A redundancy payment is tax and national insurance (NI) up to the value of £30,000.
To process the payment, you need to create a payroll item under Addition type and have it under Other Payroll items on the Employment Payment Detail.
Steps on how to create the redundancy payment
- Go to Employees then Payroll Setup.
- Select Add or Edit Payroll item.
- Select Payroll item then New.
- Payroll item type is Addition. Select Next.
- Enter the name of the addition as Redundancy. Select Next.
- Payroll item counts as qualified earnings for assessment. Select Next.
- Payroll item is pensionable earnings. Confirm with your pension provider if the amount is part of the pensionable earnings.
- Select the expense account so you can track the amount.
- Select the tax tracking type then select Next
- Under Taxes, the payment is tax and NI free up to £30,000.
- Calculate based on quantity.
- Select Finish.
Note: If you need any more information on redundancy payments, see Making staff redundant .