![[UK] Identify and avoid 4 common payroll mistakes](http://gpa.net/cdn/shop/articles/bigstock-Stressed-Young-Asian-Businessm-458058235_1200x.jpg?v=1659718942)
Each year, thousands of UK businesses face inconsistencies in their payroll records when it’s time to file their tax returns. Payroll year-end, though a challenging time for businesses, is also the perfect time to take stock of current payroll processes to minimise potential mistakes, BOSS Magazine reports.
The best way to mitigate these mistakes is to first identify them and then proactively prevent their reoccurrence. BOSS Magazine’s list of the most common payroll mistakes could help pinpoint weaknesses in your payroll system while offering solutions to help you rectify them.
Miscalculated Pay
Of all the common payroll mistakes on this list, you are most likely to become aware of this one first. Few employees are willing to accept less pay than they’re owed, however, fielding queries or complaints on a regular basis from more than one member of staff quickly becomes time-consuming.
Whether you’re failing to action pay rises or log overtime, miscalculating an employee’s pay time and time again could build resentment and result in a breakdown in trust.
If you have miscalculated someone’s pay, you will need to pay them what they’re owed at the next available instance. Depending on the amount owed, this may mean transferring the money outside of your usual payment schedule or waiting until the following month to top up their salary.
To prevent pay miscalculations from impacting your business in the future, BOSS Magazine suggests spending some time reassessing the way in which employees are notifying you of any overtime they’ve worked and whether pay rises are being communicated through the appropriate channels. Instead of sending e-mails that are likely to get lost, perhaps employees can submit timesheets through an integrated payroll system.
Non-Compliance
The way businesses are required to manage payroll has changed in recent years, most notably due to new GDPR regulations requiring employees’ personal information to be kept secure. Your payroll system must be protected against data breaches and all third-party processors should be selected and assessed with caution. In addition, any data that you do hold about your employees must have been collected for a lawful reason and can only be used fairly.
If you suspect that your existing payroll system may not be GDPR compliant, you must familiarise yourself with the regulations before taking action. Fines for breaches of GDPR legislation can be severe, with some businesses paying up to 4 per cent of their global annual turnover as a penalty.
Using payroll software that’s HRMC-recognised will not only help you to file your tax return more efficiently, but it’s more likely to be up-to-date with essential security features.
Incomplete Records
Gaps in your payroll records can make filing your tax return a complex task, whether you’re missing just a few months of payslips or haven’t kept track of any contractors over the past year. All payroll documents and employee information should be stored for three years in case HMRC decides to carry out an audit. Key records you must keep include:
- Payments to employees and related deductions
- Payments and reports submitted to HMRC
- Holidays and paid/unpaid leave
- Sickness and other absences
- Tax code changes and notices
- Tax allowances and expenses
If any of these records are missing, HMRC may issue your business a fine of up to £3,000, which is why it’s so important to have a secure, reliable storage solution for all your payroll documents. However, if the damage has already been done and you have lost some documents, it’s important to inform HMRC as soon as you realise. In your payroll report, you will have the option of submitting estimated figures if you are unable to recover the necessary documents or provisional figures that you can update once you have the information you need.
Insufficient Tax Payment
Failing to pay enough tax to HMRC can not only result in fines and penalties but cash flow issues as well. If you’ve miscalculated the amount of tax you need to pay, then you may have less capital to work with than you had originally planned. It’s important to act quickly as soon as you’ve realised your mistake; the quicker you pay HMRC what they’re owed the less severe any fines will be.
Not paying HMRC enough tax can happen as a result of a variety of factors, from not deducting the right amount of money from your employee’s wages to keeping inconsistent records. It may also be due to a lack of awareness of various tax regulations, such as the VAT threshold or corporation tax rules.
Improve your payroll processes today
It is inevitable that payroll mistakes will occasionally happen but the way you approach their solutions is what truly counts. Automating your payroll process and investing in accounting software can revolutionise the way you approach your business’s finances.
