Payroll Processing

For details of the latest changes to Payroll, please visit docs.pegasus.co.uk.

Use the Processing command to maintain your employees' details, allocate department, profile and employee analysis codes, add bank details, post holiday and other absence details, and add payment and deduction to-date details, statutory payments, attachment orders and pensions. An employee record must be set up for every employee who is currently employed or who has been employed during the current income tax year. In addition to holding personal details, such as address and date of birth, employee records contain information necessary to calculate pay each period and for the statutory end of year reports.

Creating Records for New Employees

Important: You cannot create records in the Payroll application in advance of the first pay period. When you create a new record , you must do so in the first pay period that you will pay them. However, if you use the Personnel application, you can create records in advance of their first pay period as 'Personnel Only' records. These records are not included in Payroll calculations until the records are completed on the Payroll - Processing form.

Creating Records for Off-Payroll Workers

Off-payroll workers are created in Payroll in the same way as employee records are created. However, before off-payroll workers can be recorded the Allow Off-Payroll Workers option on the Set Options form must be selected.

A new off-payroll worker is assigned 'Start Declaration C' status for the P45, and their tax code is set to 'BR Cumulative'.

For off-payroll workers, fees charged to clients (known as 'deemed direct payments') must be subject to tax and NI deductions, and employer NI must be paid.

Off-payroll workers are processed in Payroll in the 2020-21 tax year as any other employees, with these differences:

Off-payroll workers are responsible for managing any student loans, postgraduate loan deductions and pensions, so these areas of Payroll cannot be used for them.
In the FPS file sent to HMRC for each pay period, these workers are indicated in the submission as off-payroll workers.

For the employer, these differences apply:

Employers cannot offset the Employment Allowance against Employer NI paid for off-payroll workers. The Employment Allowance form in P32 Processing excludes Employer NI paid for off-payroll workers.
Employers are not responsible for student loans or postgraduate loan deductions for off-payroll workers.
Employers are not required to pay statutory payments to off-payroll workers.
Employers are not required to enrol off-payroll workers into pensions.

Viewing Historical Leavers

The range of employees that are displayed in Payroll Processing normally excludes employees who left in an earlier tax year. To include these leavers, click the Include Historical button. The button changes to Exclude Historical and performs the reverse action if clicked again.

Creating Maintenance Codes for Employee Records

Some codes are optional, but if you want to complete the corresponding boxes on the forms associated with the Processing command, you must first create the record(s) on which your selections will be based.

Box	Prerequisite
Group	At least one group record must be created using the Group Details command on the Maintenance menu of the Payroll application before you can identify a group.
Dept Code	At least one department record must be created using the Department Details command on the Maintenance menu of the Payroll application before you can identify a department.
Profile	At least one employee profile record must be created using the Employee Profiles command on the Maintenance menu of the Payroll application before you can identify a profile code.
Bank Sort Code	At least one bank record must be created using the Bank Details command on the Maintenance menu of the Payroll application before you can identify a bank sort code on the Details and Bank form.
Payment	At least one payment profile record must be created using the Payment Profiles command on the Maintenance menu of the Payroll application before you can identify a payment on the Payments tab of the Payments & Deductions form.
Deduction	At least one deduction profile record must be created using the Deduction Profiles command on the Maintenance menu of the Payroll application before you can identify a deduction on the Deductions tab of the Payments & Deductions form.
Qualifying Days Profile	On the General tab of the SSP Qualifying Days form, you can assign an SSP qualifying days profile that is different to either the group or employee profile default. If so, you must first create that pattern using the Qualifying Days Profile command on the Maintenance menu of the Payroll application.

Box

Prerequisite

Group

At least one group record must be created using the Group Details command on the Maintenance menu of the Payroll application before you can identify a group.

Dept Code

At least one department record must be created using the Department Details command on the Maintenance menu of the Payroll application before you can identify a department.

Profile

At least one employee profile record must be created using the Employee Profiles command on the Maintenance menu of the Payroll application before you can identify a profile code.

Bank Sort Code

At least one bank record must be created using the Bank Details command on the Maintenance menu of the Payroll application before you can identify a bank sort code on the Details and Bank form.

Payment

At least one payment profile record must be created using the Payment Profiles command on the Maintenance menu of the Payroll application before you can identify a payment on the Payments tab of the Payments & Deductions form.

