For small business owners trying to keep on top of everything, running payroll in-house can be a headache. Malcolm Trotter examines the main problems and how to avoid them
Payroll is becoming an increasingly complex process, and this complexity can mean an increase in the associated risks of getting things wrong.
In addition, it can be costly and impractical to maintain the professional competence of the internal staff members who manage the payroll. Another factor to consider is pensions auto-enrolment.
Once staff have been enrolled into the pension scheme, you must ensure contributions are correct, and that your payroll software is compatible with the scheme.
Whether you continue managing the process or outsource it, the tips below will help you to get your payroll right.
Ensure that adjustments are made correctly in cases such as where a pay rise, overtime or a bonus needs to be applied.
Take the time to set up each employee properly on your payroll system, and update the payroll details as soon as an adjustment is made to their pay. Taking these steps will ensure that staff remain content and will reduce problems further down the line.
Sick pay, pension payments, expenses and other elements in a particular pay period may each need to be treated differently for income tax and National Insurance purposes. Make sure you keep up to date with the latest payroll legislation, as changes to tax can occur frequently.
Should you be unsure about anything, it is always worth seeking advice from a book-keeper or accountant. They will check that you are doing the right thing.
Missing payday deadlines has significant implications for staff . Make sure you know when your payroll deadlines are, and allow plenty of time to meet them. Put a good system in place that will alert you when deadlines are approaching.
Preparing the payroll well in advance will allow you time to look into any problems that arise, and to correct them without causing any undue stress.
As soon as an employee has left your business, remove them from the payroll, ensuring they are paid correctly for the rest of their time working for you.
If you forget to do this, it could be difficult to gain that money back, especially if managing to contact your former employee in the first place is proving challenging. Not everyone is honest.
Even if someone is aware they are still being paid for a job they are no longer doing, they may not own up and pay the money back straight away.
Failure to use the correct code can result in an incorrect tax deduction. Getting this right has become even more important since HMRC introduced real-time information (RTI) to the PAYE process.
RTI requires that for each pay period – whenever staff are paid – an accurate extract of the payroll data must be submitted online, corresponding to the actual PAYE payment made by the employer for that pay period. The RTI requirement has been the most recent catalyst for many more employers deciding to outsource their payroll function.