Don’t fall into these common payroll traps
If you're thinking payroll must be pretty straightforward, you'd be surprised at the some of the issues accountants find themselves ironing out. No one knows the pitfalls better than Page Kirk's Jo Poulter, who's our Payroll Manager and a Fellow of the Association of Chartered Certified Accountants.
If there's one issue that really jumps out in terms of payroll compliance, it has to be errors with PAYE and Real Time Information. Whether it's a Full Payment Submission (FPS) filed late or multiple FPSs filed for the same pay period, you've got a potential problem that needs to be resolved. And that's before we even get on to employee information (such as names, dates of birth or NI numbers) being incorrect!
It really pays to get all of this basic stuff right, as the demand for data from HMRC is constant and the penalties are automated and pretty unforgiving.
But there are plenty of other issues that can trip you up in the world of payroll too. Here are just some you need to watch out for…
Workers classified incorrectly
If you employ freelance consultants, you need to carefully consider their employment and tax status. Treating contractors as self-employed for tax purposes, when actually they're effectively your employee, will get you into hot water. One inquiry might start to unravel literally years of unpaid tax and NI, so it's important you have an adviser who can keep you up to date with the latest twists and turns over IR35. And don't forget that issues can arise with casual and zero-hours workers too.
Breaches of the National Minimum or Living Wage requirements
Even well-intentioned businesses can fall foul of the regulations here. Sometimes salary sacrifice arrangements bring employees below the National Minimum Wage. Then there are issues to consider such as unpaid training time, uniform deductions or errors with travel-time for hourly-paid staff. Remember that HMRC names and shames employers here, so the risk is potentially reputational as well as financial, and might impact your ability to recruit.
Pension errors
Have you missed auto-enrolment dates? Used wrong earnings as the basis for contributions? If so, you're creating a mess that may ultimately be only resolved with the help of a specialist adviser. Poor record-keeping is sadly a common problem in this area and it's also worth remembering that you need to re-enrol eligible staff every three years. In this case, it's the Pension Regulator you have to worry about, rather than the tax authorities.
Miscalculation of statutory payments
We're looking here at Statutory Sick Pay, Maternity and Paternity Pay, Shared Parental Pay and Adoption Pay. You have to make sure that average weekly earnings calculations are correct and apply eligibility rules correctly. Small employers often forget reclaim rules and there are often errors when people return from leave or work irregular hours.
Expenses and benefits in kind
The common slip-ups here tend to be failing to report benefits correctly by P11D or payroll, forgetting employer Class 1A NIC, treating taxable benefits as exempt or failing to substantiate expenses properly. It's important to pay particular attention to areas such as company cars, fuel and medical insurance.
Payroll is critical infrastructure, but in some companies it's seen more as 'admin'. If that means you have under-trained staff or become over-reliant on software, there's a real danger mistakes will creep in. It's important to work closely with an accountancy firm, who can advise you on the best course of action and keep everything on track. To find out about how Page Kirk can help, please call us on 0115 955 5500 or email enquires@pagekirk.co.uk
Fact-checked and up-to-date
The Page Kirk team is committed to providing content that adheres the highest standards for accuracy. We evaluate how the content of each article aligns with current financial procedures and standards. Therefore, the information presented in this article is accurate and up-to-date.