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Process holidays over year end

Created on  | Last modified on 

Summary

Process holidays over year end in Sage 50 Payroll Ireland.

Description

When an employee is on holiday over year end and part of this period falls on a payday in the new tax year, Revenue advises the following:

  • Tax credits and rate bands: use these for any holiday pay given in advance, ensuring they match the income tax week and tax year when you make the payment
  • Align advance payments: if you pay an employee in advance, ensure the tax credits and rate bands align with the tax year in which they receive the payment

 NOTE: For more details guidance on aligning pay dates go to revenue.ie 

 

Resolution

Follow the relevant scenario for processing holiday pay over payroll year end:

All advanced weeks are within the same tax year

If you process and pay all advanced weeks within the same tax year, use the Hol Periods feature to advance pay. This automatically increases the insurance weeks and ensures PRSI calculates correctly.

▼ View example

If you pay an employee in week 51 for both week 51 and week 52, set the Hol Periods to 1 in Time and Pay. This adjustment automatically increases the annual tax credits, insurance weeks, and other relevant fields to 2.

Weeks are processed separately in advance and paid across tax years

When payments span across two tax years and are made separately in December and January, but you process them in advance.

  • Run payroll separately for each tax year:
    • Process the payment in December in the current tax year
    • Process and submit the January payroll in the new tax year, scheduling the payment for January

This ensures correct insurance weeks and PRSI reporting.

▼ View example

For an employee paid on 27 December, and 3 January 2025, report as follows:

  • In the current tax year - One insurable week for week 52 of the current tax year, paid in December
  • In the new tax year - One insurable week for week 1 of the new tax year, scheduled in advance for January

Advanced weeks span two tax years

If you pay an employee in December for periods relating to January holidays, follow these steps:

  1. Process December payment:
    • Pay the employee for two weeks' pay, week 52 and week 1
    • Apply only one week's tax credit and rate bands for the December payment
  2. Adjust January payment:
    • In January, skip week 1 and set it to week 2
    • In Time and Pay, ensure the insurance weeks are set to 2, then process week 2

 NOTE: Paying an employee two weeks' pay in December (week 52 and week 1) means their net pay in December can be lower, as it uses only one week's tax credits. However, in January, their net pay is higher, as they receive one week's pay in week 2 using two weeks' worth of tax credits. 

What to do if you process holiday pay incorrectly

If you process holiday payments in the wrong tax year, this can lead to employee payments and tax credits being recorded incorrectly with Revenue.

▼ View example

If you process an employee's pay in week 1 of January, but pay this in December, the employee can be taxed incorrectly for the current tax year.

Steps to correct this:

  1. Reprocess payroll correctly:
  2. Adjustments on ROS:
    • You may be able to make any adjustments directly on your ROS account. For more information, contact Revenue's Employer Helpline, at revenue.ie

 

SEPA Credit Transfer

If you pay your employees by SEPA bank transfer, the process can vary depending on the scenario.

▼ All advanced weeks are within the same tax year
  • Create one SEPA file that includes all payments made in the current tax year
  • Ensure the execution date aligns with the payment date
▼ Weeks are processed separately in advance and paid across tax years
  • Create two separate SEPA files
    • One for the December period (current tax year)
    • Another for the January period (new tax year)
  • Set the execution date to align with the payment dates
  • Check with your bank that they support this approach
▼ Advanced weeks span two tax years
  • Create one SEPA file for the payment made in December
  • Ensure the execution date aligns with the payment date

Related Solutions

Generate a SEPA bank transfer file