Payroll Qualification

Model answers

Level 2 Certificate in Payroll Administration (QCF)

Determining net pay (DNP)

December 2010

The model answers may, in parts, be longer than would be expected of candidates in the exam. The fuller version is given for teaching purposes.

Section 1

Task 1.1

Calculation for Task 1.1 – Alwyn Evans Jones – April 2010 gross to net pay
Basic pay / 2,754.75
Pension contribution for April 2010 / 2,754.75 x 7.5%= / 206.61
Charitable giving for April 2010 / 73.50
Tax calculation
Cumulative gross pay / 2,754.75
Less cumulative allowable deductions / 206.61 + 73.50= / 280.11
Cumulative pay for tax purposes / 2,754.75–280.11 = / 2,474.64
Tax code used / K273 / Tax basis / Cumulative
Adjustment for tax code / 228.25
Cumulative net taxable pay / 2,474.64+228.25 = / 2,702.89
Tax calculation
2,702.00 x 20%= / 540.40
Tax due for April 2010 / 540.40
NICs calculation / NI letter used / F
2,754.75 – 476.00 = / 2,278.75
476.00 – 412.00 = / 64.00
Employee’s contribution payable
2,278.75 x 9.4% = / 214.20
64.00 x 1.6% = / (1.02)
Total / 213.18
Employer’s contribution payable
2,278.75 x 11.4% = / 259.78
64.00 x 1.4% = / (0.90)
Total / 258.88

Payslip for April 2010

Employee: Alwyn Evans Jones / Date: 30 April 2010
Payments
£ / Deductions
£ / Year to date
£
Basic pay:2,754.75 / Income tax:540.40 / Gross pay: 2,754.75
NIC:213.18 / Pay for tax purposes: 2,474.64
Pension:206.61 / Income tax:540.40
Charitable giving: 73.50 / Employee’s NIC:213.18
Social club: 29.00 / Employer’s NIC:258.88
Pension:206.61
Charitable giving: 73.50
Social club: 29.00
Total gross pay: / 2,754.75 / Total deductions: / 1,062.69 / Net pay: 1,692.06

NI number:SI926751CTax code:K273

Calculation for Task 1.1 – Alwyn Evans Jones – May 2010 gross to net pay
Basic pay / 2,754.75
Overtime / 387.32
Pension contribution for May 2010 / 206.61
AVC for May 2010 / 25.00
Charitable giving for May 2010 / 73.50
Cumulatives: / Pension 206.61+ 206.61= 413.22
AVC = 25.00
Charitable Giving 73.50 + 73.50 = 147.00
Cumulative gross pay to May 2010 / 2,754.75 + 2,754.75 + 387.32 = / 5,896.82
Less cumulative allowable deductions / 413.22 + 25.00 + 147.00= / 585.22
Cumulative pay for tax purposes / 5,896.82 – 585.22 = / 5,311.60
Tax code used / 647L / Tax basis / Cumulative
Adjustment for tax code / 833.34 + 246.50 = / 1,079.84
Cumulative net taxable pay / 5,311.60 – 1,079.84 = / 4,231.76
Tax calculation
4,231.00 x 20% = / 846.20
Tax due to May 2010 / 846.20
Tax deducted in April 2010 / 540.40
Tax due for May 2009 / 846.20–540.40 = / 305.80
NICs calculation / NI letter used / F
3,142.07 – 476.00 = / 2,666.07
Employee’s contribution payable
2,666.07 x 9.4% = / 250.61
(1.02)
Total / 249.59
Employer’s contribution payable
2,666.07 x 11.4% = / 303.93
(0.90)
Total / 303.03

Payslip for May 2010

Employee: Alwyn Evans Jones / Date: 28 May 2010
Payments
£ / Deductions
£ / Year to date
£
Basic pay: / 2,754.75 / Income tax: 305.80 / Gross pay: / 5,896.82
Overtime: 387.32 / NIC:249.59 / Pay for tax purposes: / 5,311.60
Pension:206.61 / Income tax: / 846.20
AVC: 25.00 / Employee’s NIC:462.77
Charitable giving: 73.50 / Employer’s NIC:561.91
Social club: 29.00 / Pension:413.22
AVC: 25.00
Charitable giving:147.00
Social club: 58.00
Total gross pay: / 3,142.07 / Total deductions: / 889.50 / Net pay: 2,252.57

