Payroll can get very technical, very quickly. To ensure you can navigate the different nuances while running payroll, we’ve put together a quick glossary of common payroll terms that can be your personal handy guide.
Accounts Office Reference is the reference number used by employers when making PAYE payments to HMRC. It will be 13 digits long starting with 3 numbers, 2 letters then 8 more numbers. It is unique to each employer.
Build up of amounts due to be paid, such as accrual of holiday.
AE or Automatic Enrolment is now a legislation that every employer must offer their employees the chance to be enrolled into a pension scheme from the age of 22 onwards if they earn over £10,000 per annum. Employees are assessed every pay period based on their age and income. If the employees are eligible, they are to be automatically enrolled into the workplace pension scheme.
AEO or Attachment of Earnings Order is sent to an employer to notify them that they will need to start making deductions from an employee’s wages. The notification will also specify the amount.
AML or Additional Maternity Leave comes after ordinary maternity leave, which lasts 26 weeks.
The payment of an amount for the whole year paid in equal instalments, normally monthly.
In relation to statutory payments, APP would mean Adoption Pay Period, which is made up of two 26 week periods, one is called Ordinary Adoption Leave and the other is Additional Adoption leave.
In relation to pensions, APP would mean Appropriate Personal Pension scheme, which is a personal pension scheme that was used by an individual before 6 April 2012 to contract out of the state second pension on the protected rights basis.
All employers have to contribute towards the funding of apprentices in the workplace. This is calculated as 0.5% of any NI-able pay the company pays as a whole. Employers who have no connection to any other company are entitled to an £15,000 per year allowance to offset against the apprenticeship levy due, meaning that only employers with an NI-able pay bill of over £3,000,000 have to actually pay apprenticeship levy.
The amount determined by HMRC in respect of calculating the benefit value of a company car.
AVC or Additional Voluntary Contribution is an additional contribution employees can make towards their pension.
AWE is the term used when calculating an employee's average weekly earnings.
Salary an employee should have received, but didn’t. Includes missed payments, such as regular hours, overtime, or commissions.
Bankers Automated Clearing Service. An electronic payment system used to make payments directly from one bank account to another. These payments usually take 3 working days to process.
Also known as non-cash benefits, benefits in kind are taxable items or services that are provided to employees on top of their regular salary. Benefits in kind can include perks like private healthcare, gym memberships, company cars and travel expenses.
CCV or Child Care Vouchers are no longer available. However, if the scheme was joined prior to 2018, this allowed working parents the opportunity to sacrifice part of their pre-tax salary to pay for registered childcare.
The Clearing House Automated Clearing Service. A same-day payment system traditionally used for transactions on a tight schedule.
CML or Compulsory Maternity Leave, is compulsory for women to take two weeks of maternity leave, or four weeks if they work in a factory, following the birth of their baby.
CSA or Child Support Agency as an entity will send a schedule to an employer to deduct child maintenance payments from an employee.
CTAEO or Council Tax Attachment of Earnings Order is a notification a council will send to an employer to deduct payments from an employee for overdue council tax. This is repaid in percentage bandings.
Declaration of Compliance must be completed within 5 months of staging date/duties start date. Complete a form online with The Pensions Regulator. This informs them of the number of workers on your payroll, how many were automatically enrolled, how many were not, and which pension scheme was used.
DEO or Deduction from Earnings Order (raised by CSA for child maintenance), is an order made by DWP (Department of Work and Pensions) to deduct payments from an employee. This could be for overpaid benefits.
DWP or Department for Work and Pensions is responsible for welfare, pensions, and child maintenance policy.
In Scotland, an Earnings Arrestment (EA) is a form of Diligence, which is a legal term for procedures used to recover debts. When served with a schedule of arrestment, the employer must make deductions from the debtor's earnings and forward the amount of those deductions to the creditor.
Employees who must be automatically enrolled into a pension scheme if they are 22 - state pension age and earn over £10,000 per year.
