Process a Payment After Leaving

Some employees may be due payments after they have left your company. If an employee has been terminated, has had a P45 produced, and has had their leave date reported to HMRC, their record can’t be amended. In this case, you need to process a Payment After Leaving (PAL).

Before you begin

If you have to pay an employee after they leave (including a taxable redundancy payment of over £30,000), you should:

• Use tax code 0T (England), S0T (Scotland), or C0T (Wales) on a week 1 or month 1 basis.
• Deduct National Insurance (unless the payment is for redundancy) and any student loan repayments as normal, unless the PAL is an irregular payment (e.g. accrued holiday pay or an unexpected bonus). In the case of irregular payments, the payment should be treated as a weekly payment.
• Report the payment and deductions in your next FPS using the employee’s original date of leaving and employee ID, and set the Payment after leaving indicator.
• Give the employee a payslip, showing the gross amount and deductions.
• In the FPS, add the additional payment in the Year to date field if the payment is in the same tax year.

Note: A new P45 won’t be provided.

How to create a PAL payslip

1. From the left side bar, navigate to Employees.
2. Select Terminated from the top bar.
3. Select the relevant employee.
4. Click Actions in the top right corner.
5. Select Payment After Leaving.
6. Choose the Payment Type. Regular payment refers to contractual payment due, such as salary or notice pay. Normal thresholds for National Insurance apply. Irregular payment refers to non-contractual payment, such as accrued holiday pay or an unexpected bonus. Weekly thresholds for National Insurance apply.
7. Choose When should the payment be made? Upcoming payroll will include the PAL in the next normal payroll run. Custom date will pay the PAL before the next normal payroll run.
8. If you select Custom date, choose How would you like to process this custom date payment?
   • Automatically apply pay advance deduction - The PAL is made manually outside of UK Payroll on your chosen date. UK Payroll automatically applies a net advance deduction for the full amount to the employee's payslip to ensure they are not paid again on payday. The employee's payment and taxes are reported to HMRC as normal.
   • Manually add pay advance deductions - The PAL is made manually outside of UK Payroll on your chosen date. UK Payroll does not automatically apply a net advance deduction to the employee's payslip. You will need to add this manually. This option allows you to add a partial net deduction if you wish to pay part of the payment prior to payday, and the outstanding amount within the payroll. The employee's payment and taxes are reported to HMRC as normal. Note: With this option, you must manually add at least a partial net advance deduction to the employee’s payslip.
   • Do not process payment for this employee - The PAL is made manually outside of UK Payroll on your chosen date. UK Payroll does not automatically apply a net advance deduction to the employee’s payslip or attempt to make any payment to the employee on payday. You will need to add the net deduction and make the payment manually. The employee’s payment and taxes are reported to HMRC as normal.
9. Once the settings are correct, click Enable & close.

How to add pay items to the employee’s payslip

Once you have created a PAL payslip, add the pay items as your normally would to the payroll draft. To learn more, see Add one-off and recurring pay items.