Employee Allowances | UK

An employment allowance is a fixed sum of money paid to an employee or taken into consideration when working out their final salary. Let's take a look in detail.
  • Author: Siva
  • Last updated: April 3, 2022
  • 3 Minutes
employee allowance in the UK

We all get confused when we look at our payslip and see the various deductions taken from our salaries. But how many of us see an allowance that bolsters how much we earn? If you do, the likelihood is that these may be just as difficult to understand.

In this article, we will discuss the types of allowances you can claim as an employee and how your employer will manage these. First, let’s have a look at what an employment allowance is.

What is an employment allowance in the UK?

An employment allowance is a fixed sum of money paid to an employee or taken into consideration when working out their final salary. Often an employment allowance is given to meet a specific need essential to their role (e.g. to buy uniform, safety equipment, or pay for travel expenses). 

The allowance amount can come in many forms and may be paid as a fixed amount in basic salary or as an increase in taxable allowance leading to a reduction in the amount of tax paid.  

How is an employment allowance beneficial to the employee?

An employment allowance benefits an employee by allowing them to earn more money. Often the extra money is made available to pay for out of pocket expenses they would otherwise have to pay for themselves. This way the employer (or government if it is given as a tax rebate) take some of the burden for paying for items that are essential to the employee’s role.

What are the claim categories under employment allowance?

There are many allowances that can be claimed for by an employee, including:
  • Travel expenses (such as bus, train, and petrol fees).
  • Hotel costs if the use of the hotel was necessitated by work.
  • Clothing and safety equipment allowances if they are vital for work.
  • Any costs of education if they are vital to your role.
  • Medical expenses incurred as a result of your job (although often these are paid by insurance if you perform a role where accidents and injuries can happen).
  • Food costs for if you are required to eat while performing a specific role for the company you work for.

It’s important to remember that you do not automatically qualify for any of these allowances and you would have to check with your employer if they are available to you. 

Who is eligible for the employers’ allowance?

The employers’ allowance is a National Insurance rebate that allows employers to access up to £4,000 reduction in their National Insurance contributions. Only businesses with an employer’s National Insurance liability of less than £100,000 a year are eligible to claim the allowance.

How do employers manage these allowances in the payroll?

That depends on how the allowance is paid. If it is paid directly from the employer, it is generally added to the basic salary of an employee. If it is paid as an increase in tax allowance, this will be seen in the tax code of the employee and will reduce the amount of tax paid.

How and when can such claims be initiated?

Allowance claims from an employer can be initiated at any time (although some may be time-barred). If the allowance is paid through a tax rebate then the employee will need to contact the government tax office for it to be applied.

All things considered, Papershift is planning to payroll organizing software. In addition to payroll, shift planningstaff time tracking and absence management can be easily managed.

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Written by Siva

I write & describe the value & benefits delivered by Paperhift's rota planning, staff time tracking, and employee payroll management software. Especially useful for Shift Planners, Rota Managers, Team Admins, and HR Teams :-)