Why a sound Payroll system pays dividends

Payroll tends to be a poor relation but boy is it important when it’s wrong

One thing you can be sure of – if you mess up a payroll you’ll really know about it and it could have big consequences. That’s why it’s really important that whoever is responsible is accurate, reliable and on time. If not, it needs fixing.

Payroll and Covid 19

As if payroll wasn’t enough to think about the two very different furlough schemes, plus the new JSS job support scheme are trying the patience of everybody involved. It’s hard to overstate the pressure and strain this has put on those administering the schemes. For instance, there is still no information whatsoever on how the new scheme will work from the 1st November and the devil is in the detail. Even when announced it’s likely that the rules will change or some will be unclear or ambiguous. That’s not to say the scheme isn’t very welcome but there’s no avoiding the fact that it’s a significant extra burden on payroll staff. It’s easy to make a mistake and again there are implications. So there’s even more focus on the importance of having a really solid payroll before the complication of the schemes on top.
Probably never before have there been so many changes to employees on payrolls, all of which is extra effort and something more to go wrong. Those businesses lucky enough to be growing and there are plenty, will be expanding their payroll, which is extra effort.

Opportunities for Payroll Providers

Despite the pressures here are some ideas to help or improve.

•    Sort out payroll claims with CJRS and JSS

As the Job Retention Scheme (CJRS) finishes in October employers will have to make difficult decisions - either paying full wages or terminating employment. The new JSS is a third scheme - this involves subsidising non-working hours alongside a matching contribution from the government.

Remember with CJRS that for October the employer contributions have increased to 20% of wages and the government claims are now only for 60%. All October CJRS claims have to be made by the end of November.

Then JSS starts on the 1st November. This is for when employees work at least 33% of their usual hours. Any unworked hours can be subsidised by the employer and government, each contributing 33% towards these unworked hours.
The employer will pay the employees and then claim for the 33% value of the unworked hours in the month. The first claim in December will be for November and monthly thereafter.

•    Be able to prove your claim

Businesses need to be able to show that their claims were correct, in case there’s an HMRC check. Clearly there will have been a lot of fraud and mistakes - HMRC will be keen to recoup as much as possible. Some payroll software will keep an audit trail of your calculation.

•    Find better ways to handle variable hours etc.

Rather than keying in variable data look for technology to help – Excel or a portal for instance. Better processing of this information is an opportunity for improvement, cutting back on manual steps and possible mistakes. plus reducing the admin time involved.

•    Payslips

If your payslips are not electronic you’re really missing out on many benefits – speed, security, much lower cost and a much better service for the employee. Probably from a Cloud portal.

•    Look at HR alongside payroll

There’s a growing move to link payroll with HR so look out for software development. Clearly a lot of the data is the same and it’s inefficient to maintain two sets of such, especially if they are different. 

This entry was posted in Payroll and tagged in Payroll by Caroline

How to Avoid Costly Payroll Mistakes

It’s often a struggle fitting in the payroll processing but clearly it’s important to avoid mistakes which can quickly lead to staff problems and significant fines.

Running a payroll is quite a change. It’s easy to regard it as a simple task when in fact an awful lot can go wrong, causing cost and upset employees, not to mention fines from HMRC or the Pension Regulator.

The table below shows some of the errors we’ve inherited with new payrolls, nearly all of which you will need to be on the right side of when running your payroll, whoever does it.

Some tips if you run the payroll yourselves

• Keep up to date with new payroll and employment regulations

Otherwise expensive mistakes can be made. When this involves employees, considerable upset can be caused

• Be accurate

Avoid errors, gaps and mistakes. Don’t pay wrong amounts which can lead to all sorts of issues and complications

• Set it up correctly

This is clearly essential otherwise you’ll risk being wrong, possibly every month and it will catch up with you sooner or later

• Avoid penalties

Observe HMRC deadlines. Penalties from late filing or payroll errors can be surprisingly high. Late means an automatic fine from HMRC which is very difficult to dispute. You need to know exactly what to do and always achieve it

• Maintain good records

You should record everything clearly and keep all the information for the current tax year plus the preceding three. This includes starting and leaving dates, maternity dates, benefits, time and rates of pay

• Check matters affecting the payroll

This includes benefits and student loans which may change tax codes. If not handled correctly there may be costly amendments required, possibly upsetting employees and landing your business with a tax bill

• Avoid paying a contractor when really they are an employee

This can be a tricky area. If you employ freelancers or contractors you need to be conversant with the difficult to understand rules. When might they be regarded by HMRC as an employee and must therefore be on the payroll, subject to PAYE and NIC? HMRC can go back years in claiming unpaid taxes

• Be careful handling childcare vouchers

If these are through a salary sacrifice scheme then they need to be deducted from gross salary before tax. If not, then you will be missing out on NI savings and employees will be overtaxed

This entry was posted in Payroll and tagged in Payroll by Caroline