If you skip a months pay and then get double the month after
Discussion
The company i work for are struggling cash flow wise this month and have asked if any staff can not be paid this month but receive double pay nest month.
Are there any tax implications here? For example will employees have to pay more tax overall than they would have done if it was monthly over the 2 months as normal?
Because the two pay cheques straddle the financial year-end, I think there could be some edge cases where employees pay more.
If you earn £49,999 you currently don't pay any higher rate tax, but if you punted the last pay cheque from 2020/21 to 2021/22 you would earn £45.8k in one year and £54.1k in the next. Total extra tax of (40%-20%)*£4.1k = £833.
What I don't know is whether the taxman allows you to recognise the income in the year it is accrued, even if it's not settled in cash until later.
If you earn £49,999 you currently don't pay any higher rate tax, but if you punted the last pay cheque from 2020/21 to 2021/22 you would earn £45.8k in one year and £54.1k in the next. Total extra tax of (40%-20%)*£4.1k = £833.
What I don't know is whether the taxman allows you to recognise the income in the year it is accrued, even if it's not settled in cash until later.
Maverick007 said:
weirdly, by not being paid at all in March, the annual salary for this current year will stay just under the higher rate tax bracket, whereas obviously if i had been paid on time i would have gone into the higher tax bracket.
i wonder how that will impact things?
It sounds like you are in the edge case I described and may lose out from this overall.i wonder how that will impact things?
I would compare your net pay in the two scenarios (ie £X in 2020/21 and £X in 2021/22 and £X*11/12 and £X*13/12) using listentotaxman or whatever site you like.
Cyder said:
If I worked for a company with financial issues that couldn’t pay me this month but promised to pay me 2 x months next month I’d be very suspicious indeed. Will cash flow suddenly increase, or is the can being kicked down the road?
This, what do the other members of staff think? If it is anything like my company there will be people who live pay cheque to pay cheque who simply would not be able to do this.I had a similar situation years ago where the company were asking all of us to take a 20% pay cut, it did not end well after that.
How much do you know about your companies cashflow?
Does it do project work etc ie for simplicity does it get infrequent huge receipts at a time, or does it get multiple small receipts?
How many staff does it have, are any still on furlough etc.
There is obviously a risk here overall, they have presumably not been paid significant sums and have utilised all their credit availability (and/or don't want to/can't take more on).
So if they are a small company and waiting on a trusted customer to 'come good' that's all fine if they do actually come good but again there is some risk. All I'm saying is here is that I've been in situations (pre covid) where month end cashflow has been tight due to large single receipt timing and the staff have always been blissfully unaware of the financial hurdles that might have occurred to get through. A week later and all is fine in the world.
It would be interesting to see what upper management/company owners on here make of such an announcement, I'm sure if varies person to person company to company but in my position where your job makes you privy to all this stuff I know it would very much be avoided if at all possible.
I realise that's a lot of pessimism, but it could be realism quite quickly, as ultimately in these situations no matter how nice your company and directors are you are all relying on income from other companies, who are relying on other companies etc etc.
Does it do project work etc ie for simplicity does it get infrequent huge receipts at a time, or does it get multiple small receipts?
How many staff does it have, are any still on furlough etc.
There is obviously a risk here overall, they have presumably not been paid significant sums and have utilised all their credit availability (and/or don't want to/can't take more on).
So if they are a small company and waiting on a trusted customer to 'come good' that's all fine if they do actually come good but again there is some risk. All I'm saying is here is that I've been in situations (pre covid) where month end cashflow has been tight due to large single receipt timing and the staff have always been blissfully unaware of the financial hurdles that might have occurred to get through. A week later and all is fine in the world.
It would be interesting to see what upper management/company owners on here make of such an announcement, I'm sure if varies person to person company to company but in my position where your job makes you privy to all this stuff I know it would very much be avoided if at all possible.
I realise that's a lot of pessimism, but it could be realism quite quickly, as ultimately in these situations no matter how nice your company and directors are you are all relying on income from other companies, who are relying on other companies etc etc.