Any employer with a total Class 1 NI liability of less than £100,000 will be able to claim employment allowance, which is a £5000 allowance to offset against any employer's NI due to be paid in that tax year.
Employees who are not eligible for automatic but have a right to join a pension scheme. They are aged between 16-74 and earn less than £6240 per year.
EPS or Employer Payment Summary is reported to HMRC once a month and advises HMRC if there are any statutory recovered payments or CIS liabilities which would reduce the PAYE bill due to HMRC.
The Employment Rights Act (ERA) 1996 set out the rights of employees in situations such as dismissal, unfair dismissal, parental leave, and redundancy. It governs what employers can expect from employees, what employers can ask employees to do, and employees' rights at work.
Every year, the Department for Work and Pensions (DWP) reviews the earnings thresholds for automatic enrolment.
The EWC or Expected Week of Childbirth (also known as Expected Week of Confinement) is the week beginning Sunday and ending Saturday in which it is expected that childbirth will take place.
Some payrolls may be exempt from Automatic Enrolment (AE) duties meaning no declarations or re-declarations need to be completed for the company. The Pensions Regulator will have been made aware that the company is exempt. These payrolls could be payrolls that have no workers for AE (i.e. under 16 or over 74, or they do not ordinarily live or work in the UK, or they are directors without a contract of employment)
EYU: Earlier Year Update is a submission we can make to HMRC for tax years 2017-18 and years prior to that, to make any corrections.
Faster Payments is one of the ways you can send money electronically in the UK. It’s a real time payments system, which means that any money sent is received in near real time, 24 hours a day.
FPS or Full Payment Submission which is submitted every payroll and must be sentto HMRC. This informs HMRC how much employees have been paid each pay periodand how much tax/NI is due on these payments. Must be done on or before pay day.Failure to do so can lead to fines from HMRC.
Organisations with 250 or more employees have to report on their gender pay gap annually, based on a ‘snapshot date’ of 31 March for public sector organisations, or 5 April for private and voluntary sector employers.
Group personal pensions (GPPs) are a type of defined contribution pension which some employers offer to their workers. As with other types of defined contribution scheme, members in a GPP build up a personal pension pot, which they then take money from when they retire.
This is the total amount an employee receives prior to any tax deductions.
His Majesty’s Revenues & Customs. They are the UK government’s official regulatory body responsible for the administration and collection of taxes.
LEL or Lower Earnings Limit is set each tax year by the government. Even if an employee earns more than the lower earnings limit (LEL), they are not required to pay primary, class one national insurance contributions until their earnings reach the primary threshold. In the 2022/23 tax year, the LEL is set at £123 a week.
MA or Maternity Allowance is awarded via DWP to employees who do not qualify for SMP.
If a business chooses to pay employees an amount towards the mileage costs, these reimbursements are called ‘Mileage Allowance Payments’ (MAPs). 45p per mile is the tax-free mileage allowance for the first 10,000 miles in the financial year – it’s 25p per mile thereafter. Any amount paid over the approved rate would be classed as a benefit in kind.
MW or Matching Week is a term used within adoption legislation to refer to the week (Sunday to Saturday) when the adoption agency tells your employee that they have been matched with a child.
This is the total amount an employee actually takes home after all deductions have been made.
Employees who are not eligible for automatic enrolment but can choose to opt in to a pension scheme. They are between 16 - 21 or State Pension Age - 74, earning over £10,000 per annum, OR 16-74 earning over £6240 but under £10,000.
National Insurance contributions are a tax on earnings and self-employed profits paid by employees, employers and the self-employed. They can help to build your entitlement to certain benefits depending whether you are employed or self- employed, such as the State Pension and Maternity Allowance.
NINO or National Insurance Number is made up of two letters to start, 6 numbers and a letter to finish. This is one of the ways HMRC can identify an employee.
