Know your classifications
Employees, freelancers, and contractors all have to be treated according to the relevant rules for their classification. Add in recent IR35 changes and this is an area of payroll that can become extremely complex.
Sadly, we’ve seen firsthand from new clients just how easy it is to get in a muddle and, if it happens to you, unpicking it later can be time-consuming and costly. In fact, it’s often when people have got into a muddle with their employee classifications that they make the logical decision to outsource payroll management to a specialist service provider like us.
Tax can be extremely taxing!
You might recall a campaign by HMRC that claimed ‘Tax doesn’t have to be taxing’. Unfortunately, the fact is, tax is an extremely complicated topic, and errors in ensuring the correct tax deductions are made at source is probably one of the most common mistakes we see when clients outsource their payroll to us.
Tax codes can change frequently and are further affected by things like car allowances, staff benefits, and recently by furlough and flexi-furlough so it’s easy to see how mistakes can happen.
If you’re not ready to outsource your payroll function then we would highly recommend that you register for the HMRC PAYE dashboard so that you can easily check employee tax codes on a regular basis.
Save the date
While we are on the subject of HMRC, their various deadlines should feature as immovable dates in your work calendar. But take care because different activities have different deadlines and you need to be on top of them all to avoid the penalties, fines, and interest charges that come from missing them.
If outsourcing your payroll isn’t a route you want to take, then allow plenty of time before each deadline to work through the paperwork and submit your returns on time. We’ve lost count of the number of new clients who have come to us after realising they’ve left it all too late and need help to meet the deadlines.
Check the tech
Maybe you’re reading this and thinking “It’s OK, I’ve got amazing payroll software that does all this for me”. You might be right but a word of caution for you. Whilst there is very good software available that will save you time and reduce your costs, these packages are only as good as the data that you put in them.
This means that if your HR or payroll staff aren’t 100% up to date with the latest legislation, allowances, and employee information, your payroll won’t be accurately processed.
HR departments and payroll teams have to work effectively together to ensure that the correct information is available and auto-enrolment processes are followed for all employees.
Your employees must be currently enrolled as well as having the mechanisms in place to opt-out or postpone their contributions.
Your auto-enrolment duties are complex and compliance is essential to avoid penalties.
How to get your payroll right
Knowing what can go wrong is all well and good but what can you do to get it right?
Record keeping is the number one priority. Accurate records will help you remain compliant and enable your payroll to be accurately processed.
Training your staff is the second most important thing to do. You must invest in regular training and updating to ensure your payroll team knows what to do and how to do it. This means training them in the theory of applying the rule correctly, understanding the legislation, and keeping up to date with periodic changes by HMRC and the Pensions Regulator. On top of this, they need to have a thorough understanding of how to process payroll using the systems in place within your organisation.
Quality training can be expensive which is not a ‘one and done’ activity. This is a common reason why our clients outsource their payroll services to the Accountancy Solutions team.
Finally, the systems in your business need to be correctly configured to integrate where possible. This reduces the amount of double, and even triple handling of data across your business, saves you money, and improves the quality of your records – something you will be grateful for should HMRC decide to inspect your business.
At Accountancy Solutions we are tech experts and getting our clients’ systems set up correctly is a fundamental part of our service. In addition to improving compliance this often realises cost savings running into thousands of pounds a year.
Do you need help with your payroll?
If you’d like to discuss any aspect of your payroll function and understand how outsourcing could benefit your business, we’d love to speak to you. Simply call 01962 462 007 or click here to get in touch.
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