Calculations for 2 full time employees on basic salary

[KevinJackson]

Company X has two full time employees on minimum wage and has planned to pay his employees on 28th of each month:

Employee 1 => (Gross monthly = £987.50) + (Employer NI = £39.40) = £1026
Employee 2 => (Gross monthly = £987.50) + (Employer NI = £39.40) = £1026

Company X has £10,000 in its current account at the beginning of the month.

Is the following calculations correct?

1- Sending an Employer Payment Summary (EPS) by the 19th telling that for both employees the company is going to pay £1026 for the current month.

2- Doing a bank transfer of £78.8 to HMRC on 21nd [deadline is 22nd]

3- Paying Employee 1,Employee 2 (via bank transfer) on 28th the amount £987.50 each.

4- The money left in the bank account at the end of the 28th (assuming there have not been any other transactions) going to be 10000 - (1026*2) = £7948

 

[Newchodge]

You will be sending an FPS not EPS. You are paying HMRC a month early - the amount due on any FPC submitted up to 5th of any month is due in that month. If you pay on 28th you can submit the FPS on 28th and pay by 22nd of the following month. Also, if that is the total you are paying you can pay it quarterly.

So if you have 10,000 in the bank at the beginning of the month you will have liabilities of 2052 but you would only have paid 1973.20 so will have cash of 8026.80 at the end of the month.

Assuming your figures are right.

 

[Newchodge]

Minimum wage is 7.83. Full time is usually at least 35 hours. That is 274,05 per week or about 1,192 per month.

 

[KevinJackson]

Minimum wage is 7.83. Full time is usually at least 35 hours. That is 274,05 per week or about 1,192 per month.

You are right, but I have a question : If Personal allowance is [£11,850 or £987.5 monthly], how come the minimum monthly wage of £1,192 doesn't match the gross pay £987.50? Shouldn't the personal allowance match or be equal to the amount a full time minimum wage employee gets?

 

[Newchodge]

You are right, but I have a question : If Personal allowance is [£11,850 or £987.5 monthly], how come the minimum monthly wage of £1,192 doesn't match the gross pay £987.50? Shouldn't the personal allowance match or be equal to the amount a full time minimum wage employee gets?

They are completely separate matters. Apart from anything else, not everyone has a tax free allowance of 11850 and the minimum wage is hourly, so not everyone would have the same weekly wage as the definition of full time varies from employer to employer. You may as well ask why NI starts at such a lower level than PAYE.

 

[chalkie99]

I'm not an accountant but, on the figures shown, why would the money paid to the employees be gross?

What about the employee national insurance contributions which should be deducted at source?

 

[KevinJackson]

Company X has two full time employees on minimum wage and has planned to pay his employees on 28th of each month:

Employee 1 => (Gross monthly = £987.50) + (Employer NI = £39.40) = £1026
Employee 2 => (Gross monthly = £987.50) + (Employer NI = £39.40) = £1026

Company X has £10,000 in its current account at the beginning of the month.

Is the following calculations correct?

1- Sending an Employer Payment Summary (EPS) by the 19th telling that for both employees the company is going to pay £1026 for the current month.

2- Doing a bank transfer of £78.8 to HMRC on 21nd [deadline is 22nd]

3- Paying Employee 1,Employee 2 (via bank transfer) on 28th the amount £987.50 each.

4- The money left in the bank account at the end of the 28th (assuming there have not been any other transactions) going to be 10000 - (1026*2) = £7948

You will be sending an FPS not EPS. You are paying HMRC a month early - the amount due on any FPC submitted up to 5th of any month is due in that month. If you pay on 28th you can submit the FPS on 28th and pay by 22nd of the following month. Also, if that is the total you are paying you can pay it quarterly.

So if you have 10,000 in the bank at the beginning of the month you will have liabilities of 2052 but you would only have paid 1973.20 so will have cash of 8026.80 at the end of the month.

Assuming your figures are right.

Assuming my calculation are correct, how did you get the total employment payment of 1973.20 and the value £8026.80 if we do the following calculations:
2 * 987.50 = £1,975
£10,000 - (2 * 987.5) = £8,025

Where does this £1.8 (1975-1973.20) come from?

 

[KevinJackson]

I'm not an accountant but, on the figures shown, why would the money paid to the employees be gross?

What about the employee national insurance contributions which should be deducted at source?

The net pay for the employee would be £953.24 = £987.50 - [£34.26 Employee NI]
In fact the total money which company X needs to pay to HMRC is (£39.40 * 2) + (£34.26 * 2) = £147.32

 

[Newchodge]

In fact the total money which company X needs to pay to HMRC is (£39.40 * 2) + (£34.26 * 2) = £147.32

I can't be arsed to check your figures, but can you explain how 2 idential employees, earning the same amount of money, have different deductions?

