Holiday pay at year end

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

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

 

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.

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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.

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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.
   

 

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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.