Employees are a company’s biggest asset – and making sure they are paid properly has to be a business owner’s number one priority.
James Milne Chartered Accountants partner, Lauren Thompson offers advice to business owners wanting to avoid payroll errors.
Ensuring staff are remunerated accurately and on time is a fundamental part of running a business. Payroll errors can be costly – not just in terms of employee morale but also potential penalties from HM Revenue and Customs and now also the Pension Regulator.
Many small businesses operate their payroll themselves, using HMRC approved software. Business owners have a choice of which software to choose, each varying in terms of usability, availability of features and of course price. The cost of user-friendly and accessible software can be an additional burden to employers. Importantly, payroll software must be capable of reporting to HMRC in real time, as every time an employee is paid, HMRC must be informed. Real-Time Information (RTI) compliant software is essential as it records and reports employee details and pay, pension and tax deductions as well as providing details of HMRC liabilities.
As well as submitting RTI information, employers must ensure digital payroll records are GDPR complaint, and that all employer reporting requirements, such as payslips and P60s are produced and distributed securely. It is therefore important that software be regularly updated, maintained, and adjustable according to business needs.
Confidentiality is vital when to comes to individual salaries. If managed internally, particularly in smaller businesses, it can be awkward for individuals to have access to the personal pay details of colleagues and friends, leading to bad feeling and potential breaches of confidentiality.
Payroll can be complicated. In March 2017, Tesco – the UK’s largest retailer – reimbursed 140,000 employees at a cost of almost £10 million due to a ‘technical error’ in its payroll system. In the same year, John Lewis was found to have inadvertently breached minimum wage legislation leading to an adjustment of £36 million to its profits in that year. John Lewis claimed its error was due to the complexity of payroll legislation.
Over the last 18 months, the challenges of the pandemic have added further complexity to the payroll process, such as furlough payments, flexible working and redundancies. This has been a demanding and tense time for in-house payroll administrators and business owners. The timing of regular payroll cycles are tying, with particular pressure in smaller organisations where there is no suitable holiday cover. The regulatory requirements, and the costs of meeting them, can make the payroll service which specialists such as James Milne provide, a great solution for employers.
Outsourcing payroll is an increasingly popular solution for large and small businesses. A payroll specialist will be up to date with changes to legislation and have the necessary software, processes, capacity and expertise to handle all requirements. Over the past five years, HMRC has invested heavily in rooting out non-compliance, and business owners need to follow suit.
James Milne Chartered Accountants has a specialist payroll division, managed and operated by trained staff. Servicing customers across the north-east from small family businesses to larger enterprises, our software, systems and expertise remove the risk of making expensive payroll errors.