All businesses have a duty to comply with all laws and regulations regarding payroll. Managing employee salaries and payments correctly is paramount to employee satisfaction and retention.
Failure to adhere to these payroll regulations can have significant consequences for a company, from penalties and fines to other legal issues.
When it comes to payroll compliance, there are a few common mistakes that businesses can make, sometimes unknowingly. Let’s take a look at a few of them, and the ways in which you can actively comply with the relevant laws.
Common Payroll Compliance Mistakes
Managing payroll requires a lot of time and attention to detail. Even the smallest mistake can affect an employee’s pay and if it occurs on an ongoing basis, employees can become frustrated and may choose to leave the company.
These are the most frequent payroll errors that usually take place.
Not Calculating Overtime Rates Correctly
If your company does pay overtime, it is essential to work out these wages correctly. If not, employees could be underpaid for their time and work.
It can become time-consuming and difficult to manage multiple employees working different overtime hours, and this is where mistakes can easily happen. For this reason, it is always recommended to use a time-tracking system that can accurately calculate the amount of overtime pay according to the hours worked.
Missing The Deadlines For Payroll Tax
Payroll tax is mandatory for companies to pay, and failure to do so can incur hefty penalties. In the UK, businesses are required to pay National Insurance Contributions (NICs) and Income Tax. This is to cover employees for benefits such as healthcare or a pension fund.
Using a payroll software can offer reminders about these deadlines to avoid them being missed.
Companies that offer payroll software in the UK include:
Not Keeping Up-To-Date Records
Companies can be audited from an external party at any time. If payroll information is incomplete or has discrepancies, the company can face penalties or fines for non-compliance.
It can become inconvenient to manage physical payroll records, but storing them digitally will reduce the likelihood of misplaced information.
How To Stay Compliant With Payroll Regulations
Maintaining payroll compliance is an ongoing process that requires a proactive approach. This includes staying up-to-date with the current regulations and monitoring laws that are subject to change.
Here are a few ways in which you can make sure that your company is maintaining their compliance.
Utilise Payroll Software
Using payroll systems reduces the risk of inaccuracies by automating processes that that include the handling of tax returns and the processing of deductions for given payroll periods.
A lot of payroll solutions include additional features that allow tax tables to be updated automatically, to make sure that the business is working with the most recent tax figures.
Run Regular Audits
By conducting regular payroll checks, it will be easier to identify and rectify any issues. These audits usually look at the calculations of salaries and overtime, as well as submitted returns.
It is always beneficial to have an external body conduct these audits to remove any bias during the evaluation.
Have A Coherent Procedure In Place
Implementing set practices and policies regarding the payroll process will aid in the management of the process right from the start.
This payroll plan should incorporate all aspects from deductions to returns to pick up any errors early. Moreover, having a payroll document can help with the training of new payroll employees.
Consult Tax Professionals
Seeking the expertise of employment lawyers and tax practitioners can prove highly beneficial especially when it comes to “complicated” matters such as multi-location payrolls or and independent contractor classifications.
These specialists will offer their experience and advice on how to handle payroll regulation issues for the company to maintain their compliance.
Provide Proper Training For Payroll Staff
All payroll staff, or HR teams, should receive adequate training on compliance and the relevant laws. This will make it easier to avoid mistakes, or handle errors correctly if they do occur.
Investing in a dedicated payroll team will help a business in maintaining its compliance.