Deduction

At least one deduction profile record must be created using the Deduction Profiles command on the Maintenance menu of the Payroll application before you can identify a deduction on the Deductions tab of the Payments & Deductions form.

Qualifying Days Profile

On the General tab of the SSP Qualifying Days form, you can assign an SSP qualifying days profile that is different to either the group or employee profile default. If so, you must first create that pattern using the Qualifying Days Profile command on the Maintenance menu of the Payroll application.

Using Payroll Groups

When creating employee records, you might want to enter information for all new employees in one procedure, regardless of their pay frequency or group. Where you choose more than one group from the Select Payroll Groups list displayed when you click Processing, you can select the group that is to apply for each employee subsequently. You can transfer employees from one group to another. If you want to do this, you must select both the employee’s present group and new group. For all other processes, employee records are only available if they belong to one of the groups you have chosen in the Select Payroll Groups list. For example, if you use the Payments & Deductions command on the Action menu associated with the Processing form, only employees belonging to the selected group(s) will be available.

Entering Employee Details

Box	Description
Employee Ref	A unique reference that identifies the employee. If you need to change the employee reference, use the Transfer command.
Surname	The employee's full official surname. If the surname is double-barrelled, enter the whole double-barrelled surname. HMRC does not permit accented characters (for example, ‘Sinéad’) to be used in RTI Submissions so these are not permitted. Important - Real Time Information Submissions: If the employee's surname changes, you must contact HMRC by telephone to discuss the situation. You must not simply change the surname and send another submission. This will cause problems for HMRC with reconciling its data with that held in Payroll.
Forenames	The employee's full official forenames. Leave a space between names. HMRC does not permit accented characters (for example, ‘Sinéad’) to be used in RTI Submissions so these are not permitted. Important - Real Time Information Submissions: If the employee's name changes, you must contact HMRC by telephone to discuss the situation. You must not simply change the name and send another submission. Even if you change the forename from say 'Steve' to 'Steven' without first contacting HMRC this will cause problems with reconciling data held by HMRC with that held in Payroll.
Title	The employee's title, such as Mr, Mrs, Miss, Ms, Rev, Dr, and so on. Do not enter the title in the forename or surname boxes.
Dept Code	A reference that identifies the department to which the employee belongs. You can select from a list. Departments are defined using the Department Details command on the Maintenance menu.
Profile	A reference that identifies the profile for the employee. You can select from a list. Profiles are defined using the Employee Profiles command on the Maintenance menu.
Start Date	The date on which the employee started employment with your company. Important: If you realise that the employee's start date is wrong, after sending the first Full Payment Submission you must contact HMRC by telephone to discuss how to resolve it. You must not simply change the start date and send another submission.
Date of Birth	The employee's date of birth. The value in the Age box is calculated according to this.
Gender	An option that determines the gender of the employee. The application uses this information when validating entries and performing calculations. For example, the NI rate B is not allowed for male employees, neither is any SMP information; the application checks the appropriate retirement age for male or female employees when you use NI rate C, and so on.
N.I. Code	An option that determines the NI rate for the employee. You can select from a list. Payroll supports all current NI codes. In addition, you can enter a type 'X' if no national insurance is paid by either employee or employer. If a female employee is below her state pension age and her NI code is changed to C, you won't be able to save her record. If a female employee is above her retirement age and her NI code is changed from C to another code, you can save her record but you'll have to confirm the change. NI category letters M (standard) or Z (deferred) must be used for employees who are under 21 on the usual pay date in a pay period.
N.I. Number	The employee's national insurance number. If you do not have a current NINO for an employee, you must leave the N.I. Number box blank. When you save the employee record, the application will display the message: ‘Please try to identify the employee’s NI Number as soon as possible. Please complete HMRC form CA6855 to obtain the correct number.’ If you try to enter a temporary number, the application will display a message: ‘Temporary NI Numbers are no longer valid. If you don’t know the employee’s NI Number then please leave it blank.’ Even if you have no NINO, you should complete the Date of Birth box. If this is also left blank, the application will display the message: ‘Please try to identify the employee’s date of birth as soon as possible.’ Similar messages are indicated when you use the Calculation command for any employees with a blank NINO or date of birth. In addition, if the application detects any residual temporary NINOs when a calculation is performed in the new Income Tax year, an exception message will be produced as follows: ‘Temporary NI numbers are no longer valid. Setting to blank.’ There are only three circumstances when category letter X can be used: - for employees paid below the Lower Earnings Limit for every pay period (for example, employees who are under 16 years old). - for pension-only schemes - for workers from abroad. Employees on deferred NI categories because they're already paying NI in another job will be reset to a non-deferred category during the End of Year Cleardown. If they want to continue to defer NI contributions they must apply to HMRC for each tax year.
