1. Administering Payroll for the United Kingdom
  2. Set Up Automatic Calculation of Recovery and NIC Compensation Amounts

Set Up Automatic Calculation of Recovery and NIC Compensation Amounts

Currently, payroll process runs don't automatically calculate recovery and NIC compensation amounts for absence payments. However, the application provides predefined balances that you can use to set up elements to calculate these amounts.

Once you perform this setup, the Employer Payment Summary (EPS) process automatically retrieves the year-to-date (YTD) recovery and NIC compensation amounts from the predefined balances and include them in the EPS submission to HMRC.

The setup process involves two steps:

  • Setting up the elements

  • Setting up the balance feeds

Set Up Elements

Use the Manage Elements task in the Payroll Calculation work area to perform the necessary setup, as summarized here:

  1. Create an element for each absence payment type.

  2. Attach formulas to each element to calculate the recovery and NIC compensation amounts for the payments.

  3. Create a set of indirect elements, with input values to hold the calculated recovery and NIC compensation amounts. You need additional elements for recovery and NIC compensation for each of payment types.

  4. Define eligibility for each element, as appropriate.

Set Up Balance Feeds

Using the Balance Definitions task in Payroll, define balance feeds from the input values of the recovery and NIC compensation elements listed above to the appropriate predefined balances:

  • SMP Recovery

  • OSPP Birth Recovery

  • OSPP Adoption Recovery

  • ASPP Birth Recovery

  • ASPP Adoption Recovery

  • SAP Recovery

  • ShPP Adoption Recovery

  • ShPP Birth Recovery

  • SMP NIC Compensation

  • OSPP Birth NIC Compensation

  • OSPP Adoption NIC Compensation

  • ASPP Birth NIC Compensation

  • ASPP Adoption NIC Compensation

  • SAP NIC Compensation

  • ShPP Adoption NIC Compensation

  • ShPP Birth NIC Compensation

The predefined balances store the running YTD totals. Once setup is complete, payroll runs calculate the recovery and NIC compensation amounts automatically and feed the predefined balances. When you run the EPS process, it retrieves the YTD values from the predefined balances.