Ten most common payroll mistakes

For many people managing an efficient and smooth-running payroll system is a daunting and a time consuming prospect. The responsibilities and highly administrative tasks involved, such as paying employees and filling in government forms is stressful and made worse by the constant legislative changes and HMRC guidelines.

So it’s no surprise that payroll errors are a common thing within businesses.  These errors can have a detrimental and costly effect on both staff and the employers. If your business is struggling with the demands of payroll, it can be helpful understanding what kind of mistakes are made and exactly how to avoid them.

Here is a list of 10 of the most common payroll mistakes made by businesses to be aware of.

·    Missing deadlines -  Missing filing deadlines set by HMRC can be very costly for a business. You should mark on a calendar all the necessary dates so you can be sure not to miss them.

     Depending too much on the payroll system used -  The Payroll system used can only be as good as the person using it. Ensure that all relevant data is entered correctly and efficiently, so that the system can calculate everything correctly, and also make sure you update the software each year for new legislation if it isn’t cloud based.

·    Not keeping records -  You need to keep records of Payroll according to HMRC guidelines. HMRC requires all UK businesses to maintain accurate and detailed records for the current and three previous tax years. Not complying with these guidelines can be very costly for businesses and can result in a hefty £3,000 fine

·    Not having adequate backup -  You should always back up your records so that vital information cannot be lost if an error was to occur.  Some payroll systems can do this for you automatically, but if not, always have a backup.

·    Inexperienced staff -  The person doing payroll needs to know how to do it properly. Managing payroll in-house requires highly trained personnel who have the relevant expertise, knowledge and qualifications to ensure payroll is processed accurately and on time. Inexperienced staff may be incapable of complying with current legislation such as RTI and auto-enrolment, and could make incorrect employee deductions.

·    Dealing with statutory payments -  This can be confusing if you do not understand the legislation correctly.  You can find all the information you need on gov.uk

·     Processing payroll late-  Paying your employees late will cause you and your staff a great deal of unhappiness.  It’s one of the main reasons why an employee will choose to leave a company.

·     Using the wrong tax code -  The tax code should come from the P45 or failing that a P46 should be completed but may employers will just use a code they are familiar with, meaning the employee could pay the incorrect tax which could then have a negative effect on their wages.

·    Under/ over payments to staff -  You always need to check exactly what your staff should be paid in that particular period, it’s an error which can be very costly and time consuming to correct. If these payroll processing mistakes persist, you could be seriously affecting staff morale and motivation, causing their motivation and productivity to drop.

·    Year End submission mistakes -  This is normally caused by mistakes during the year but also lack of knowledge of how to complete this process.  This process is now a lot simpler due to the introduction of RTI.

HOW TO AVOID COMMON PAYROLL ERRORS

Choose the right payroll solution

Having the right payroll solution is key to an efficiently ran payroll, make sure you choose a payroll solution that meets the size and shape of your workforce and not get sucked into purchasing costly subscriptions for software or outsourcing prices which aren’t manageable.  The key is to find a supplier who can give you a flexible and tailored solution that is right for you now, but a company that can also grow and develop with your business needs.

Hire qualified staff

If you want to run your payroll system in-house, dedicate time and resources to hiring adequately trained staff who are up to date with current legislation and have the expertise to run a smooth payroll. Regular training is also essential, as although these people may be experts when it comes to payroll, they don’t know how you calculate employees pay as every company is different.  Spend the time training them on this so no mistakes are made. If you employ an outsourced provider, ensure they can provide expert help and guidance so that you’re always on top of payroll legislation and changes, so you can still be in control.

Payroll outsourcing

Payroll outsourcing is an increasingly popular solution for any business that wants complete assurance that their payroll is being calculated correctly. At Chrysalis Payroll we specialise in providing tailored payroll outsourcing solutions, giving you the benefits of a specialised in house payroll department, at the fraction of the cost. With our expertise, software and our dedication to work with you as a company, we can ensure fast, reliable and secure payroll processing which is on time every time, and what’s better, we will even save you time and money.  Go to our Payroll Services page to find out our pricing structure and more.