Practical steps when an employee dies
When an employee dies, you will have to deal with payroll and pension issues. You will also have to make temporary arrangements to cover their work.
Payroll issues
You or your payroll department, if you have one, must calculate the final pay amount owed to the employee. You should make sure this is paid to the deceased employee's personal representative, usually the executor of the estate.
You will need to consider whether the employee was:
due any outstanding payments of wages
due tax credits
due to make payments from their salary, such as student loan or child support payments
receiving statutory payments, eg maternity pay
a member of a company share scheme
Payments made after an employee's death are still subject to the same tax rules as normal. However, Class 1 National Insurance contributions (NICs) - from both employer and employee - do not have to be made. See our guide on how to manage National Insurance.
You will also have to remember to complete a final P45 form on behalf of the deceased employee.
For information on deducting tax and NICs from the final payment, download the employer's further guide to PAYE (Pay As You Earn) and NICs from the HM Revenue & Customs (HMRC) website (PDF) - Opens in a new window.
Occupational pension schemes
A surviving spouse or other dependants may be entitled to receive a survivor's pension.
In some cases, a lump-sum payment may become available. This will often be paid to the surviving spouse, or to a person named on the employee's nomination form, or to the executor of the estate as decided by the scheme's trustees.
If the pension scheme is trust based, the trustee chair of the pension scheme will be able to provide further detail on any payments which need to be made to the deceased's dependants.
If the pension scheme is contract based (eg a group personal pension), you will need to approach the scheme provider. They will be able to advise on any death-in-service benefits that are due.
Staffing issues
You will have to make arrangements to cover the deceased employee's work.
In the short term, you could:
reallocate work to existing staff
take on a temporary member of staff, eg an agency worker
You can then begin your recruitment process to find a replacement.