The basic rules for employers with new employees are important for any business.
There is no ‘Casual Labour’ exemption, if you take an employee on with intention of keeping them for just a couple of weeks on a temporary basis – the rules still apply.
If the correct PAYE and NIC is not deducted off employees, then the Employer will be held liable for any shortfall discovered.
If a new employee does not have a P45 from their previous job, then they must sign a P46 (or if they are students working only in the holidays, a P38S).
If they tick Boxes A or B – they will be on the emergency PAYE code (of 647L in 2009/10)
Employees on the basic code of 647L will pay no tax on earnings up to £125 a week, above that tax is deducted at 20%.
National Insurance Contributions are paid by the employee (11%) and employer (12.8%) on earnings above £110 per week.
If the week’s earnings are between £95.01 and £110.00 per week there are no contributions deducted but the employee is still credited with a basic National Insurance contribution. For this reason a form P11 (deduction sheet) must be maintained throughout the year for the employee.
If the employer does not pay an employee more than the NIC LEL (Lower Earnings Level) (of £95 a week in 2009/10), they do not have to prepare a P11 deductions sheet for them or include them on the year end P35. However, the employer must still have a record of wages paid to each employee in each week or month.