An employer’s guide to running December payroll

Christmas is a busy time of year bringing lots of unique HR and payroll challenges to your desk. Having a good system in place in time for December is highly recommended if you want to have yourself a merry little payday! But what rules do you need to consider when running your December payroll?

From rules around working on Christmas Day and offering bonuses to questions around whether to pay staff early: We’ve gathered expert tips to save you from getting wrapped up in end-of-year payroll stress.

Let’s get into it. What steps can you take to make sure your December payroll runs smoothly?

Decide if you want to pay employees early for Christmas

First things first it’s important to decide when you pay your employees over the festive period. There are no rules in place that force you to pay your employees early in December. But there are pros and cons to opting to pay staff early or sticking to your usual pay date.

Some employers may choose to pay staff a little early to help employees make sure all festive activities are paid upfront.

Others may recognise that while paying employees early can feel welcome in December, it can make the wait time between December and the January pay date feel extra-long…

It’s worth noting that employees who claim Universal credit will potentially be impacted by any change in pay date in December, as claims are based on the amount paid to them within the claim period. Therefore, bringing forward payday may impact their entitlement to benefits.

Running payroll early can also increase the business risk of overpaying staff if they leave over the festive period. If you pay up to and including the last working day of the month, but pay on 20th, any late leavers not recorded on payroll may ultimately be overpaid and owe you back the money for the days not worked.

No matter when you decide to pay your employees, it’s essential you follow the right rules. If you do decide to pay employees early and you normally pay your staff by BACS, any new pay date will have to be processed in time to ensure a clear BACS processing day to facilitate payments.

You must make sure your regular pay date is reported to HMRC, via your full payment submission (FPS) and employer payment summary (EPS). Not just the date you change your pay date to.

Review tax rules around Christmas bonuses and gifts

As with paying your employees early, Christmas bonuses aren’t mandatory unless specified in your employees’ contract. But they are a nice touch should your budget allow for them.

When you give any bonus to an employee, it will need to be processed correctly in your payroll. Bonuses may be additional but they’re still taxable therefore the usual payroll deductions will apply.

It’s useful to note that gift vouchers valued at £50 or less (which can’t be exchanged for cash) are considered trivial and therefore don’t incur the same tax rules as a Christmas bonus.

You might want to consider a mix of financial and non-financial benefits to reward your team this festive season. Offering them access to a staff perks platform, or giving them praise through an employee recognition tool can be a cost-effective way to reward and celebrate team success.

Clearly communicate holiday rules with employees 

If your holiday year runs from January to December, Christmas is likely to be a busy time for annual leave in your team. Having a fair system in place for staff holiday planning to deal with requests on a first come first serve basis is the best way to avoid conflict and holiday clashes that can leave you understaffed.

It’s also important to make sure you communicate your annual leave policy early on in the year. You can’t control when your staff choose to book a holiday. But if you opt for a use-it-or-lose-it approach, make sure you encourage employees to take their full annual leave entitlement evenly throughout the year to save your team from a last-minute winter wipe-out!

If you work in an industry which requires employees to work over Christmas, it’s important you lay out pay rules in your employee contracts. For example, there’s no legal right to be paid more for working on a Bank Holiday. But there may be a contractual right to higher pay or double pay, in which case your employee must be paid accordingly.

Need more in-depth payroll support this December?

Don’t get your tinsel in a tangle this December—handle pay the smart way!

Discover BrightHR Payroll, our end-to-end payroll software that simplifies payroll tasks, helps you stay compliant with HMRC, and bridges the gap between HR and employee pay.

Book a free demo with one of our experts or call us on 0800 470 2432 today.