In the unfortunate circumstances where an employee dies, your payroll department must calculate the final pay amount owed to the employee. You should make sure this is paid to the deceased employee’s personal representative. You will need to consider whether the employee was;
• Due any outstanding payments of wages
• Due to make any payments from their salary, i.e. student loan or child support
• A member of a company share scheme
• Receiving statutory payments, i.e. maternity pay
• Due any payments for untaken holidays
If an employee has untaken holidays and subsequently dies, a payment instead of holidays can be claimed by the employee’s family or person handling their estate. This was recently confirmed during a European case, though in theory it solely applies to the minimum four weeks’ leave under EU law. Whereas rare in practice, an employee on holidays who then dies could have several years’ untaken holidays.
Payments made after an employee’s death are still subject to the same tax rules. However, Class 1 National Insurance Contributions (NIC’s) – from both Employer and Employee do not have to be made.
The death of an employee terminates the contract of employment automatically by reason of “frustration” i.e. the contract can no longer be performed as envisaged. There is no obligation on the employer to pay notice but salary to the date of death should be paid in the normal way.
