Set employee as director

If your employee is a company director, set their employment status as director, select their directorship start date, and select their National Insurance calculation method. We'll calculate their taxes as a director instead of a regular employee.

How it works

  • If you add an employee as a Director, Xero will add the Directorship section in the next effective pay period and calendar after their directorship start date.
  • Once an employee has been marked as a Director, Xero will calculate National Insurance as if they are a Director for the rest of the tax year. When you reach tax year end, Xero will recalculate this to ensure the correct values have been contributed.
  • If you pay the employee for their directorship but they later give this up, you can enter an end date and Xero will add a note in the employee details showing the pay period and calendar when the directorship stopped.
  • You can only reinstate the employee as a Director after their effective pay period has passed.

Set an employee's employment status as director

  1. In the Payroll menu, select Employees.
  2. Click the employee's name to open their details.
  3. Click the Taxes tab.
  4. Select the checkbox next to Is [employee’s name] a director?
  5. Under Directorship Start Date, select the date the employee's directorship started or is due to start.
  6. Under NICs Calculation Method, select how to calculate National Insurance for the director:
    • Annual (also known as the Non-Cumulative or NIC method): The director doesn't pay any National Insurance until they meet the annual threshold (the 2017/18 threshold is 8164; the 2016/17 threshold is 8060). Each time you pay a director, Xero looks at their total pay for the tax year so far, and once the threshold is exceeded, Xero will start to deduct NIC. This means that it is unlikely you will see NIC deductions until the later months of the year.
    • Alternative (also known as the Cumulative method): Xero looks at the threshold (the 2017/18 threshold is 8164; the 2016/17 threshold is 8060) in conjunction with the current tax week and the start date of directorship before it calculates your directorship deductions.
  7. Click Save.

You might also be interested in