 

[Newchodge]

You have forgotten employer's NI alowance.

 

[Newchodge]

Where does this £1.8 (1975-1973.20) come from?

There
So if you have 10,000 in the bank at the beginning of the month you will have liabilities of 2052 but you would only have paid 1973.20 so will have cash of 8026.80 at the end of the month.

 

[KevinJackson]

I can't be arsed to check your figures, but can you explain how 2 idential employees, earning the same amount of money, have different deductions?

Employer NI for 2 employees = £39.40 * 2 = £78.80
2 Employees NI contribution = £34.26 * 2 = £68.52

altogether would be £147.32

 

[Newchodge]

Employer NI for 2 employees = £39.40 * 2 = £78.80
2 Employees NI contribution = £34.26 * 2 = £68.52

altogether would be £147.32

You need to research Employers NI Allowance. There will not be any employers NI to pay.

 

[KevinJackson]

You need to research Employers NI Allowance. There will not be any employers NI to pay.

Assuming Category Letter A we will have the following for each employee:

Lower earnings limit - £ 503
Earnings above the lower earnings limit up to and including the primary threshold - £ 199.00
Earnings above the primary threshold up to and including the upper earnings limit - £ 285.50

Employer's NICs due - £ 39.40
Employee's NICs due - £ 34.26

Total of Employee's and Employer's NICs due £ 73.66

 

[Newchodge]

As I said - You need to research Employers NI Allowance. There will not be any employers NI to pay.

 

[Scalloway]

Employment Allowance
You could get up to £3,000 a year off your National Insurance bill if you’re an employer.

https://www.gov.uk/claim-employment-allowance

 

[KevinJackson]

Employment Allowance
You could get up to £3,000 a year off your National Insurance bill if you’re an employer.

Kudos to you for this great point to mention and a question: Does that mean in our example company x will only pay [2 Employees NI contribution = £34.26 * 2 = £68.52] monthly and skip its employer's NI contribution until that £3,000 reached within the tax year or the company needs to pay the employer's NI on monthly basis anyway and then claim it back later on?

 

[RCW20025]

You just don't pay over the employers NI element until the £3,000 has been used up.

 

[NicoJ]

Lots of useful info in this thread but not actually answered the opening post so here goes:

1.You send an FPS not an EPS as Cyndy pointed out

2. No the amount you would pay over would be the employees NIC of £68.52 - calculated by you - as the employment allowance would kick in (Cyndy has already pointed out the dates were incorrect also)

3. No you would pay the employee their net pay which I think you calculated as £953.24

4. The amount in the bank would be £8025 assuming you paid the deductions over to HMRC early

As noted though you may want to check the minimum wage.

 

[Newchodge]

Am I being small minded for mentioning that I raised the Employer's NI allowance 3 times, twice pointing out that it means no employer's NI in this scenario, then Scalloway. who is a great contributor, gets the kudos for mentioning itonce. I think I'll go and sulk.

 

[KevinJackson]

[Kudos to you] Powered by 3. In fact in this particular scenario I was mainly to blame because I got distracted so much with my calculations and whether they are correct that I didn't pay attention to your tax relief recommendation. Well done.

 

[KevinJackson]

Am I being small minded for mentioning that I raised the Employer's NI allowance 3 times, twice pointing out that it means no employer's NI in this scenario, then Scalloway. who is a great contributor, gets the kudos for mentioning itonce. I think I'll go and sulk.

[Kudos to you] Powered by 3. In fact in this particular scenario I was mainly to blame because I got distracted so much with my calculations and whether they are correct that I didn't pay attention to your tax relief recommendation. Well done.

 

[SteveHa]

There's a big assumption that both employees are on a standard tax code. If there are any deductions in their codes then there may be tax to pay, too.

 

[KevinJackson]

There's a big assumption that both employees are on a standard tax code. If there are any deductions in their codes then there may be tax to pay, too.

In this particular case the tax code for both employees is 1185L. Employer's contribution to a hypothetical pension scheme is 1% [Er = 987.50 * 1% = £9.875 ] and Ee Pension is [9.875 * 80% = £7.9] which is tax relief at source. How would this change the dynamics of that £3000 tax allowance for the employer (Company X)? Are there any more taxes to pay for this employer?

 

[Newchodge]

[Kudos to you] Powered by 3. In fact in this particular scenario I was mainly to blame because I got distracted so much with my calculations and whether they are correct that I didn't pay attention to your tax relief recommendation. Well done.

Thank you