NI number:SI926751CTax code:647L

Calculation for Task 1.1 – Helen Burlison-Rush – Week 1, April 2010 gross to net pay
Basic pay / 750.00
Pension contribution for week 1 / 750.00 x 7.5% = / 56.25
AVC for week 1 / 75.00
Tax calculation
Cumulative gross pay / 750.00
Less cumulative allowable deductions / 56.25 + 75.00 = / 131.25
Cumulative pay for tax purposes / 750.00 – 131.25 = / 618.75
Tax code used / 647L / Tax basis / Cumulative
Adjustment for tax code / 96.16 + 28.45 = / 124.61
Cumulative net taxable pay / 618.75–124.61 = / 494.14
Tax calculation
494.00 x 20% = / 98.80
Tax due for week 1 / 98.80
NICs calculation / NI letter used / G
Employee’s contribution payable
750.00 – 110.00 x 4.85% = / 31.04
Employer’s contribution payable
750.00 – 110.00 x 11.4% = / 72.96
110.00 – 95.00 x 1.4% = / (0.21)
Total / 72.75

Payslip for Week 1, April 2010

Employee: Helen Burlison-Rush / Date: 9 April 2010
Payments
£ / Deductions
£ / Year to date
£
Basic pay: / 750.00 / Income tax: / 98.80 / Gross pay: / 750.00
NIC: / 31.04 / Pay for tax purposes: / 618.75
Pension: / 56.25 / Income tax: 98.80
AVC: / 75.00 / Employee’s NIC: 31.04
Social club: / 6.50 / Employer’s NIC: 72.75
Pension: 56.25
AVC: 75.00
Social club: 6.50
Total gross pay: / 750.00 / Total deductions: / 267.59 / Net pay: 482.41

NI number:ZE513984ATax code:647L

Calculation for Task 1.1 – Helen Burlison-Rush – Week 2, April 2010 gross to net pay
Basic pay / 750.00
Bonus / 374.97
Holiday pay / 750.00 x 2 = / 1,500.00
Pension contribution for week 2 / 2,250.00 x 7.5% = / 168.75
AVC for week 2 / 75.00 x 3 = / 225.00
Cumulative gross pay to week 2 / 750.00 +750.00 + 374.97 + 1,500.00 = / 3,374.97
Less cumulative allowable deductions / 56.25 + 168.75 + 75.00 + 225.00 = / 525.00
Cumulative pay for tax purposes / 3,374.97–525.00 = / 2,849.97
Tax code used / 647L / Tax basis / Cumulative
Adjustment for tax code / 384.64 + 113.80 = / 498.44
Cumulative net taxable pay / 2,549.97-498.44 = / 2,351.53
Tax calculation
2,351.00 x 20% = / 470.20
Tax due to week 2 / 470.20
Tax deducted in week 1 / 98.80
Tax due for week 2 / 470.20– 98.80 = / 371.40
NICs calculation / NI table letter used / G
2,624.97/3 = 874.99 average
Employee’s contribution payable / 874.99– 844.00 / = 30.99 x 1% x 3 = / 0.93
844.00– 110.00 / = 734.00 x 4.85% x 3 = / 106.80
Total / 107.73
Employer’s contribution payable / 874.99– 770.00 / = 104.99 x 12.8% x 3 = / 40.32
770.00- 110.00 / = 660.00 x 11.4% x 3 = / 225.72
110.00 – 95.00 / = 15.00 x 1.4% x 3 = / (0.63)
Total / 265.41

Payslip for Week 2, April 2010

Employee: Helen Burlison-Rush / Date: 16April 2010
Payments
£ / Deductions
£ / Year to date
£
Basic pay: / 750.00 / Income tax: / 371.40 / Gross pay:3,374.97
Bonus: / 374.97 / NIC:107.73 / Pay for tax purposes:2,849.97
Holiday pay: 1,500.00 / Pension:168.75 / Income tax: 470.20
AVC: 225.00 / Employee’s NIC: 138.77
Social club: 19.50 / Employer’s NIC: 338.16
Pension: 225.00
AVC: 300.00
Social club: 26.00
Total gross pay: / 2,624.97 / Total deductions: / 892.38 / Net pay: 1,732.59
NI Number:ZE513984ATax code: 647L

