Starters and leavers – What is needed?
Why starters and leavers are a big deal for your business
When you’re an employer, it’s inevitable that you’ll have starters and leavers. You’ll always have had them and you’re probably (more or less) aware of what you need to do. However, the legislation around starters and leavers is forever changing, so it’s important that you keep up to date. It’s only by staying up to date that you know you won’t fall foul of the law.
What do you need to do when someone joins your business?
When you have a starter, you need to create an Employee Record for them so that they are included in your Full Payment Submission (FPS) under Real Time Information (RTI). Depending on the size of your company, you may obtain all the required information from Human Resources or you may have someone appointed to gather the necessary information for new starts. Either way, you need to make sure you have a system in place to collect the information.
What paperwork is required for starters?
An employee record
When someone joins your company, you need to create an Employee Record for them that contains the following information:
- Full name and title, address, date of birth and gender.
- Start date and their contractual hours.
- Their job title, location and place of work.
- Their basic pay, annual salary or hourly rate.
- Their pension details and details of any other Benefits in Kind.
- Employee reference number.
- How often they get paid, how they are paid and their bank details.
A new start will normally provide you with a P45. When you receive a P45, you should keep parts 2 and 3. Part 1A is kept by the employee. When you are presented with a P45 from a new start, it’s important to check that is for the current tax year and that all the information is correct. If the P45 does not refer to the current tax year, the figures from the employee’s previous employment should not be used. In this instance, you should ask your new start to complete a Starter Checklist to provide you with the relevant information for HMRC.
In the absence of a current year P45, you can avail of the Starter Checklist created by HMRC, which you can find here. This is a standard form that you can customise to suit your own needs if you so desire. The most important thing is that the final checklist contains an employee declaration and student loan questions which are included in the HMRC version.
In the employee declaration, the new start should tick Statement A, B or C. The tax code used will depend on which statement has been ticked. If no statement is ticked or if the form isn’t signed, the code OT should be used. Student loan questions are asked so that you, the employer can establish whether or not deductions should be made.
National Insurance Certificates
New starts may provide age exemption certificates, a certificate of election or a deferment certificate to prove their right to nil or reduced rate National Insurance Contributions. Again, it is important to take heed of these and to retain them on file.
What about leavers – what do you need to do when someone leaves?
When an employee leaves, they need to be paid what they’re due. That goes without saying. To help make sure that the right amount is paid, a leaver notification is normally issued that contains the following information:
- Their full name, payroll number and leaving date, plus an address for sending their final payment, payslip and P45.
- Their reason for leaving, together with their payment due at that time, plus any other additional payments.
- A statement of their annual leave, loans, special circumstances or deductions due.
It is important that this information is generated in good time to avoid any errors in payments made.
The other paperwork that needs to be taken care of is:
As an employer, you are required to provide your employee with a P45 when they leave. You will also need to inform HMRC via the FPS. For the P45, it’s up to you to produce parts 1A, 2 and 3 in order to give the employee all the information they need to pass on to their next employer.
National Insurance Certificates
If the leaver is affected by NI exemptions, elections or deferment then you will be required to complete a National Insurance Certificate to give to the employee when they leave.
A note to bear in mind about different types of leavers
You would be forgiven for thinking that a leaver is a leaver, but in fact, there are different kinds of leaver. An employee technically “leaves” if they die or retire as well as if they decide to move on to another job. In the event of death, any payments which are due to be made will be liable to tax, but not National Insurance. In the event of retirement, where the employee will receive a pension from the employer, the employee is treated as a standard leaver.
If an employee has already left and there is a payment due, there are special rules to follow if you have already issued a P45. You can find them here in the section Paying an employee after giving them a P45.
What should you do if you need help?
In principle, starter and leaver policies and procedures are relatively straightforward. That said, it is your duty as an employer to adhere to the most recent requirements and make sure you have all the necessary paperwork in place. The GOV.UK website is a great resource that is full of useful information, but nothing beats having a trusted advisor onside when you need more specific help.
At Payplus, our teams work closely with our clients to make sure they stay on the right side of the regulations when it comes to starters and leavers – and a whole lot more.
If you need support regarding any element of your payroll, we’d love to hear from you. Not only do we speak your language; we provide a service that our clients tell us is outstanding. Get in touch and let us help ease your payroll burden.