Tax Code	Important: Only change an employee’s tax code if told by HMRC to do so. The employee's tax code including the suffix or prefix. When creating a record for a new employee, the default tax code is the one entered for the tax year in the Emergency Tax Code box on the Payroll - Utilities - PAYE/NI/Stat. Payments form. All current tax codes are allowed, including NI and NT. These are special codes that identify employees who pay no PAYE; but the NI tax code indicates that NI may be deducted. M & N tax codes (marriage allowance) Anyone who is not liable to income tax above the basic rate will be able to transfer a portion of their personal allowance to their spouse or civil partner if the recipient is also not liable to income tax above the basic rate. The tax code suffixes are M & N: The M code is used by the person in receipt of the allowance The N code is used by the person who is transferring the allowance. BR, D0 & D1 tax codes (for second jobs) These tax codes are used for second jobs: The 'BR code' for someone who pays tax at the basic rate. The 'D0 code' for someone who pays tax at the higher rate. The 'D1 code' for someone who pays tax at the additional rate. The software allows codes up to 'D8', primarily for use in Scotland should the Scottish Parliament introduce new tax bands during the tax year.
Week 1/Month 1	This option is displayed as 'Week 1' for weekly paid groups and 'Month 1' for monthly paid groups. It determines that a new employee is to use the emergency tax code operated on a non-cumulative basis. This method ignores all previous pay and tax in the year and calculates tax as if the employee is in their first pay period. The Week 1 or Month 1 box is cleared at the end of the tax year when the Payroll - EOY/Special Reports - End of Year Cleardown is run. ‘NT’ and ‘D0’ (D-Zero) tax codes can be used on either a ‘week 1’ or a ‘month 1’ basis or on a cumulative basis.
Trade Dispute	An option that indicates the employee is in a trade dispute with the employer. Tax refunds are withheld from employees on trade dispute. You can also set this option at group or employee profile level.
Taxpayer	An option that indicates which tax regime the employee is subject to. The options are: Rest of the UK Scottish Welsh. The tax regime is included in the Full Payment Submission (FPS) for each pay period, and on printed documents (P45, P60 and so on). Scottish tax codes are automatically prefixed with 'S' and Welsh tax codes with 'C' 'in the background, so you must not enter the 'S' or 'C' in the Tax Code box manually. Scottish Rate of Income Tax details are maintained on the Payroll - Utilities - Scottish Tax form. Welsh Rate of Income Tax details are maintained on the Payroll - Utilities - Welsh Tax form.
Director settings
Date of Appt.	The date on which the director was appointed.
Start Week	The week number in which the director started. If a director starts or an employee becomes a director part way through the tax year this information enables the employee to be pro-rata'd from the tax week they became a director. A default is calculated according to the entry in the Date of Appt. box.
APP Held	An option that indicates that the director had an Appropriate Personal Pension while on NI category letter A.
Adv	An option that determines how directors NI contributions are treated. You can select S or T from a list or leave the box blank. Director’s National Insurance is calculated on a cumulative value through the tax year. This often results in the director paying no national insurance during the first few periods of the tax year, followed by a very high deduction in the period in which their annual cumulative earnings exceed the annual threshold. The director may ask that their deductions are spread over the tax year. If set to 'S', normal NI calculations resume in week 52 or month 12. You cannot set the indicator to ‘S’ after period 1 (or 2 or 4 for two or four-weekly payrolls) except when a new employee starts. If the director's NI letter changes during the initial periods, the application prompts you to choose between reverting to annual calculations or continuing on a weekly/monthly basis. If set to 'T’, special director’s NI processing is switched off, but reinstated at the start of the next income tax year. If an NI code is changed, and this flag is set, the message ‘Revert to Standard Director’s calculation?’ appears. A reply of ‘Yes’ sets the flag to ‘T’. If the setting is blank, the application calculates director’s NICs based on an annual or pro rata earnings period.
Holiday Days	The number of days or part-days holiday entitlement. This is a memorandum field only, holding the employee's holiday entitlement.
P45 Produced	An indicator that a leaver has been given their P45. This box is enabled only if the employee is marked as a leaver on the Payroll - Processing - Leavers form. When the Payroll - Utilities - Update command is run, it checks whether there are any leavers in this period that have not had this box ticked to indicate that they have been given their P45. You then have the choice to have the box ticked automatically if the P45s have been printed. If the P45 have not been printed you can quit the Update to print the P45s from the Payroll - Periodical Reports - P45 menu.

