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Holiday pay at year end

Created on  | Last modified on 

Summary

Options for holiday pay processing over year end in Sage Payroll.

Description

When an employee's holiday falls over two tax years, Revenue advises the following:

  • Tax credits and rate bands - use these for any holiday pay given in advance. Ensure 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 are correct. They must align with the tax year in which they receive the payment

NOTE:

For more detailed 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 Advanced Holiday Pay payment. 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, enter 1 in the Quantity field for Advanced Holiday Pay. This automatically increases the annual tax credits, insurance weeks and other relevant fields to 2.

Process separate weeks in advance and pay across tax years

If you process payments across two tax years in advance with separate payments in December and January, run payroll separately for each tax year:

  • Process the payment in December in the 2025 tax year
  • Process and submit the January payroll in the 2026 tax year, scheduling the payment for January

This ensures correct insurance weeks and PRSI reporting.

▼ View example

For an employee paid on Friday 26 December 2025, and Friday 2 January 2026, report as follows:

  • In 2025 - One insurable week for week-52 of 2025, paid in December
  • In 2026 - One insurable week for week-1 of 2026, scheduled in advance for January

Advanced weeks span two tax years

  1. Process each week up to week-52 as normal.
    • If the employee is on holiday in week-51, process each week in turn, or use the advance pay option. Pay them up to the end of week-52
  2. Process week-1 as normal as a separate pay run.

NOTE:

If you pay your employees by SEPA or Paypath bank transfer, you need to send separate payment files. One up to the end of the last tax year and one for the new tax year. Your employees then receive two separate payments.

 

What to do if you process holiday pay incorrectly

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

▼ View example

If you process the pay in Week-1 of January 2026 but pay it in December 2025, the calculation for the year 2025 can be incorrect.

Steps to correct this:

  1. Edit the pay run:
    • Edit 2025 and resend your payroll submission
    • Edit 2026 and resend your payroll submission
  2. Adjustments on ROS:
    • It's possible to make adjustments directly on your ROS account. For more information, contact Revenue's Employer Helpline at revenue.ie
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