Insider Insight to Perfect Payroll

Sep 8, 2020 | Payroll, TC news

Choose your software carefully

There is a wide range of affordable payroll software available to employers but be sure to do your research before deciding which solution is best for your organisation.  Cloud software options take away the need to install updates or backup data but remember to consider your organisation’s data protection policies and where your cloud software vendor will store your data.

Prepare a timetable

It helps to plan a year in advance, starting with the payment dates each month and working back, when you will gather, process and check payroll information.  Remember to consider bank holidays (you may need to arrange to pay your staff a day earlier than normal) and your own annual leave.   Try to build in time to resolve any queries you may need to pick up with other departments and for unforeseen delays or problems.

Keep employee details up to date

Remember you are processing personal data so it is essential that you keep employee details up to date to comply with the UK’s data protection rules.

It also makes the whole process easier if you know your payroll records are accurate and up to date.  Avoid skipping key fields like work patterns or contracted hours, even if you can run your payroll without this information.  At some point, for example to process statutory sick pay, you are going to need it.

Deal with tax code changes every pay period

Some software will ‘collect’ tax code changes automatically from your HMRC PAYE account however we advise always checking your online account to make sure you have captured all HMRC notifications including student loan stop and start notices.  All such notices should be applied as soon as you receive them to ensure they are actioned in the next pay run.  Failure to operate tax codes correctly for your staff may result in you having to pick up the cost of any underpaid tax.  If an employee believes their tax code is wrong, they should contact HMRC to discuss their concerns.

Choose a simple but robust method for recording hours, holidays and absences

Many payroll systems have features designed to help employers keep track of employee hours, holidays and absences however a simple spreadsheet or manual record for that matter, will suffice providing the information is up to date and recorded accurately.  Make sure you retain your records of hours and absences etc for audit and verification purposes.

Keep your employees informed

Head off any post pay-day queries by telling employees in advance about significant variations which effect their take home pay.  For example, if they have received a significant change to their tax code or you are processing back pay or a bonus which may take them into the higher rate tax brackets for a month or so.  Any deductions from employee pay should always be done with your employees’ knowledge and consent, with the exception of auto enrolment pension contributions.

Also make sure your employee handbook is up to date and contains the information workers need to be able to understand how things like expense claims, sick pay, parental leave, pensions and salary sacrifice work in your organisation.

Stay up to date with payroll legislation

The rules around payroll are complex and voluminous and change it seems, constantly.   Keeping up to date can be challenging however it is your duty as an employer to make sure you operate PAYE and make statutory payments and deductions correctly.  HMRC offer free webinars and the .GOV website is a good source of guidance.  ACAS and the Chartered Institute of Payroll Professionals (CIPP) are also reliable sources of up-to-date information.   

Speak to the experts

Know when to call in the experts.  Making mistakes in payroll is likely to damage employee relations and can also be costly if you end up having to pick up the bill for underpaid tax or national insurance.  The recent job retention scheme and furloughing of employees has demonstrated how important it is to also seek employment law or human resources expertise to ensure changes to contracts are properly documented and flow through into payroll.

Double check everything before you finalise your payroll and make your submissions on time

Time spent checking your payroll before finalising can prevent a time-consuming headache sorting things out, later down the line.  Review the payroll reports in detail and cross-check to input spreadsheets, timesheet summaries etc.  Check payslips against those from last pay period to help spot any changes you may have missed.  Double check tax code changes, student loan notices etc have been correctly updated and do not forget to make your submission on or before pay day to avoid a potential fine for late submission.

Make sure you back up your data and keep your records safe and secure

Finally, if your software is not cloud based then you will need to back up your payroll data.  Make sure you do this regularly and can access the backup files, if required.  You have a duty to keep payroll records for HMRC purposes for three tax years (plus the current tax year) but you may need to keep certain information for longer.  For example redundancy records must be kept for six years  and pension benefits records should be kept for twelve.

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