5. Calculate earnings ‘at a rate’

When reporting expenses and benefits, you need to work out your employee’s earnings ‘at a rate’. This affects which end-of-year form you submit.

To work out earnings at a rate:

  1. Take your employee’s earnings during the year.
  2. Add the value of any expenses or benefits you’ve given them during the year.
  3. Work out the full-year equivalent if they didn’t work the full year.

Example
Your employee starts work on 6 October 2013 and earns £5,000 to the end of the tax year. You also pay them £500 in that period towards travel.

They earn at a rate of £11,000 a year: £5,000 x 2 (the equivalent of a full year’s earnings) + £500 x 2 (the equivalent of a full year’s travel contribution).

For part-time employees, don’t gross up earnings to a full-time equivalent when calculating at a rate.

Example
Your employee works part-time two days a week and earns £5,000 a year. You also pay them £1,000 a year towards travel.

They earn at a rate of £6,000 a year: £5000 pay + £1,000 towards travel.

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