Apply a Net Advance to an employee payslip

Net Advances can be applied to fix payroll errors or to solve a pay query.

Before you begin

There are several methods to calculate Net Advances. Choose the method that suits your company best.

Apply the standard 28% deduction -  Apply a blanket deduction of 28% (20% for tax and 8% for National Insurance). The tax will be adjusted in the next payslip.

Example:
Gross pay: £500
Standard deduction: £500 x 28% = £140
Net pay: £360

1. If an employee missed a payment of £500, multiply it by the standard deduction. 
2. Add the gross pay as a gross addition to the employee’s payslip.
3. Then, add the net pay as a net deduction to the employee’s payslip.

Apply the following month’s thresholds - As the payment will be processed in the following month’s payroll, you can choose to apply the following month’s thresholds.

Example:

1. If an employee missed a £500 bonus in July, check August’s Net pay. In this example, let’s say August’s Net pay is £1000.
2. Add the bonus as a gross addition to the employee’s payslip.
3. Calculate the Net Advance, which is the difference between August’s Net pay after adding the bonus and the Net pay prior to adding the bonus.
4. Then, add the Net Advance amount as a net deduction to the employee’s payslip.

Apply the thresholds for the month the employee should’ve received payment - This is the most accurate method for tax and National Insurance.

Example:

1. If an employee missed a £500 bonus in April. Their April gross pay should have been £2500 (£2000 salary plus £500 bonus).
2. Use HMRC’s Income tax calculator and National Insurance calculator to assess the amount of tax and National Insurance due.
3. For the figures in this example, the tax due is £290.90. The National Insurance due is £116.16.
4. Therefore, the Net pay is £2093.64 (Gross pay £2500, minus the tax and National Insurance due £406.36).
5. Therefore, the Net advance is £2093.64 minus the net pay already paid in April.
6. Add the April gross pay as a gross addition to the employee’s payslip.
7. Then, add the Net advance as a net deduction to the employee’s payslip.

How to apply a Net advance to an employee payslip

Add the gross pay and the pay advance (net deduction) to ensure the payment is reported the HMRC and the employee isn’t paid twice.

1. From the left side bar, navigate to Payrolls.
2. Select the relevant draft payroll.
3. Select the relevant employee.
4. Click Add pay item > + Gross addition.
5. Select the Type of addition.
6. Fill out the required information, including the Amount, and toggle off Pensionable if you don’t wish for the Net Advance to have pension deducted.
7. Click Add gross addition.
8. Click Add pay item > - Net deduction.
9. Select Pay advance from the Type of addition drop down menu.
10. Enter the Amount.
11. Click Add net deduction.