Research suggests that 50% of employees will simply walk away if two or more payroll errors are made. Less well reported is the catalogue of penalties that can result from not correctly navigating the minefield of HMRC’s employment laws. In today’s article, we take a look at payroll legislation and how you can stay on top of it.
UK Payroll Legislation
UK payroll legislation is managed by HMRC, and it can be dizzying in its complexity. Even with helpful software, employees still have to complete a range of critical tasks. These include recording pay, calculating deductions, producing pay-slips, reporting Full Payment Submissions (FPS), sending Employer Payment Summaries (EPS), and mandatory viewing of the account balance by the 14th of each month. Companies also need to factor in Statutory Sick Pay policies (SSP), holiday entitlement, and National Living Wage (NLW) laws. Failure to do all of this will result in penalties.
Common Payroll Headaches
Every single list of payroll pain points gives misclassification as the primary ouch. This stems from the problem that, confusingly, “all employees in Britain are workers, but not all workers are employees.” Penalties for misclassification can be severe, and the same is true for miscalculating hours. Unfortunately for companies, this is where software cannot help, with manual data entry being required at various stages. As such, SMEs are left to traverse the very choppy waters of HRMC alone, resulting in the daunting G2 statistic that 40% of payroll mistakes are caused by human error.
Human Errors In Payroll
Despite all the threats, penalties, and exodus of frustrated employees, payroll legislation problems are generally the result of simple human error. Mistyping a figure, misplacing a dot, and misinterpreting policies are not deliberate inefficiencies. Instead, they are the natural consequences of a complex system. G2 statistics suggest that, even with software, companies spend 120 hours a year on payroll and 33% still make errors. The research found that, to avoid this, 53% of companies now choose to outsource their payroll to an expert. G2 describes this move as money-saving, stress-reducing, efficiency-boosting, and good for company reputation. After all, nobody wants to waste 120 hours on payroll only for a human error to inadvertently place the company on an employment Black List.
The Benefits Of Professional Help
For businesses in Nottingham, one of the biggest stress-relievers of trusting your payroll to a professional is accountability. By outsourcing the task, you outsource the risk, and absolve yourself of any responsibility. This keeps your reputation as an employer intact. However, it goes without saying that professionals know exactly what they are doing when it comes to payroll and its legislation, so a shining advantage is that figures will be accurate. Employees will be correctly classified, everybody will be paid on time, and HMRC will be happy. In return, organisations are given the dual gifts of peace of mind and 120 extra hours to dedicate to growing the business.
What Next?
Payroll errors can cost companies money, employees, and reputation. Expert help from experienced accountants can help to safeguard your organisation. For friendly advice, please get in touch with the team at Vanilla Accounting today.
Image Source: Canva
