Death in employment: Payroll responsibilities

In the unfortunate event of an employee passing away, your payroll department must calculate the final pay owed to the employee and ensure it is paid to their personal representative. A personal representative is the person who is legally responsible for dealing with the estate of the person who has passed away.

What payments should be considered?

• Outstanding wages

• Salary deductions

• Company share schemes

• Statutory payments

• Untaken annual leave days

Making the final payment

Payments made after an employee’s death are still subject to tax rules, but National Insurance Contributions from both the employer and employee are not required. Category letter X should be used so as to not deduct any National Insurance. You should not produce a P45.

The death of an employee terminates their contract due to “frustration,” and while there’s no obligation for the employer to pay notice, the salary up until the date of death should be paid as normal. When producing the Full Payment Submission (FPS), put the date the employee died as the date of leaving.

Dealing with the death of an employee is never easy, but it’s important to ensure that their final payment is calculated correctly and paid to their personal representative.

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This content may have been developed with the assistance of AI tools. Content is reviewed by a member of the Bright team before publication. Guidance on legislation can be obtained from your industry body.