Level 2 in Payroll Administration

Payroll Qualification

Model answers

Level 2 Certificate in Payroll Administration (QCF)

Determining net pay (DNP)

June 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 – Donna Bellony – April 2010 gross to net pay
Basic pay / 2,087.50
Pension contribution for April 2010
(1 mark only for incorrect rounding) / 2,087.50 x 6.5%= / 135.69
AVC for April 2010 / 75.00
Tax calculation
Cumulative gross pay / 2,087.50
Less cumulative allowable deductions / 135.69 + 75.00 = / 210.69
Cumulative pay for tax purposes / 2,087.50 - 210.69 = / 1,876.81
Tax code used / 647L / Tax basis / Cumulative
Adjustment for tax code / 416.67 + 123.25 = / 539.92
Cumulative net taxable pay / 1,876.81 – 539.92 = / 1,336.89
Tax calculation
1,336.00 x 20%= / 267.20
Tax due for April 2010 / 267.20
NICs calculation / NI table letter used / D
2,087.50 – 476.00 = / 1,611.50
476.00 – 412.00 = / 64.00
Employee’s contribution payable
1,611.50 x 9.4% = / 151.48
64.00 x 1.6% = / (1.02)
Total / 150.46
Employer’s contribution payable
1,611.50 x 9.1% = / 146.65
64.00 x 3.7% = / (2.37)
Total / 144.28

Payslip for April 2010

Employee: Donna Bellony / Date: 30 April 2010
Payments
£ / Deductions
£ / Year to date
£
Basic pay:2,087.50 / Income tax:267.20 / Gross pay: 2,087.50
NIC:150.46 / Pay for tax purposes: 1,876.81
Pension:135.69 / Income tax:267.20
AVC: 75.00 / Employee’s NIC:150.46
Leisure club: 87.50 / Employer’s NIC:144.28
Pension:135.69
AVC: 75.00
Leisure club: 87.50
Total gross pay: / 2,087.50 / Total deductions: / 715.85 / Net pay: 1,371.65

NI number:TP205169ATax code:647L

Calculation for Task 1.1 – Donna Bellony – May 2010 gross to net pay
Basic pay / 4,175.00
Bonus / 2,500.00
Pension contribution for May 2010 / 6,675.00 x 6.5%= / 433.88
AVC for May 2010 / 75.00
Charitable giving for May 2010 / 250.00
Cumulatives: / Pension 135.69 + 433.88 = 569.57
AVC 75.00+ 75.00= 150.00
Charitable Giving 250.00
Cumulative gross pay to May 2010 / 6,675.00 + 2,087.50 = / 8,762.50
Less cumulative allowable deductions / 569.57 + 150.00 + 250.00 = / 969.57
Cumulative pay for tax purposes / 8,762.50 – 969.57 = / 7,792.93
Tax code used / BR / Tax basis / Cumulative
Adjustment for tax code / Nil
Cumulative net taxable pay / 7,792.93
Tax calculation
7,792.00 x 20% = / 1,558.40
Tax due to May 2010 / 1,558.40
Tax deducted in April 2010 / 267.20
Tax due for May 2009 / 1,558.40 – 267.20 = / 1,291.20
NICs calculation / NI table letter used / D
6,675.00 – 3,656.00 = / 3019.00
3,656.00 – 3,337.00 = / 319.00
3,337.00 – 476.00 = / 2,861.00
476.00 – 412.00 = / 64.00
Employee’s contribution payable / 3,019.00 x 1% = / 30.19
319.00 x 11% = / 35.09
2,861.00 x 9.4% = / 268.93
64.00 x 1.6% = / (1.02)
Total / 333.19
Employer’s contribution payable / 3,338.00 x 12.8% = / 427.26
2,861.00 x 9.1% = / 260.35
64.00 x 3.7% = / (2.37)
Total / 685.24

Payslip for May 2010

Employee: Donna Bellony / Date: 28 May 2010
Payments
£ / Deductions
£ / Year to date
£
Basic pay: / 4,175.00 / Income tax: 1,291.20 / Gross pay: / 8,762.50
Bonus 2,500.00 / NIC:333.19 / Pay for tax purposes: / 7,792.93
Pension:433.88 / Income tax: / 1,558.40
AVC: 75.00 / Employee’s NIC: 483.65
Charitable giving:250.00 / Employer’s NIC: 829.52
Leisure club 87.50 / Pension: 569.57
AVC: 150.00
Charitable giving: 250.00
Leisure club: 175.00
Total gross pay: / 6,675.00 / Total deductions: / 2,470.77 / Net pay: 4,204.23

NI number:TP205169ATax code:BR

Calculation for Task 1.1 – Debjani Mukherjee – April 2010 gross to net pay
Basic pay / 1,750.00
Tax calculation
Cumulative gross pay / 1,750.00
Cumulative pay for tax purposes / 1,750.00
Tax code used / 647L / Tax basis / Month 1
Adjustment for tax code / 416.67 + 123.25 = / 539.92
Cumulative net taxable pay / 1,750.00 – 539.92 = / 1,210.08
Tax calculation
1,210.00 x 20% = / 242.00
Tax due for April 2010 / 242.00
NICs calculation / NI table letter used / A
Employee’s contribution payable / 1,750.00 – 476.00 x 11% = / 140.14
Employer’s contribution payable / 1,750.00 – 476.00 x 12.8% = / 163.07

