Payroll mistakes and how to avoid them

Payroll mistakes and how to avoid them

Payroll and Pensions processing is an important part of the day to day running of any business, if you have disgruntled employees who have not been paid correctly and on time then that’s not good for them and the business.

Here are some of the most common mistakes in payroll and how you can avoid them.

 

Missed deadlines

This is one of the most common mistakes and can easily be done. Late submissions to HMRC can incur warnings and even penalties. Late payments of PAYE to HMRC can also attract penalties and interest charges.  It’s vital that you know when your deadlines are each pay period and ensure that you are fully compliant with your returns and payments.

Paying the staff late is also a serious issue, it’s a fact that some employees have been known to leave their job for this reason.

Every business that has a PAYE scheme in place and employs staff, must advise TPR (The Pensions Regulator) within 5 months of the PAYE scheme being set up of their pension duties. Failure to do this can result in fines. These fines escalate and can reach such an amount that it may cause the business serious financial hardship.

Further declarations are required to be completed every 3 years to TPR

It’s important to also consider a pension provider if you have employees on the payroll, this is a legal requirement and forms part of the declarations to TPR.

 

Incorrect data with your employees

Using the wrong tax code can cause problems for any employee, it’s important when you take on new starters that they complete a starter checklist that clearly shows what tax code should be applied, by ticking the correct box on the form, will allow the payroll processor to apply the correct coding.

Having an incorrect National Insurance number can be an issue if not corrected within the first tax year of their employment as the NI paid by the employee will not be recorded against their NI record. With the introduction of Real Time Information (RTI), HMRC can usually identify an incorrect NI number and will advise the payroll provider to correct.

Having the correct date of birth is also very important as it can define what NI letter to use and what rate of pay if paying the national minimum wage (NMW). It can also influence whether an employee is eligible to auto enrol into a pension scheme.

 

Miscalculating pay

This can cause issues for both the employee and the business. All the employee wants after working all month is to expect their pay to be correct and paid on time. Overpayments to employees can cause some anxiety especially if it has been going on for some time. They will be required to pay this back and a time scale must be agreed with the business. Underpayments of salary will also cause some employees to feel disgruntled and this may lead to bad feelings between both parties.

 

Incomplete or non-transparent information

All payroll processors require the information they receive to contain all the facts for them to process correctly. They are occasions when instructions come over that are not clear enough and they need to be clarified with the client to avoid any potential errors.

Hourly paid employees must have their hourly rate clearly shown on their payslips. Did you know it’s a legal requirement to ensure employees receive a payslip? Uou would be surprised how many business fail to provide these.

Also, to ensure that salaried employees are compliant with the National Minimum Wage/National Living Wage (NMW/NLW} it is important that the payroll processors have a record of the hours worked per week.

 

Keeping records

It’s essential to keep up to 6 complete tax years of reliable records, if HMRC need to investigate your PAYE activities, these records will be vital in any investigation.

 

In summary

To avoid any of these common mistakes and errors, you need to consider if your current payroll processes and provider are working as well as they should be. If not, why not consider having an informal discussion with us at Haines Watts.

Our payroll team work out of the 3 offices in Liverpool , Wirral and Chester and have a wealth of experience between them and have covered all aspects of payroll and pension legislation.

Our mission is to provide a cost effective but first-class service to all our clients and to ensure that employees are paid correctly and on time each pay period whilst ensuring the business remains compliant.

 

Contact us at our offices today for more information.