When you run a business, payroll is an important part of your monthly processing. You need to pay employees correctly and on time if you want to keep morale high but there are also legal requirements to factor into the process, such as ensuring HMRC receives the information and payments they require. The complexity of payroll is why many companies outsource – but if you are doing it yourself, here are some common payroll mistakes to avoid.
1. Being caught out by new regulations
HMRC are always changing things and their method of letting businesses know can be a little complex. That means it is easy to miss out on some new regulations or requirements that affect your business until you get a fine or penalty through the business door. Therefore, it is worth signing up to newsletters and notifications about anything new that comes out to help stay on top.
2. Missing deadlines
The calendar is your best friend when running payroll because there are lots of different deadlines that apply to the whole process and missing them will cost you money. From the submission of tax and national insurance information to the end of year processing, there are lots of dates to remember so put them all in a calendar with reminders well in advance to cover the requirements.
3. Not having a payroll plan
Smaller businesses often fall into the trap of thinking payroll is simple, especially when using PAYE but there is still work that needs to go into the process. You need to have a plan to show what needs to be done when to ensure you complete all elements of the process.
4. Confusing net and gross pay
Net and gross pay is one of the easiest areas to get confused and can lead to the most problems. You need to submit completely accurate information to HMRC or those dreaded fines can follow. So, understanding the difference is a key part of this.
5. Not using software
If you are going to DIY your payroll, you need good payroll software to handle the requirements – it is almost impossible to do it manually. That means setting up the software well in advance of the first payroll and ensure it is doing everything you need. Have a payroll expert look at it if you are uncertain to make sure it protects you.
6. Getting confused around types of pay
There’s pay then there’s statutory sick pay and maternity pay, paternity and parental pay, bereavement leave and holidays as well as much more. You need to understand all of these different types of pay, when people receive them and how to show them correctly on the payroll.
These are six of the most common payroll mistakes that we see. Payroll is a complex system that requires some specialist knowledge and training and that’s why many businesses choose to outsource to an expert, rather than risk falling into the deadline and penalty trap with HMRC. Trace Payroll are here to help. To speak to a payroll provider and streamline your payroll process, get in touch using the details below.