If the company is that close to the wire, take what you can now, and start looking for another job.
If the administrators are called in next month, you'll be a month down, and you'll find out just how badly employees get shafted when a company goes under. As a mere employee, you'll be at the very bottom of the pile, and you'll wait many months to find out if there's any loose change left to pay you after the priority creditors are paid off, and the legal and accounting parasites have sucked the rest of the pot dry. Hint: There won't be.
If the administrators are called in next month, you'll be a month down, and you'll find out just how badly employees get shafted when a company goes under. As a mere employee, you'll be at the very bottom of the pile, and you'll wait many months to find out if there's any loose change left to pay you after the priority creditors are paid off, and the legal and accounting parasites have sucked the rest of the pot dry. Hint: There won't be.
Feck that! Start looking for something else, surely? Unless you have some reason for wanting to stay with them and you honestly think that this really is a "one off", but it still suggests the company is struggling to borrow money, as normally paying staff is the most important payment and once companies can no longer do that it's the end of the road.
What about if the company runs the March payroll as usual, so that the P60's show the correct earnings for the current tax year, and with no overlap with the new tax year?
In that case the tax situation would be unchanged from normal, and the only difference is that the staff won't physically get the money until April instead of March.
Would this work?
In that case the tax situation would be unchanged from normal, and the only difference is that the staff won't physically get the money until April instead of March.
Would this work?
Maverick007 said:
if my pay for the current tax year does indeed stay under the £50k instead of say £54k will i end up paying less tax for the current year to compensate for the extra tax i'll end up paying next tax year?
You lose out by about £50 extra tax. The bigger concern is, as others have said, losing out on £54k.Fishlegs said:
If the company is that close to the wire, take what you can now, and start looking for another job.
If the administrators are called in next month, you'll be a month down, and you'll find out just how badly employees get shafted when a company goes under. As a mere employee, you'll be at the very bottom of the pile, and you'll wait many months to find out if there's any loose change left to pay you after the priority creditors are paid off, and the legal and accounting parasites have sucked the rest of the pot dry. Hint: There won't be.
Hard to see beyond this.If the administrators are called in next month, you'll be a month down, and you'll find out just how badly employees get shafted when a company goes under. As a mere employee, you'll be at the very bottom of the pile, and you'll wait many months to find out if there's any loose change left to pay you after the priority creditors are paid off, and the legal and accounting parasites have sucked the rest of the pot dry. Hint: There won't be.
You've done the work and now they're not paying you for it. How many suppliers are also waiting to be paid?
Why can't the company borrow from a bank like most companies do?
I’d personally pay my staff team out of my own pocket rather than ask them to wait for their wages. The companies financial problems shouldn’t become the employees problem.
The fact they’re asking this would have me very concerned, they’re either unable or unwilling to borrow to cover wages and that’s not okay. Stand your ground and get what you can as soon as you can.
The fact they’re asking this would have me very concerned, they’re either unable or unwilling to borrow to cover wages and that’s not okay. Stand your ground and get what you can as soon as you can.
One other point to consider, if you receive child benefits then they begin to taper down from £50k -> £60k.
If you earn over £50k in a financial year and receive child benefit you’ll have to complete a self assessment tax return and owe some tax back to HMRC.
So the additional £4K next year could end up costing you more.
If you earn over £50k in a financial year and receive child benefit you’ll have to complete a self assessment tax return and owe some tax back to HMRC.
So the additional £4K next year could end up costing you more.
What’s the guarantee you’ll receive two months pay next month?
The company sounds like it’s circling the drain to try and attempt something like this. Staff should always be paid first, then things like rent, electric, etc. No doubt they are also seeking breaks from these obligations as well or are in arrears.
Be very wary of any flannel spouted by management about this being a temporary measure.
The company sounds like it’s circling the drain to try and attempt something like this. Staff should always be paid first, then things like rent, electric, etc. No doubt they are also seeking breaks from these obligations as well or are in arrears.
Be very wary of any flannel spouted by management about this being a temporary measure.
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