Task 1.2

(a)November’s total gross payroll cost

Alternative values

Pay elements:Salary427,193.24

Bonus 92,517.38

Expense reimbursement 16,817.73

Occupational maternity pay 2,126.24

Statutory maternity pay 7,392.18 591.37

Occupational paternity pay 266.89

Statutory paternity pay 817.39 65.39

Occupational sick pay 1,079.98

Statutory sick pay 1,082.17

Total549,293.20541,740.39

Employer:NICs 74,781.92

Pension contributions 57,917.68

Gross cost681,992.80674,439.99

(b)Net tax and net NIC amounts

Income tax 84,048.53

Student loan deductions 12,202.00

Total tax payment 96,250.53

Employee’s NIC63,958.95

Employer’s NIC 74,781.92

SMP recovery(6,800.81)

SPP recovery( 752.00)

Net NIC131,188.06

Payment due for November227,438.59

(c)SMP recovery

The payroll summary will show the higher amountbut you could elect to manually adjust the recovery down to 92% of £194.32 in order to recognise the true amount paid. (Candidate could instead state that since the higher sum, £2,194.32 is shown on the payroll summary it would be in order to recover 92% of this and adjust the payment of PAYE in the following month)

Section 2

Task 2.1

(a)Deduct in accordance with the order

(b)£1

(c)The aggregate amount of court order deducted from the employee must agree with the aggregate amount of payments made to the court.

Task 2.2

(a)Check the total NIC, employees and employers, in the last tax year. If this is above £45,000for the whole tax year then thestandard recovery applies.

(b)4.5%

(c)It is taken automatically from the regular PAYE payments

Task 2.3

(a)Contributions to the annual party,

authorised by the events manager.No

Trades union subscriptions, membership

form completed and signed by employee.Yes

Season ticket travel loan repayments.Yes

Recovery of overpaid wages, signed by

the HR Director.Yes

Pension contributions as defined

in the contract.Yes

(Contribution levels must be clear for the condition to apply)

(b)Yes

(c)A CTAEO is a statutory deduction and does not require employee authorisation.

Task 2.4

(a)Any TWO from:

Sample signatures of employees on file, carrying out checks for employee visits or telephone enquiries, password protected systems, password protected screensavers, logging out of systems when away, locking the payroll office door, locking cabinets etc.

(b)Give them the information immediately

Task 2.5

(a)Any TWO from:

Statutory notice (may refer to SL1)

P45 with box five ticked by previous employer

P46 with box D ticked by employee and signed

May just refer to P45 and P46

(b)Nil

(c) Carry on deducting and call the helpline

(It is the employer’s responsibility to sort it out, not the employee’s)

Task 2.6

(a)NI category letter

Khadjan is in the COSR scheme, no other circumstancesD

Matthew is not in a pension scheme, no other circumstancesA

Dorothy is in the Stakeholder scheme and is over state pension ageC

Aleem is in the COSR scheme and is over state pension ageC

Ursula has a private pension, no other circumstancesA

(b) Expenses reimbursement

Task 2.7

(a)BR

(b)Up to six weeks, whatever NIC letter applied before they left

After six weeks NIC reverts to letter A

(c)Deduction of occupational pension contributions will depend on the terms of the scheme and whether the payment being made is pensionable.

Task 2.8

(a)Any TWO comments from:

Check headcount, manually test a sample of payments, do sample checking of income tax and NIC, check totals against previous payrolls, sample check payments for excessive basic or overtime or bonus payments.

(b)

Any TWO from:

Get employee to collect pay advices personally

Check NINOs immediately upon starting

See P45s, get employees to attend pay office with forms, etc

(c)On or before pay day

Task 2.9

(a)Both have no free pay, BR is 20% taxand D0 is 40% tax.

(b)With a suffix code the pay adjustment is deducted from pay before tax is calculated whereas with a “K” code the pay adjustment from the tables is notionally added to pay.

(c)50% of the gross pay for tax purposes

Task 2.10

(a)Yes

(b)The limit is 100% of pay.

(c)Payment is made to an approved agency for transfer to the charities.

1