Box

Description

Employee Ref

A unique reference that identifies the employee.

If you need to change the employee reference, use the Transfer command.

Surname

The employee's full official surname. If the surname is double-barrelled, enter the whole double-barrelled surname.

HMRC does not permit accented characters (for example, ‘Sinéad’) to be used in RTI Submissions so these are not permitted.

Important - Real Time Information Submissions: If the employee's surname changes, you must contact HMRC by telephone to discuss the situation. You must not simply change the surname and send another submission. This will cause problems for HMRC with reconciling its data with that held in Payroll.

Forenames

The employee's full official forenames. Leave a space between names.

HMRC does not permit accented characters (for example, ‘Sinéad’) to be used in RTI Submissions so these are not permitted.

Important - Real Time Information Submissions: If the employee's name changes, you must contact HMRC by telephone to discuss the situation. You must not simply change the name and send another submission. Even if you change the forename from say 'Steve' to 'Steven' without first contacting HMRC this will cause problems with reconciling data held by HMRC with that held in Payroll.

Title

The employee's title, such as Mr, Mrs, Miss, Ms, Rev, Dr, and so on. Do not enter the title in the forename or surname boxes.

Dept Code

A reference that identifies the department to which the employee belongs. You can select from a list. Departments are defined using the Department Details command on the Maintenance menu.

Profile

A reference that identifies the profile for the employee. You can select from a list. Profiles are defined using the Employee Profiles command on the Maintenance menu.

Start Date

The date on which the employee started employment with your company.

Important: If you realise that the employee's start date is wrong, after sending the first Full Payment Submission you must contact HMRC by telephone to discuss how to resolve it. You must not simply change the start date and send another submission.

Date of Birth

The employee's date of birth. The value in the Age box is calculated according to this.

Gender

An option that determines the gender of the employee. The application uses this information when validating entries and performing calculations. For example, the NI rate B is not allowed for male employees, neither is any SMP information; the application checks the appropriate retirement age for male or female employees when you use NI rate C, and so on.

N.I. Code

An option that determines the NI rate for the employee. You can select from a list. Payroll supports all current NI codes. In addition, you can enter a type 'X' if no national insurance is paid by either employee or employer.

If a female employee is below her state pension age and her NI code is changed to C, you won't be able to save her record. If a female employee is above her retirement age and her NI code is changed from C to another code, you can save her record but you'll have to confirm the change.

NI category letters M (standard) or Z (deferred) must be used for employees who are under 21 on the usual pay date in a pay period.

N.I. Number

The employee's national insurance number.

If you do not have a current NINO for an employee, you must leave the N.I. Number box blank. When you save the employee record, the application will display the message: ‘Please try to identify the employee’s NI Number as soon as possible. Please complete HMRC form CA6855 to obtain the correct number.’ If you try to enter a temporary number, the application will display a message: ‘Temporary NI Numbers are no longer valid. If you don’t know the employee’s NI Number then please leave it blank.’ Even if you have no NINO, you should complete the Date of Birth box. If this is also left blank, the application will display the message: ‘Please try to identify the employee’s date of birth as soon as possible.’

Similar messages are indicated when you use the Calculation command for any employees with a blank NINO or date of birth. In addition, if the application detects any residual temporary NINOs when a calculation is performed in the new Income Tax year, an exception message will be produced as follows: ‘Temporary NI numbers are no longer valid. Setting to blank.’

There are only three circumstances when category letter X can be used:

- for employees paid below the Lower Earnings Limit for every pay period (for example, employees who are under 16 years old).
- for pension-only schemes
- for workers from abroad.

Employees on deferred NI categories because they're already paying NI in another job will be reset to a non-deferred category during the End of Year Cleardown. If they want to continue to defer NI contributions they must apply to HMRC for each tax year.

Tax Code

Important: Only change an employee’s tax code if told by HMRC to do so.

