01 December 2021

The CIPP’s policy and research team explores how payroll teams can help to support employees over the festive period, which is a joyous, but also expensive time of year

Gifts under the tree, an enormous turkey on the dining table and enough chocolate to feed a small army. Christmas is often the time where indulgence and excess is at its peak. For some, the cost of the festivities is planned and accounted for, but for many, Christmas brings with it a raft of financial challenges.

How can the payroll industry support financial well-being during the festive season?


An early pay day

The CIPP Payslip Statistics Report 2021 shows that less than one third of employers maintain the same contractual payday during December. The majority give employees an earlier pay day in the lead up to the big day. This gesture is often well received but can create a significant impact to those in receipt of universal credit (UC).

UC is calculated based on earnings between the same two dates each month, and dates vary depending on the recipient. If the employer reports the early pay date through real time information (RTI), instead of the contractual pay date, this can create problems. This change in pay date could be reported to the Department for Work and Pensions as a second payment in the same earnings period. This can, and has, resulted in claimants losing some, or all, of their entitlement to UC during a difficult financial period.

The solution is simple! Payrollers need to ensure they always report the contractual pay date through RTI. This will remove the risk to impacted employees and ensure their UC is paid correctly and on time.


An extra payment?

Payroll teams are familiar with the range of errors that can impact the payroll. The source of these errors is often not the payroll teams themselves, but the data that is sent to them. Every team, whether in-house, or delivering payroll as a service, will have a clear approach to correcting these errors.

Some teams will provide maximum flexibility when it comes to pay advances. Pay on demand technology may even be in place to support employees to access pay. However, many teams will still be working within set parameters when it comes to extra payments. Is there a lower limit on payments made between pay days? Are rules in place to keep additional pay runs to a minimum?

During December, payroll can have a significant impact on individuals. Putting more flexible measures in place to support additional pay advances during the festive period could be the difference between someone having a great Christmas, and not.


Christmas savings schemes

Savings schemes have received some bad publicity following a case which is still going through the courts. Iceland had a Christmas savings schemes in place to help employees save for the festive period. When Her Majesty’s Revenue and Customs (HMRC) conducted a national minimum wage (NMW) audit, Iceland was said to have reduced the pay of their employees below NMW due to the Christmas savings scheme.

HMRC stresses the importance of any savings scheme being independent from the employer. There have been examples where savings schemes were not entirely independent from the control of the employer, and therefore deductions were deemed to be for the employer’s own use and/or benefit. Subsequently, the deduction would be used when calculating NMW – even in cases where amounts were returned to employees in full.


Education and communication

Payroll has a wealth of information that can support employees in better understanding their pay. Many employees now receive a payslip through an online portal. This portal could be used as a communication platform throughout the year but adding a festive twist to the information could also encourage employees to take the time to review.

  • do employees understand what their tax code is, and how to check it’s correct?

  • do employees have visibility of tax allowances they could be entitled to?

  • are employer benefits and access to retail discounts well advertised during this season of spending?

  • do employees know about salary sacrifice schemes, and if they would benefit from taking part?

In addition to, or instead of online communications, the payroll team could run a payroll clinic, or workshop to give employees access to the team and their whole remit of knowledge.


A balanced approach

The payroll industry faces challenging deadlines throughout the year, and often early pay days and the additional trials of December can put a strain on the resource available within the team. Some teams will want to support employees but will be restricted to the tools and the resources they have available.

A balanced approach is important to prevent teams from becoming over stretched – admitting our limitations is just as important as knowing our strengths. Planning and reviewing early can help. One hour per month throughout 2022 will mean a ‘Christmas well-being project’ could have almost two full days dedicated to it by December 2022. Even the smallest steps towards a goal can create a real long-term impact. 


Featured in the December 2021 / January 2022 issue of Professional in Payroll, Pensions and Reward. Correct at time of publication.