaps adding an annual bonus, that will add further pressure on payroll teams. Whilst there is no right or wrong way to approach this, employers should keep the following in mind.

Cashflow

A fundamental consideration of whether an employer can pay staff early will be cash flow. Put bluntly, can the business afford to bring its payroll forward by a week or 10 days? Forecasting the impact on cash flow will be essential, and something your accountant can help support.

Payroll date

Choosing the date on which to pay staff will be the first challenge. It typically takes two working days to run a payroll and transfer money into employees’ bank accounts. Given that staff will want to be paid before the 25 December, a cut-off date will need to be agreed.

Whilst it might be easy to bring forward the pay date for salaried staff where monthly pay is fixed, it is a little more challenging for those paid an hourly rate. Employers will need to estimate hours yet to work to the month end with corrections made in January.

Sickness

Staff absences due to sickness tend to rise over the winter months and absence rates will need to be considered when paying staff early. First, a cut-off date for sick days will need to be agreed, and checks for statutory sick pay taken into account.

Commissions and bonuses

Commissions and bonuses are of course welcomed by staff but can create headaches for payroll teams where pay is made early. Bonuses will need to be agreed well in advance and a cut-off for commission agreed. Commissions for the remainder of the month may need to be estimated or carried over into January.

Seasonal staff

It is common for retail and hospitality businesses to take on seasonal staff to meet increased demand. Here, a decision will need to be taken whether they too will be paid early. Whilst an employer may decide to pay them at the end of the month, they may not want the trouble of running two payrolls in December.

Employee finances

Responsible employers should also consider the financial impact on employees should they decide to pay staff early in December. It will leave a long window until the January pay date and businesses should be mindful that they may need to help staff through the following month.

Additionally, employers will need to consider the impact on any benefits staff may receive and ensure Universal Credit payments are protected. This is simply done by reporting the normal or contractual payday on the Full Payment Submission (FPS) and not the early date of pay.

Forward planning is critical if a business wishes to pay its staff earlier than normal this December and the Kreston Reeves payroll team is on hand to help support you and your business. Contact us today for more information.