Handling your payroll isn’t easy, it can be expensive, it has absolute deadlines, and there are lots of moving parts that vary from month to month, depending on what your staff situation is.
It might seem really straightforward to do a payroll – you have X-number of staff who are due Y, with Z deducted. But it rarely is as simple as this, as each individual’s own tax affairs will play a part in determining their deductions (including whether they’ve got a second job, are on Basic Rate, or have a split Personal Allowance).
Even the smallest mistakes in payroll can lead to expensive consequences, and very unhappy staff, especially if they’re paid late or not what they’re owed.
Five of the most common issues that companies have found when processing their payroll are:
Misclassifying Your Employees
There is more than one type of employee – you could have full-time, part-time, independent contractors, and so on. Each type of employee has a different tax requirement and reporting to HMRC can be different as well.
If you misclass an employee they may lose access to certain benefits, such as overtime, company pension, holiday pay, etc – so it’s essential that you get the classification right.
Making Late Payments
Your employees are counting on you to run your payroll on time, and ensure that their hard earned wages are in their accounts exactly when they’re supposed to be. If you are struggling with your payroll, process it late, or have to re-run it due to errors, you could end up with very unhappy employees who then struggle to meet their own financial obligations – this could result in increased staff turnover, reduced morale, lower levels of productivity, and a negative reputation for your company.
Processing the Information Incorrectly
Inaccurate information is the bane of any payroll processing, if you don’t have the right data you could end up over or under-paying employees, or holding up the payroll process as you fix it.
Fixing errors can require a lot of rework and extra time, but it can’t be left unattended – if you’ve overpaid your staff, you’re affecting your own bottom line and setting expectations that they will be receiving that pay-packet each month, and if you underpay you’ll end up with the same consequences as making a late payment.
Keeping Track of Overtime
When your employees are going above and beyond for you, and working hours beyond their contract, they have to be remunerated properly – and there are laws protecting employees and requiring businesses to pay specific overtime wages.
These hours and the relevant over-time wage (such as time-and-a-half, or double-time) must be recorded accurately to prevent over or under-payment.
Understanding Regulations and Keeping Up with Changes
There are laws and regulations that govern how payroll is processed, when certain accounts have to be reported, and how data has to be submitted. It is your responsibility as the employer to stay up to date with any legislation that may affect your business, and to ensure that you are legally compliant with HMRC regulations.
Failure to keep your business compliant can damage not only your company (reputation and influence), but also see you issued with fines and penalties. It also has a negative impact on your staff – as you may not be paying them the correct amount, for example – with the National Minimum Wage and the National Minimum Living Wage being split out by age bracket, if you aren’t keeping careful records you could end up underpaying an employee who has moved into a new age bracket and is legally required to have a higher wage.
The ins and outs of managing payroll are tricky, and you can’t stop and redo everything from scratch without running the risk of causing a cascade of late payments, failed compliance, and escalating trouble both internally with staff and externally with HMRC.
Keeping on top of payroll is absolutely essential for the health of your business, and having qualified, professional, and experienced assistance in dealing with your payroll can save you a lot of time, money, effort, and hassle.
If you’d like to discuss your current payroll, how you can improve it, and whether it’s legally compliant in every aspect – or if you’re starting up new and want to make sure your payroll does exactly what it needs to, then you should get in touch with our experts today.
We will help you manage every aspect of your payroll, so you can spend your time on other parts of your business, safe in the knowledge that you’re in good hands.
