PAYE Changed from monthly to weekly and we got hit for tax and NI

ConfusedMark

Hi

My wife’s pay changed at the start of June from Monthly to Weekly, as she used to work a month in hand the company decided to bring everyone’s normal end of month (June) payment forward to the middle of the month during the transition. Meaning that this week she has been paid for all of Mays hours and a week in June. As we were away last week, there were 0 hours for the June part of this pay.

On this payslip, there are 123 hours worked (correct for May) and it shows taxable pay of ~£1000 and has had the following deductions

PAYE (Tax): ~£170
Nat Ins: ~£90
Student Loan: ~£65
Pension: ~£60 (higher rate than usual)

The payslip also indicates that she is being paid weekly

I am sure from this she is being taxed as though she is earning >£1000 in a week rather than taking the whole working period into account. Whilst it could be argued that the Tax will balance out over the year that isn't true for the other deductions and we believe that she's overpaid on the other three by over £100 (closer to £200 once you include the income tax)

Are we missing something here? If not, what can we do about this? It seems wrong that the company can include a months’ worth of hours in a weekly payslip and leave the employee out of pocket for hours worked...

FYI - Payslips from earlier this year that have similar hours worked have much lower deductions all around e.g. £2 student loan

Dazed_and_confused

The tax element could be because she isn't entitled to as many tax free allowances on this pay day.

Payment made in month to 5 June 2017 which is month 2 of the tax year would have attracted 1/12 of her tax code allowances (so £958 if shes on tax code 1150L) and in total since the start of the tax year she would have had 2/12 of her tax allowance (£1916 on code 1150L).

You haven't said when the weekly payment was made but if we assume today then that is in week 11 of the tax year so she is entitled to 11/52 of her tax code allowances which on code 1150L would be £2432 so she is only getting £516 pay before starting to pay tax on this payslip. Pay period 11 only started yesterday so if she was paid earlier in the week she would only be entitled 10 weeks worth of her allowances so even more tax to pay on this pay day.

It does seem there would be a large NI hit and as you say that doesn't even out over the year.

Really only the employer can explain why they've timed the change in that way.

ConfusedMark

Thanks for the quick reply

Pay date was apparently the 9th, we only got the payslip yesterday though to discover what was going on, so it was pay period 10 but the hours are still correct in the original post.

She's spoken to payroll about it today and been told that this is entirely normal and legal. Still seems very unfair for the employee to lose out on money because the employer is changing the pay period

Dazed_and_confused

It's no doubt perfectly legal but doubt it's normal, universal credit is paid monthly I thought because it's meant to help people used to how the world of work works!

Maybe wife's employer will start producing little brown envelopes each week with cash inside, bank transfers are so last century!!

getmore4less

Of the top of my head without working it through.

On the NI I think she would have hit this issue when she left anyway if they paid the "in hand" pay with the final pay(2 months in 1 pay cycle).

If there really was no pay(not even holiday pay) for the week then she may have paid less NI than if they had roll the in hand in the may pay(paying 2 months)


the other option they had was to pay may pay period end JUne then go to Junes pay weekly paid in July etc.

if they have now removed the in hand completely ie. you get paid the end of the week you work that months you now have the money you could have been waiting a long time for.

chrisbur

In my opinion the conversion to weekly pay period should not have happened until the following payday. The pay period is meant to reflect what is actually being paid not what is going to be paid in the future.
This would not affect the amount of tax that would be due as this is decided by the total paid for the year. There would probably be extra tax above a normal weekly amount as this looks like more than 52 week's pay is being paid in the year.
The main affect would be on the national insurance. Even if it was applied to this monthly pay in a weekly pay period there are examples in the HMRC instructions which cover cases where more than one payment is made in a pay period for example where holiday pay is paid in advance or where the first payment due to a new starter is paid late so that they get more than one payment in a pay period. In these cases HMRC advise that a calculation of national insurance should be based on the NI that would be due if these payments were paid separately not as one lump sum. This case is not exactly the same but seems to me to be in the same spirit.
https://www.gov.uk/government/publications/cwg2-further-guide-to-paye-and-national-insurance-contributions/2016-to-2017-employer-further-guide-to-paye-and-nics
If your employer feels that they have done this correctly the only thing that you could do is complain to HMRC. I think it probable that they would agree it was wrong to do this but I cannot be certain of this. Even if they agree this is likely to annoy your employer which may not be in your interest. Only you can decide this.
Regarding pension you would have to contact whoever runs the pension scheme about that, I have no idea how they would view it.
Regarding student loan you can get a refund of any over-payment at the year end but it would I believe be based on yearly earnings and as I said before your yearly earnings look like they will include more than 52 week's pay. So it may not amount to a great deal.

ConfusedMark

Hi - thanks for the detailed response Chris - I wasn't aware that we could contact HMRC about the NI or the SLC. We'll look into that.

As for annoying the employer, it's a 0 hour contract and is only slightly above the living wage. There are most definitely other jobs our there if the employer wants to be offended over this

Thanks again to everyone who's replied

peter3hg

As NI is based on the pay period she will have paid NI on earnings over one weeks worth of the primary threshold (£157). What they should have done is paid May's pay monthly and then paid the week in June as a separate pay run. Then she would have paid NI on pay over £680 in May and pay over £157 for the week in June. Therefore her NI would be ~£80 less than she's paid.
I would point out to the employer that this error has cost them money as well as the employer NI works on the same basis.

Intoodeep

And if they had a brain surely they should have changed from Monthly to Weekly at the end of the 2016/17 Tax Year starting with week 1 in 2017/18 Tax Year or is that just too simple ?