Source: BOSS Magazine
(Links via original reporting)
Each year, thousands of UK businesses face inconsistencies in their payroll records when it’s time to file their tax returns. Payroll year-end, though a challenging time for businesses, is also the perfect time to take stock of current payroll processes to minimise potential mistakes, BOSS Magazine reports.
The best way to mitigate these mistakes is to first identify them and then proactively prevent their reoccurrence. BOSS Magazine’s list of the most common payroll mistakes could help pinpoint weaknesses in your payroll system while offering solutions to help you rectify them.
Miscalculated Pay
Of all the common payroll mistakes on this list, you are most likely to become aware of this one first. Few employees are willing to accept less pay than they’re owed, however, fielding queries or complaints on a regular basis from more than one member of staff quickly becomes time-consuming.
Whether you’re failing to action pay rises or log overtime, miscalculating an employee’s pay time and time again could build resentment and result in a breakdown in trust.
If you have miscalculated someone’s pay, you will need to pay them what they’re owed at the next available instance. Depending on the amount owed, this may mean transferring the money outside of your usual payment schedule or waiting until the following month to top up their salary.
To prevent pay miscalculations from impacting your business in the future, BOSS Magazine suggests spending some time reassessing the way in which employees are notifying you of any overtime they’ve worked and whether pay rises are being communicated through the appropriate channels. Instead of sending e-mails that are likely to get lost, perhaps employees can submit timesheets through an integrated payroll system.
Non-Compliance
The way businesses are required to manage payroll has changed in recent years, most notably due to new GDPR regulations requiring employees’ personal information to be kept secure. Your payroll system must be protected against data breaches and all third-party processors should be selected and assessed with caution. In addition, any data that you do hold about your employees must have been collected for a lawful reason and can only be used fairly.
If you suspect that your existing payroll system may not be GDPR compliant, you must familiarise yourself with the regulations before taking action. Fines for breaches of GDPR legislation can be severe, with some businesses paying up to 4 per cent of their global annual turnover as a penalty.
Using payroll software that’s HRMC-recognised will not only help you to file your tax return more efficiently, but it’s more likely to be up-to-date with essential security features.
Incomplete Records
Gaps in your payroll records can make filing your tax return a complex task, whether you’re missing just a few months of payslips or haven’t kept track of any contractors over the past year. All payroll documents and employee information should be stored for three years in case HMRC decides to carry out an audit. Key records you must keep include:
- Payments to employees and related deductions
- Payments and reports submitted to HMRC
- Holidays and paid/unpaid leave
- Sickness and other absences
- Tax code changes and notices
- Tax allowances and expenses
If any of these records are missing, HMRC may issue your business a fine of up to £3,000, which is why it’s so important to have a secure, reliable storage solution for all your payroll documents. However, if the damage has already been done and you have lost some documents, it’s important to inform HMRC as soon as you realise. In your payroll report, you will have the option of submitting estimated figures if you are unable to recover the necessary documents or provisional figures that you can update once you have the information you need.
Insufficient Tax Payment
Failing to pay enough tax to HMRC can not only result in fines and penalties but cash flow issues as well. If you’ve miscalculated the amount of tax you need to pay, then you may have less capital to work with than you had originally planned. It’s important to act quickly as soon as you’ve realised your mistake; the quicker you pay HMRC what they’re owed the less severe any fines will be.
Not paying HMRC enough tax can happen as a result of a variety of factors, from not deducting the right amount of money from your employee’s wages to keeping inconsistent records. It may also be due to a lack of awareness of various tax regulations, such as the VAT threshold or corporation tax rules.
Improve your payroll processes today
It is inevitable that payroll mistakes will occasionally happen but the way you approach their solutions is what truly counts. Automating your payroll process and investing in accounting software can revolutionise the way you approach your business’s finances.
Source: BOSS Magazine
(Links via original reporting)