The employee's tax code including the suffix or prefix. When creating a record for a new employee, the default tax code is the one entered for the tax year in the Emergency Tax Code box on the Payroll - Utilities - PAYE/NI/Stat. Payments form. All current tax codes are allowed, including NI and NT. These are special codes that identify employees who pay no PAYE; but the NI tax code indicates that NI may be deducted.

M & N tax codes (marriage allowance)

Anyone who is not liable to income tax above the basic rate will be able to transfer a portion of their personal allowance to their spouse or civil partner if the recipient is also not liable to income tax above the basic rate.

The tax code suffixes are M & N:

The M code is used by the person in receipt of the allowance
The N code is used by the person who is transferring the allowance.

BR, D0 & D1 tax codes (for second jobs)

These tax codes are used for second jobs:

The 'BR code' for someone who pays tax at the basic rate.
The 'D0 code' for someone who pays tax at the higher rate.
The 'D1 code' for someone who pays tax at the additional rate.

The software allows codes up to 'D8', primarily for use in Scotland should the Scottish Parliament introduce new tax bands during the tax year.

Week 1/Month 1

This option is displayed as 'Week 1' for weekly paid groups and 'Month 1' for monthly paid groups.

It determines that a new employee is to use the emergency tax code operated on a non-cumulative basis. This method ignores all previous pay and tax in the year and calculates tax as if the employee is in their first pay period.

The Week 1 or Month 1 box is cleared at the end of the tax year when the Payroll - EOY/Special Reports - End of Year Cleardown is run.

‘NT’ and ‘D0’ (D-Zero) tax codes can be used on either a ‘week 1’ or a ‘month 1’ basis or on a cumulative basis.

Trade Dispute

An option that indicates the employee is in a trade dispute with the employer. Tax refunds are withheld from employees on trade dispute. You can also set this option at group or employee profile level.

Taxpayer

An option that indicates which tax regime the employee is subject to.

The options are:

Rest of the UK
Scottish
Welsh.

The tax regime is included in the Full Payment Submission (FPS) for each pay period, and on printed documents (P45, P60 and so on). Scottish tax codes are automatically prefixed with 'S' and Welsh tax codes with 'C' 'in the background, so you must not enter the 'S' or 'C' in the Tax Code box manually.

Scottish Rate of Income Tax details are maintained on the Payroll - Utilities - Scottish Tax form.

Welsh Rate of Income Tax details are maintained on the Payroll - Utilities - Welsh Tax form.

Director settings

Date of Appt.

The date on which the director was appointed.

Start Week

The week number in which the director started. If a director starts or an employee becomes a director part way through the tax year this information enables the employee to be pro-rata'd from the tax week they became a director. A default is calculated according to the entry in the Date of Appt. box.

APP Held

An option that indicates that the director had an Appropriate Personal Pension while on NI category letter A.

Adv

An option that determines how directors NI contributions are treated. You can select S or T from a list or leave the box blank. Director’s National Insurance is calculated on a cumulative value through the tax year. This often results in the director paying no national insurance during the first few periods of the tax year, followed by a very high deduction in the period in which their annual cumulative earnings exceed the annual threshold. The director may ask that their deductions are spread over the tax year.

If set to 'S', normal NI calculations resume in week 52 or month 12. You cannot set the indicator to ‘S’ after period 1 (or 2 or 4 for two or four-weekly payrolls) except when a new employee starts. If the director's NI letter changes during the initial periods, the application prompts you to choose between reverting to annual calculations or continuing on a weekly/monthly basis.
If set to 'T’, special director’s NI processing is switched off, but reinstated at the start of the next income tax year. If an NI code is changed, and this flag is set, the message ‘Revert to Standard Director’s calculation?’ appears. A reply of ‘Yes’ sets the flag to ‘T’. If the setting is blank, the application calculates director’s NICs based on an annual or pro rata earnings period.

Holiday Days

The number of days or part-days holiday entitlement. This is a memorandum field only, holding the employee's holiday entitlement.

P45 Produced

An indicator that a leaver has been given their P45. This box is enabled only if the employee is marked as a leaver on the Payroll - Processing - Leavers form.

When the Payroll - Utilities - Update command is run, it checks whether there are any leavers in this period that have not had this box ticked to indicate that they have been given their P45. You then have the choice to have the box ticked automatically if the P45s have been printed. If the P45 have not been printed you can quit the Update to print the P45s from the Payroll - Periodical Reports - P45 menu.