Handle payroll changes, leavers and corrections

Payroll leaver and correction checklist

Begin with evidence rather than the outcome somebody expects. Record the employee and employment, what changed, the effective date, when payroll received it, the source and authority, who reviewed it and whether an open or processed payroll period is affected.

Change, adjustment or correction?

An approved pay rise effective next month is a prospective change. An HMRC notice effective in the current open payroll is a current unprocessed change. A timesheet received after an earlier payroll may create a retrospective adjustment if the earlier payroll correctly used the records available then. A salary rate that payroll held but failed to apply is a retrospective correction.

The distinction matters because it determines whether to update a future record, recalculate an open version, create back pay, correct an employee payment or amend RTI. “It arrived late” does not answer those questions.

Authority is not always employer approval

A contract change or discretionary bonus may need employer approval. An HMRC tax-code notice, student-loan notice, pension instruction, court order or statutory requirement instead needs authenticity, applicability and effective-date review. Do not require a manager to “approve” whether HMRC’s valid instruction applies, and do not let the absence of an ordinary approval field block a required instruction.

Derive calculation and reporting effects from the instruction and context. Pay, tax, NI, pension and loan instructions can affect calculation. Identity, employment, tax, NI, loan and leaver information can affect reporting. Never trust manually selected impact flags without comparing the actual event.

Identify the first applicable payroll

Compare the effective date with the contractual pay period, payment date, open payroll window and input snapshot. Then determine whether the instruction arrived before closure and whether any processed period is affected.

If a change belongs in an open draft, apply it to that version and repeat the relevant controls. If the run was already approved, any calculation-affecting change creates a new version under Lesson 8. Materiality changes the review depth, not whether the version history exists.

For a future change, record the first applicable run and leave earlier payroll untouched. For a retrospective adjustment, retain the earned period and calculate any back pay through the employer’s documented method. Do not silently replace the historical salary or hours and make prior reports appear different.

Validate maintained instructions

For an HMRC notice, confirm the employee, effective date, notice source and whether it supersedes an earlier instruction. For pension or official-order changes, confirm the scheme, authority, timing and applicable limits. For employee-requested identity or bank changes, use the relevant identity and fraud controls. Lesson 11 routes the event; it does not recreate every specialist calculation.

Reconcile the applied change

Confirm that the intended run used the new instruction, calculations were reviewed, employee outputs changed as expected and any reporting fields followed the maintained treatment. Retain the prior and replacement instructions when one supersedes another.

Four different leaver dates

The leaving date is when employment ends. The final payment date is when the employee is last paid. The FPS payment date reports the relevant payment. The P45 issue date records when the leaving document was provided. These dates can differ, and the leaving date must not be changed merely to match payday.

Move the leaver case through authorised, final inputs pending, ready for final payroll, final pay calculated, leaving reported, P45 issued and closed states. Reopen the case if a subsequent payment or error appears; do not overwrite the closed evidence.

Coordinate ordinary final payroll

Confirm the authorised leaving date and approved inputs for wages or salary, variable pay, holiday, notice, expenses, benefits, deductions and pension effects. Detailed calculation of holiday, PILON, redundancy and disputed termination terms belongs to the specialist guides.

For an ordinary current-year leaver, report the leaving date through the maintained payroll route and give the employee a P45 when they leave. Reconcile the final payslip, employee payment, FPS acceptance, leaving date and P45.

Keep two zero-pay leaver routes separate

If final payment happened before a leaving date falling on or after the next 6 April, include the leaving date in the first FPS of the new tax year with zero current-period pay and tax, zero YTD values and that FPS period’s payment date.

If a current-year leaver was omitted from the relevant report, include the leaver through HMRC’s maintained route with zero current-period values but the last reported YTD information. These scenarios are not interchangeable.

If the wrong leaving date was reported, update the payroll record; HMRC warns that reporting the amended date in the next FPS can create a duplicate record. If the employee continues working and no P45 was issued, remove the leaving date and retain the payroll ID. If a P45 was issued, follow the supported new-employment and payroll-ID route.

