Gross to net question

dotchas

Hi, 
Looking for advice on payroll calculations.
If someone had to pay back overpaid wages £1200 gross
How do you get the net figure?
20% tax
13.5 NI
9% pension
Do they come off in any particular order?
Thank you

Dazed_and_C0nfused

It depends on the tax code used (and whether it was cumulative or non cumulatibe can make a difference) and what method was used to make the pension contribution.

Net pay could reduce the amount of tax payable and salary sacrifice could reduce the amount of tax and NI payable.

dotchas

Oh its more complicated than I thought

Marcon

dotchas said:

Hi, 
Looking for advice on payroll calculations.
If someone had to pay back overpaid wages £1200 gross
How do you get the net figure?
20% tax
13.5 NI
9% pension
Do they come off in any particular order?
Thank you

There's a good explanation + worked example here: https://www.litrg.org.uk/tax-guides/taking-employee/pay-and-deductions#toc-overpayment-of-wages

Go to the section headed 'Overpayment of Wages', noting particularly:

An employee shouldn’t be asked to pay back more than they actually received. As an alternative therefore, or where an employee has left (and the employer decides not to simply write the overpaid amount off), an employer should work out the amount of the overpayment that the employee actually received (that is, the net amount, after deduction of tax and NIC) and recover that (either by making a deduction from net pay or by asking the employee to pay it back by cheque for example).

Once that has been received, the employer should go back and rewrite the incorrect payroll entries to recover the overpaid tax and NIC from HMRC. This should restore the status quo.