The following advice on how employers should handle uncollected wages appeared in a recent issue of the IPPM's Advice Online newsletter.

Question: I wondered if you could help me on a subject that has cropped up within our organisation. We have a number of payments to employees that have not been collected despite several attempts to contact them. There appears to be 2 schools of thought.

1. We do nothing and hold the money in a suspense account and await the employee to make contact.
   
   
2. We report to the IR that the employee hasn't been paid and amend the reported P14/P45 figures.

Answer: ITEPA 2003 S685 says that PAYE, for employees who are not directors, should be operated at the earlier of

• when payment is actually made, or
  
  
• when the employee is entitled to be paid, even if the pay is not drawn until later.

So in this case PAYE has been operated when the employee was entitled to be paid. The fact that the employee has not yet drawn the pay does not change anything. If the pay remains awaiting collection by the employee then the employer should not do anything further regarding PAYE.

It is for the employer to decide what happens to the uncollected pay. If the employer decides after, say, six months that because the pay has not been collected the money returns to the employer's possession then I think the Inland Revenue would not object to the employer reporting amended P14/P35 figures. If the employee then claimed payment after, say, twelve months and the employer then made the payment, PAYE would have to be operated at that point.

From the NICs perspective, IR would say that the employer has placed earnings at the employee's disposal. Since earnings have been paid, they attract a NICs liability. Although we don't know the reason for the employee's failure to take possession of his net pay but in light of the fact that earnings have been 'paid', the NICs presumably recorded and reported on form P14 are correctly due. If the employee fails to collect the net pay, what the employer does with it is a matter for them.

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...back to 20 August 2004