Advanced: payment after leaving

Treat the instruction and its processed result separately. The instruction records the original leaving date and payroll ID, payment date and tax years, gross-payment source and maintained tax instruction. The result records the payroll run, FPS, gross, deductions, net payment, employee payment and written confirmation.

After a P45 was issued, use the original leaving date and payroll ID, set the payment-after-leaving indicator and apply the maintained 0T, S0T or C0T week-1/month-1 instruction as appropriate. Use the actual payment date. In the same tax year, include the subsequent payment in the employment’s corrected YTD values. In a later tax year, that year’s YTD fields contain only the later-year payment. Give written confirmation and never issue another P45. Follow HMRC’s employee-leaving guidance.

Open a coordinated correction case

Preserve the original run, employee output, payment, FPS or EPS response and HMRC reconciliation. Record when the error was discovered, the affected year and payment date, the root cause, impacted systems and supplied correction amounts by category.

Do not reduce the case to one “difference.” Keep corrected gross pay, net amount due or recoverable, PAYE, employee and employer NI, pension, student-loan, HMRC-liability and already-paid amounts separate. The lesson uses supplied software outputs; it does not manually reproduce statutory calculations.

Preserve the route decision

The correct route depends on tax year, affected field, whether another employee payment is being made, whether the next regular FPS is available and whether the issue affects FPS, EPS, NI, pension or internal records. Store who decided, when, the guidance version and rationale. If facts change, create a new decision that supersedes the earlier decision rather than editing it.

For current-year pay or deduction errors, HMRC allows corrected YTD values through the next regular FPS or a supported additional FPS. An additional correction FPS uses differences in current-period fields, corrected YTD figures, the original payment date and pay frequency and reason H.

Correct an employee underpayment clearly

When an underpayment is paid separately, pay the amount due and send the additional FPS on or before the corrective payment date. Do not wait for the next routine FPS after paying the employee. Retain the original payment date, frequency, current-period difference and corrected YTD evidence. Use HMRC’s current correction guidance.

Keep specialist routes specialist

Previous-year corrections, EPS errors, historic NI categories, pension differences, deaths and complex termination payments can have different routes. Preserve the evidence and hand them to the owning specialist guidance rather than forcing the current-year additional-FPS pattern onto every case.

NI under-deduction recovery has specific restrictions. HMRC limits how much employee NI can be recovered in a later month and limits the recovery period. Keep this as a specialist signpost; do not calculate the recovery limit inside this lesson.

Review the escalation across three cases

The board shows why a future pay change needs fewer controls than an ordinary leaver, while an omitted payment after FPS affects payroll, employee payment, reporting and employer liability. Academy progress and fictional board state never prove that a real case is complete.

Track every affected destination

Use independent states for the payroll record, employee payment, FPS, EPS, HMRC liability, pension and employee communication. Mark an outcome not applicable only with a reason. A case closes only when every applicable outcome is completed or has an evidenced specialist handoff.

An accepted FPS does not close an unpaid employee balance. An employee payment does not prove RTI or HMRC liability was corrected. A corrected payroll record does not prove the employee received an explanation.

Separate overpayment correction from recovery

First correct gross payroll and RTI. Then obtain the maintained tax and NI result, establish the actual net amount owed, verify recovery authority, agree or authorise the recovery method and track deductions against the outstanding employee receivable. Gross correction and net recovery are not assumed equal.

Review the deduction’s legal authority and its treatment under current minimum-wage rules. Do not assume either that every recovery reduces minimum-wage pay or that every recovery is exempt. Communicate with the employee and follow applicable contractual, statutory and dispute guidance. Review GOV.UK deductions from pay.

Three key takeaways

1. A change, adjustment and correction are different routes determined by evidence and effective dates.
2. Employment end, final payment, FPS and P45 are separate events that must reconcile.
3. Correct the future without rewriting the past, and close every affected system independently.

What comes next

Continue to Lesson 12, Complete payroll year end and start the new tax year, to reconcile the annual position, complete final reporting, issue P60s and validate the new-year opening.