NMW or National Minimum Wage is the minimum an employer can pay its employee per hour.
NVR or NINO Verification Request is sent to HMRC to request the employee’s NINO.
OAL or Occupational Adoption Leave is an optional payment that can be made by the employer on top of the required statutory payment.
OML or Ordinary Maternity Leave is made up of 26 weeks.
OMP or Occupational Maternity Pay is an optional payment that can be made by the employer on top of the required statutory payment.
If an eligible jobholder gets automatically enrolled into a pension scheme, but wants to leave it, they have opt out rights. This means that if they opt out of the pension, by contacting the pension provider directly, they will get a refund of any pension contributions they have made, providing they opt out within 30 days of joining. The employer will also receive a refund of contributions. If they want to leave after 30 days of joining, they can do so, but they won’t be entitled to a refund of contributions. When they opt out, they forgo the right to an employer pension contribution.
OSP or Occupational Sick Pay is an optional payment that can be made by the employer on top of the required statutory payment.
Employers must use a P11D to tell HMRC about the value of any benefits in kind they’ve given to employees, including directors. This means benefits or expenses that effectively increase an employee’s income – such as a company car, private medical insurance or interest free loans. The employee pays tax on most benefits whilst the employer pays Class 1A National Insurance Contributions. A copy of the P11D must be provided to each employee affected, as this will be needed by them if they need to complete a self-assessment tax return.
Employer return to report Class 1A contributions on expenses and benefits and to confirm that P11D was completed.
P32 is a summary of payments to be made to HMRC each month for a company. This will include all PAYE, Student Loan deductions, National Insurance contributions, Sick Pay etc. This is reported to HMRC as part of the FPS and EPS.
P45s are issued once an employee has been made a leaver within the payroll.
For employees, P60s show the tax they’ve have paid on their salary in the tax year (6 April to 5 April). A separate P60 is issued for each job every tax year. For employers, P60s must be shared with their employees at the end of each tax year.
PAYE or Pay As You Earn is a system to collect Income Tax and National Insurance from employment and pay HMRC.
PAYE Reference is unique to each individual payroll. It’s how HMRC identifies each employer. This is usually in the format of 3 numbers, then a mix of letters, and numbers. For example, 123/AB45678.
PILON or payment in lieu of notice is a payment made to employees by an employer for a notice period that they have been told by the employer that they do not have to work.
From April 2019, employers could receive instructions from HMRC to deduct repayments for a Postgraduate Loan (PGL) on behalf of one or more of their employees. PGL repayments can be for either a Postgraduate Masters Loan or a Postgraduate Doctoral Loan. The HMRC will issue a PGL1 or a PGL2.
QD or Qualifying Day is a term used within SSP. It is the days that the employee normally works (their contracted working days). It may be decided not to use contracted working days. For example, if the employee works a varied or alternative working pattern each week. It will be agreed which days will be qualifying days with the employee.
QW or Qualifying Week is a term used within SMP, it is the 15th week before the week the baby is due. This period may vary depending on how often an employee is paid – weekly, monthly or other intervals.
Re-enrolment has to be completed every 3 years from staging/duties start date. Employers need to re-assess all workers on payroll, re-enrol those who are eligible jobholders who have opted out, and complete a re-declaration of compliance.
Re-Declaration of Compliance: Companies must re-enrol their employees every 3 years after their initial staging date/duty start. Companies must then report to The Pensions Regulator how many staff they have re-enrolled along with how many staff they have on the payroll, how many staff were already on the scheme and how many employees do not qualify for AE.
Entitled workers have a right to join the pension scheme. This means they can join a scheme, but there is no obligation on the employer to make a contribution to the pension, unless scheme rules dictate there must be one.
Non-eligible jobholders have a right to opt in to the pension scheme. If they choose to join a pension scheme, the employer must make a contribution as well.
RTI or Real Time Information reporting of any payments made to employees and has to be done on or before pay day.
