Dos and Don’ts: Best Practices for Paying Casual Workers

If you employ casual workers in your organisation, you need to understand your obligations and the different payroll considerations at play compared to your permanent staff. In this article, we look at the key dos and don’ts of payroll for casual workers.

Have you, or do you ever, employ casual workers for a short period? If the answer is yes then you need to take extra care when processing their pay.

In the current climate, the number of obligations placed on employers in terms of payroll compliance and best practices is continuously increasing. Be aware of the following dos and don’ts of payroll for casual workers to avoid costly missteps.

This article highlights the key dos and don’ts when handling payroll for casual workers, ensuring compliance with taxes and national insurance regulations.

EXPECTATIONS ON EMPLOYERS WITH PAYROLL FOR CASUAL WORKERS

ENSURE CASUAL WORKERS ARE ON THE RIGHT TAX CODE

Irrespective of size or resources, employers are expected to ensure that employees are paid at the correct rates, provide workplace pensions and apply the correct PAYE Tax and NIC deductions via payroll. An error leading to not enough tax and NIC being deducted from an employee could result in the employer having to pay the outstanding amount to HM Revenue & Customs (“HMRC”), which, in our experience, often turns out to be costly.

PROVIDE A STARTER CHECKLIST ON THEIR FIRST DAY

HMRC requires that all casual workers be treated through payroll in the same way as permanent staff, whether they are employed for a few days, weeks, or more. Often, casual workers may not have a P45 when they start. To ensure the correct tax code is applied, employers should provide a “starter checklist” on the first day of employment. If no P45 or completed starter checklist is received, employers should use the tax code 0T on a ‘Week 1/Month 1’ basis. This is particularly important in weekly working arrangements where prompt and accurate tax code application is critical.

AVOID PAYING CASUAL WORKERS CASH IN HAND

Paying casual workers cash in hand should always be avoided as this could result in unexpected additional costs to the employer in the face of any enquiry. HMRC may consider increasing the payments to guarantee the proper accounting of Tax and NIC, in addition to imposing penalties for non-compliance and charging interest on late payments.

For example: the employer agrees to pay a casual worker £50 per day in their hand, however, if the employee leaves before completing a starter declaration then this could result in the employee not paying the correct amount of tax due.

SUMMARY

It is clear then that since the introduction of RTI (Real Time Information), gone is the relaxed approach HMRC would take towards casual workers where they were employed for a week or less. Currently, the only concession for casual workers is for short-term harvest workers and beaters for shoots where broadly speaking, if you employ them for two weeks or less, then you can pay them without deduction of PAYE tax or NI. However, their pay is still taxable income and these employees will be required to pay any tax that may be due.

If you have any queries on payroll for casual workers or want to find out more about AAB’s award-winning payroll services,  get in touch with the team.

Talk to us about Payroll for Casual Workers

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