Payroll Terms & Abbreviations Every UK Business Owner Should Know
Payslip Terminology
Gross Pay: The total amount of money earned by an employee before any deductions are made.
Income Tax: A tax that is paid on the income that an individual earns.
Hourly Rate: The amount of money that an employee earns per hour.
Net Pay: The amount of money an employee receives after deductions have been made from their gross pay.
Basic Pay: The regular salary or hourly rate an employee receives for their standard working hours.
Bonus: A payment that is made to an employee in addition to their regular salary. Bonuses are often paid based on performance or achievement of goals.
Commission: A payment that is made to an employee based on the sales that they generate.
Pension: A retirement plan that provides a regular income to a person when they retire.
Attachment of Earnings Order: A court order that allows a creditor to collect a debt by taking money directly from the debtor's wages.
Tax Code: A code issued by HMRC that determines the amount of income tax to be deducted from an employee's wages or salary.
Salary Sacrifice: An agreement made between an employee and employer to reduce the employee’s entitlement to cash pay in return for a non-cash benefit.
Benefits in Kind: Non-cash benefits provided to employees by their employer, such as company cars or private healthcare, which are subject to taxation.
AE (Auto-Enrollment): An abbreviation used to refer to the Pensions Auto-Enrollment scheme, where workers aged between 22 and State Pension age who meet the criteria must automatically be enrolled on a workplace pension.
NINO (National Insurance Number): A unique identifier assigned to individuals in the UK for tracking their National Insurance contributions and benefits entitlement.
NI (National Insurance): A compulsory social security contribution made by both employees and employers in the UK. It funds various state benefits, including the state pension, unemployment benefits and healthcare.
Contributions: Payments that are made by employers and employees to government schemes, such as National Insurance and pensions.
Statutory Payment Terminology
SAP (Statutory Adoption Pay): A statutory payment made to eligible employees who take time off work to adopt a child, paid by the employer for up to 39 weeks.
SMP (Statutory Maternity Pay): A statutory payment made to eligible employees who take time off work to have a baby, paid by the employer for up to 39 weeks.
SPP (Statutory Paternity Pay): A statutory payment made to eligible employees who take time off work to support their partner who is having a baby or adopting a child, paid by the employer for up to 2 weeks.
SHPP (Statutory Shared Parental Pay): Gives parents greater flexibility in how they care for their child. SPL allows birth mothers to share a portion of maternity leave and pay with their partners to care for children from birth until their first birthday.
SSP (Statutory Sick Pay): A statutory payment made to employees who are unable to work due to illness or injury, paid by the employer for up to 28 weeks.
HMRC Terminology
HMRC (Her Majesty's Revenue and Customs): The UK government department responsible for the collection of taxes, including income tax and National Insurance contributions.
PAYE (Pay As You Earn): The system used in the UK for collecting income tax and National Insurance contributions from employees' wages or salaries.
RTI (Real-Time Information): The system introduced by HM Revenue and Customs (HMRC) for reporting payroll information in real-time, requiring employers to submit details of employees' pay, deductions and other payroll information with each payment.
FPS (Full Payment Submission): The report submitted to HMRC by employers every time they make a payment to an employee. It includes information on earnings, tax, and National Insurance contributions.
EPS (Employer Payment Submission): This report submitted to HMRC is sent by 19th of the month to include information that is required to be reported for the company.
FPS/EPS Penalties: Penalties imposed by HMRC for late or incorrect submission of Full Payment Submissions (FPS) or Employer Payment Summaries (EPS).
P11D: A form used to report certain benefits and expenses provided to employees, such as company cars, private healthcare, and other taxable perks. It is used to calculate employees' additional tax liabilities.
P45: A form issued by employers when an employee leaves a job. It provides details of the employee's earnings and tax payments during the tax year up to the date of leaving.
P60: An annual statement provided to employees at the end of the tax year, summarising their total earnings, tax deductions and National Insurance contributions.
P6: Provided by HMRC to update an employee’s tax code.
New starter checklist: To be submitted by a new employee if they don’t have a P45 or left their last job before 6th April.
HR Terminology
Human Resources: A team or person who manages everything to do with the organisational staff within the business from recruitment, performance management to pay and benefits.
Employment Tribunal: A court that hears cases involving employment disputes, such as unfair dismissal, breach of contract or misconduct and disciplinaries.
ACAS: Gives employees and employers free, impartial advice on workplace rights, rules and best practice.
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