What are PAYE payments?

PAYE covers all employees’ earnings at or above a certain threshold called the National Insurance Lower Earnings Limit (LEL) which amounts to £91 a week or £412 a month or £4.940 a year for the tax year 2010-2011. The PAYE system is applied to the following payments made by employers to their employees:

  • Regular salaries and wages
  • Extra payments such as overtime, shift pay, commission, bonuses and holiday pay. They are considered as part of the total pay at the time they are paid.
  • Tips, gratuities and service charges – unless these are paid directly to an employee
  • Certain reimbursements and allowances for expenses arisen.
  • Company (occupational) pension and annuity payments.
  • Statutory Sick Pay (SSP), Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP) and Statutory Adoption Pay (SAP).
  • Lump sum and compensation payments such as redundancy payments – unless they are exempt from tax.
  • Non-cash items such as vouchers, shares or premium bonds. PAYE is applied to their cash value.
  • Non-cash benefits such as company car, medical insurance, low interest loan, living accommodation and childcare. PAYE is applied to their cash value.

If you are not sure whether your payments made to employees are covered by PAYE, contact Capital Business Links Ltd on telephone number 0208 567 99 44 or at our e-mail address.