Even though the Micropay payroll software processes week 53 where the calendar is set up, there is always one question which daunts payroll operators- do I have a week 53 this year?
So first questions first- what is an extra pay period?
Week 53 occurs in a weekly payroll when there are 53 pay days in the tax year. There are normally 52 pay periods in a weekly payroll, but in some years the dates fall in a way that gives rise to an ‘extra pay period’.
An extra pay period can also occur in fortnightly and four-weekly pay frequencies.
For tax purposes, this extra pay period is calculated on a week 1 basis.
This means that the employee receives more than the year’s total tax and USC credits. The tax inspector will take this into consideration when issuing the next year’s P2C tax allowances.
The next question which usually arises is – how do I know if I have an extra pay period?
After you have fully completed Week 52 (or Fortnight 26, or Four-Weekly Period 13), check the date on which the next payday occurs.
If the next payday falls on the 30th– 31st December, you have an extra pay period – it’s that simple. If your last payment is the last Friday or Saturday of 2016 – you have an extra pay period. Still not convinced?
If the next payday occurs on or after 1 January, you don’t have an extra pay period. You must process this pay run as period one of the new tax year. It may sound small, and it’s only a week – but it is really important to ensure the returns are correct- we need to keep the tax man happy at Christmas!!