I work at a place where they have an 'employee' who earns under the LEL. I always thought that, due to RTI, employers have to run payroll for everybody. However their accountant runs payroll for them and this person doesn't go through the payroll - they are extremely honest people so have checked with their accountant. They pay this person by BACS so I've been posting the BACS payments to the Net Wages, however its obviously not balancing, plus I've not been posting anything to the P&L. Am I right that I should be posting a journal from the P&L to Balance sheet, ie 6XXX to 22xx (can't remember the nominal codes offhand).
I would post the journal as you suggested but in future post the BACS payment direct to the 6xxx P & L account.
If there is a PAYE scheme in place then ALL employees have to go through it even if they are under the LEL.
If ALL employees are under the LEL then I believe that there is no need to have a PAYE scheme set up and no RTI reporting required.
So if he/she is the only employee and there is no PAYE scheme in place, then the accountant is correct.
But if that employee works elsewhere, or even once earns more than or equal to LEL, then a payroll scheme would become obligatory and with it all the nightmares that RTI brings. That is because earning at LEL would mean some credit towards the employee's entitlement to social security benefits, such as JSA and basic state pension. I hope I'm not talking non-sense.
Earnings from separate jobs are not aggregated for pension purposes so it is possible to earn over the LEL if adding together salaries from working for more than one employer but still not pay any NI. As soon as an employee earns over LEL, even if it only happens once, then yes a PAYE scheme is obligatory.