Payslip for April 2010

Employee: Debjani Mukherjee / Date: 30 April 2010
Payments
£ / Deductions
£ / Year to date
£
Basic pay: / 1,750.00 / Income tax: / 242.00 / Gross pay: / 1,750.00
NIC: / 140.14 / Pay for tax purposes: / 1,750.00
Tax: 242.00
Employee’s NIC: 140.14
Employer’s NIC: 163.07
Total gross pay: / 1,750.00 / Total deductions: / 382.14 / Net pay: 1,367.86

NI number:YT370249CTax code:647L

Calculation for Task 1.1 – Debjani Mukherjee – May 2010 gross to net pay
Basic pay / 3,850.00
Pension contribution for May 2010 / 3,850.00 x 6.5% = / 250.25
Cumulative gross pay to May 2010 / 1,750.00 + 3,850.00 = / 5,600.00
Less cumulative allowable deductions / 250.25
Gross taxable pay / 5,600.00 – 250.25 = / 5,349.75
Pay from previous employer / 1,963.46
Cumulative pay for tax purposes / 5,349.75+ 1,963.46 = / 7,313,21
Tax code used / 162L(1) / Tax basis / Cumulative
Adjustment for tax code / 271.50
Cumulative net taxable pay / 7,313.21 – 271.50 = / 7,041.71
Tax calculation
6,234.00 x 20% / 1,246.80
807.00 x 40% / 322.80
Tax due to May 2010 / 1,246.80 + 322.80 = / 1,569.60
Tax deducted in April 2010 / 242.00
Tax deducted by previous employer / 365.40
Tax due for May 2010 / 1,569.60 – 242.00– 365.40 = / 962.20
NICs calculation / NI table letter used / D
Employee’s contribution payable / 3,850.00 – 3,656.00 x 1% = / 1.94
3,656.00 – 3,337.00 x 11% = / 35.09
3,337.00 – 476.00 x 9.4% = / 268.93
64.00 x 1.6% = / (1.02)
304.94
Employer’s contribution payable / 3,850.00 – 3,337.00 x 12.8% = / 65.66
3,337.00 – 476.00 x 9.1% = / 260.35
64.00 x 3.7% = / (2.37)
323.64

Payslip for May 2010

Employee: Debjani Mukherjee / Date: 28 May 2010
Payments
£ / Deductions
£ / Year to date
£
Basic pay: / 3,850.00 / Income tax: / 962.20 / Gross pay: 7,563.46
NIC: 304.94 / Pay for tax purposes: 7,313.21
Pension: 250.25 / Income tax: 1,569.60
Guide dogs: 150.00 / Employee’s NIC: 445.08
Student loan: 234.00 / Employer’s NIC: 486.71
Leisure club: 65.00 / Pension: 250.25
Guide dogs: 150.00
Student loan: 234.00
Leisure club: 65.00
Total gross pay: / 3,850.00 / Total deductions: / 1,966.39 / Net pay: 1,883.61
NI Number:YT370249CTax code: 162L

Task 1.2

(a)April’s total gross payroll cost

Pay elements:Salary218,914.87

Commissions 73,290.93

Expenses claimed 21,723.41

Statutory maternity pay 6,418.94

Statutory paternity pay 984.48

Statutory sick pay 854.82

Total322,187.45

Employer’s:NICs 38,321.94

Pension contributions 17,475.19

Gross cost377,984.58

(b)The total payment to be made to HMRC

Income tax 43,070.61

Student loan deductions 6,253.00

Net income tax value 49,323.61

Employees’ NIC 32,775.72

Employer’s NIC 38,321.94

SMP recovery (5,905.42)

SPP recovery ( 905.72)

Net NICvalue 64,286.52

Payment due for April113,610.13

Section 2

Task 2.1

(a)No

(b)It is a statutory deduction. Employee authority for deduction is not relevant.

(c)Any one of the following:

Stop notice

Employee leaves

Employee dies

ReachesState pension age

Task 2.2

(a)No

(b)Any one of the following:

Each employee must give their express written authority for the disclosure

Breaches the Data Protection Act

Not proper use of the data

(c)Send it to the Chief Executive and ask for confirmation.

Task 2.3

(a)No

(b)The list needs each employee’s signature.

2. Contractual deduction

Task 2.4

(a)The employer needs to hold a valid certificate of election.

(b)C

(c)A

Task 2.5

(a)Employee without a Form P45.

(b)A general notice is issued which specifies a value to be addedto standard tax codes, such as L suffix codes and a date after which the increase is to be applied. Also accepted new emergency code

Task 2.6

(a)Any two of the following:

P45

P46

P46 (PEN)

P46 (EXPAT)

(b)Only those employers with less than 50 staff

Task 2.7

(a)On or beforethe contractual pay day

(b)1. Gross pay

2. Itemised deductions (Not worried about word “itemised”)

3. Net pay

Task 2.8

(a)Voluntary

Statutory

Voluntary

Statutory

(b)Any two of the following:

The payment must be made by the employer to an agency.

The agency must be approved by HMRC.

The payment must be made within the statutory deadlines.

Donation must not exceed gross pay.

Remitted to agency by 19th.

Task 2.9

(a)A code representing the NI record for the employee

(b)Employee

Task 2.10

(a)Take the reconciled number from past pay period, deduct all leavers and add new employees. Add any returning employees to the result and this should reconcile with the total number of payments made.

(b)1. See each employee personally at least once a year

2. Get employees to sign for their payslips

(c)Any two of the following:

Proper contracts of employment

Compatibility checks

Comparing with previous periods

Getting an independent check, sample testing