Payroll: it pays to pay attention
Our payroll manager, Seona Kemp says the number and frequency of statute updates mean companies need to take an increasingly proactive approach to payroll activities to avoid issues further down the line.
This advice comes as HMRC recently reported that a record number of employers had breached the national minimum wage regulations during 2017/18. The total figure underpaid amounted to £15.6m and included more than 200,000 workers. Employers were fined more than £14m and over 600 employers were ‘named and shamed’. While errors will not have been made on purpose, she says, some will be down to the lack of payroll knowledge and experience.
Applying her 23 years of experience in payroll, Seona says there are some key principles to bear in mind:
Get it right first time:
It sounds obvious, but the benefit of getting your payroll right first time far outweighs the consequences of having to make amendments once submissions have been made. There’s the time and cost factor for errors and the likelihood of questions being asked by HMRC. Ensure you have the correct processes, procedures and tools in place from the outset.
Information is constantly circulating around a business and it’s vital the payroll department, or your outsourced provider, is kept in the loop – whether it’s a change of bank, salary increase or a new company benefit (the cycle-to-work scheme, for example). Again, it’s best practice that records are amended as soon as possible. A delay can cause issues at a later stage.
Payroll software is expensive and is updated regularly. In addition, there are training requirements. While there is free HMRC software available to companies with 10 or fewer employees. If you’re up to around seven employees – and growing – you perhaps need to prepare for the next level. Do you incur the cost of expensive software and recruit a payroll support person, or do you outsource?
There are at least four changes to legislation every year. The payroll entity needs to be on top of this to ensure continuity of business operations. For example, new legislation is due to come into force in April 2019, when employers must itemise payslips for employees’ wages which vary depending on how much time they have worked.
Tax certainly comes into play here and, with a requirement for regular submissions to HMRC rather than a single annual one, there is a need for tax support, care and attention and – again – a strong understanding of the correct processes and procedures.
The introduction of real-time information was the biggest change in payroll for 70 years. Some people working in payroll called it a day when the new legislation came in; for them it was too big a change. The fact payroll is aligned with pensions – and all that goes with it, from auto-enrolment to opting out – and benefits means the remit and risk of error is far and wide.
Often people in payroll are the unsung heroes of business operations: they ensure staff are paid, but rarely are they heralded for doing their jobs. However, it will soon be noticed if salaries are not being paid to staff or if you’ve not been paying the correct tax to HMRC.