SAL or Statutory Adoption Leave is the statutory amount an employer must allow an employee to take leave for Adoption leave.
SAP or Statutory Adoption Pay is guidance on the minimum amount an employer must pay an employee should they qualify for SAP, which is 90% of their AWE for the first 6 weeks, and then £156.66 or 90% of the employee’s AWE, whichever is lower for the remaining 33 weeks.
SAYE or Save As you Earn is a scheme which is where you can buy shares with your savings for a fixed price. You can save up to £500 a month under the scheme. It also comes with some tax advantages.
In relation to NIC, secondary refers to the employer. For example, secondary contributions = employer contributions.
SL or Student Loan is the amount deducted from an employee to repay their student loan.
SML or Statutory Maternity Leave is the statutory amount an employer must allow an employee to take leave for maternity leave.
SMP or Statutory Maternity Pay is guidance on the minimum amount an employer must pay an employee should they qualify for SMP, which is 90% of their AWE for the first 6 weeks, and then £156.66 or 90% of the employee’s AWE, whichever is lower for the remaining 33 weeks.
SPA or State Pensionable Age is the earliest age you can start claiming your state pension.
SPL or Statutory Paternity Leave is the statutory amount an employer must allow an employee to take leave for maternity leave.
SPP or Statutory Paternity Pay is guidance on the minimum amount an employer must pay an employee should they qualify for SPP which is £156.66 or 90% of the employee’s average weekly earnings, whichever is lower.
SRP or Statutory Redundancy Payment is the minimum amount of redundancy pay an employer must pay any employee they are making redundant with a length of service of over two years. The most common pay out is a week’s per length of service, but this is capped at 20 years. There are variations to this rule depending on the age of the employee.
This is the date that legally a company must comply with Auto Enrolment duties from. When AE was first introduced the Staging Date was a date in the future, now if an employer came into existence after October 2017 they must comply from the date they take on their first employee (Duties Start Date).
Is paid by employers to employees for up to 29 weeks. Employees who are off work sick for at least 4 consecutive days can qualify for SSP. The employee will need to have earned above the Lower Earnings Limit.
TUPE or Transfer of Undertakings (Protection of Employment) from the regulations of that name, is the transfer of employees from one employer to another. This is heavily regulated, so please ensure you speak to Pento’s Advisory team if you have any questions regarding TUPE.
TPR or The Pensions Regulator is the public body that protects workplace pensions in the UK. They govern the automatic enrolment legislation and have the power to audit/inspect, fine and imprison non compliant companies.
A tronc is a separate organised pay arrangement sometimes used to distribute tips, gratuities and service charges in restaurants, hotels and other hospitality establishments. If your employees get payments through a tronc the person who runs the tronc (known as the tronc master) must run a payroll via a separate PAYE scheme and report the information to HM Revenue and Customs ( HMRC ).
UEL or Upper Earnings Limit is the level of earnings above which the employee’s NICs become payable at 3.25% on all NICs category letters, except letters C and S. For the 2022 to 2023 tax year, the UEL is £967 per week or £4189 per calendar
VAT or Value Added Tax is at 20% for most goods and services in the UK.
WBD or Week Baby Due is the date the qualifying week is calculated from, which would be 15 weeks prior to the given date.
WD or Waiting Day is used when referring to the three days the employee waits before SSP starts. For example, if an employee is sick Monday-Friday, they will only receive two days SSP as the first three days are waiting days.
Each pay period an employer needs to assess their workforce to ensure that anyone who is eligible to be in the pension has been automatically enrolled. In the assessment, workers can be categorised into one of three categories
A Work Pattern details the days of the week the employee normally does and does not work.
National Insurance category to be used for those without a liability to NIC.
YTD or Year To Date is the accumulated value for the (tax) year.
Zero-rated for VAT purposes means there’s no supply tax charged but input tax can be claimed.