Payment After Leaving (PAL)

From time to time, employees are due payments after they have left the business. If an employee has already been terminated, had their P45 produced and had their leave date reported to HMRC, then we are unable to amend their record and a Payment After Leaving (PAL) will need to be processed.

In accordance with HMRC guidance, if you have to pay an employee after they leave (including someone you’re giving a taxable redundancy payment of over £30,000) the following applies:

• Use tax code 0T on a week 1 or month 1 basis (use the code S0T if they’re taxed at the Scottish rate or C0T if they’re taxed at the Welsh rate).
• Deduct National Insurance (unless it’s a redundancy payment) and any student loan repayments as normal - but if it’s an irregular payment like accrued holiday pay or an unexpected bonus, treat it as a weekly payment.
• Report the payment and deductions in your next FPS using the employee’s original Date of leaving and payroll ID, and set the Payment after leaving indicator.
• Give the employee written confirmation of the payment showing the gross amount and deductions (a payslip).
• Add the additional payment in the Year to date field on the FPS if the payment is in the same tax year.

Adding a PAL payslip in Pento

To add a PAL in Pento, you will need to follow the steps below:

1. Navigate to Employees from the left sidebar
2. Select Terminated 
   
   
3. Search for the relevant employee
4. To the right of the employee name and tabs, you will see a button with 3 dots. Select this.
5. Select Payment after leaving
   
   
6. Once selected, you will see a screen similar to the below: 
   
   

Payment Type

Regular payment

Select this option if the payment due is contractual, for example, salary or notice pay. The normal thresholds for National Insurance will apply.

Irregular payment 

Select this option if the payment due is non-contractual, for example, accrued holiday pay or an unexpected bonus. The weekly thresholds for National Insurance will apply.

When should the payment be made?

Upcoming payroll

Select this option if you would like the net payment to be made along with the normal payroll run.

Custom date

Select this option if you would like to pay the net payment ahead of the upcoming payroll.

Once selected, you will see the below options:

• Automatically apply pay advance deduction 
  Selecting this option means you will need to make the payment manually outside of Pento on a date of your choice. Pento will automatically apply 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 will be reported to HMRC as normal.
• Manually add pay advance deductions
  Selecting this option means you will need to make the payment manually outside of Pento on a date of your choice. Pento will 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 will be reported to HMRC as normal.

• Do not process payment for this employee
  Selecting this option means you will need to make the payment manually outside of Pento on a date of your choice. Pento will not apply a net advance deduction to the payslip or attempt to make any payment to the employee on payday. The employee's payment and taxes will be reported to HMRC as normal.

Once you have chosen the correct settings, select Enable & close.

Adding pay items to the employee's payslip

Once you have created a PAL payslip, you will need to add the pay items as you normally would to the payroll draft.

1. Navigate to Payrolls from the left sidebar
2. Search for the relevant employee
3. Their record will show as Terminated and a zero payslip will be available to add the required pay items
   
   

For further guidance on termination payments and/or how to add pay items to an employee, please refer to our help articles Termination Pay & PILON and How to Add One-Off & Recurring Pay Items to Employees