Pitfalls to avoid when processing payroll
Payroll processing is an extremely important task for employers. Getting wages and salaries spot on isn’t only essential from the employee’s point of view errors can end up costing employers dearly too. Add to this, the recent addition of Real Time Information (RTI) to the payroll equation and you begin to see that having your payroll processing ducks in a row is absolutely essential.
Here are just a few of the most common pitfalls to avoid when processing your payroll:
- Getting pay-day wrong From an employees point of view, when they have a fixed pay-day, they rely on their wages or salary arriving either in their hand or in their bank account on that day. Getting pay-day wrong is likely to lead to an unhappy workforce and may even have a knock-on financial effect on their affairs, so it’s well worth getting this one right.
- Using the wrong tax code Every employee has a tax code and it’s up to whoever is in charge of your payroll to make sure they’re using the right code, particularly now that RTI is in force. Only by using the correct tax code can you be sure that your employee is paying the right amount of tax. Tax code errors can be avoided by making sure your payroll team or provider is authorized to download your employees’ tax notices of coding from HMRC.
- Paying someone who has left This is a common pitfall whereby payroll records aren’t kept up to date and a leaver is allowed to slip through the payroll net and receive pay when they no longer work for you. Recovering payments that have been made by mistake is costly and time-consuming and should be avoided at all costs.
- Not getting the detail right Different elements of pay may require different tax and National Insurance treatments and getting the calculations right relies on attention to detail. Things like pension payments, expenses and sick pay may require different treatment to straight salary or wages and need to be dealt with accordingly.
- Inaccurate working patterns If you have members of staff with different working patterns; which most companies have, then it’s important that these are accurately reflected in your payroll processing. Getting working hours right for your employees isn’t only important for their salary or wage calculation it also impacts on sick pay, holiday pay and holiday entitlement, so this is really important.
- Treating childcare vouchers wrongly If you have employees who take advantage of the childcare voucher scheme, it’s essential to make sure that these are treated as a salary sacrifice and are deducted from the gross income of the employee before tax and National Insurance are calculated. Failure to get this right means that your employee’s net pay will be inaccurate and you could end up paying employer’s National Insurance contributions that you don’t need to.
- Getting bank details wrong Getting bank account numbers and bank sort codes right is absolutely essential in the chain of payroll processing events. It is only by double checking bank details can you be sure that the payments made will arrive in the right accounts at the right bank. Providing such information electronically as well as checking net pay reports prior to sending payments will help reduce errors in this area.
- Not implementing pay adjustments correctly In many instances, employees will be awarded a pay rise or a bonus of some description. Two common mistakes made when processing payroll is that pay rises aren’t acknowledged as permanent adjustments and that one-off bonus payments are. Each of these have their own problems and call for all adjustments to be checked with great care.
Many employers are waking up to the huge impact that Real Time Information is going to have on their payroll processing and are seeking to avoid errors at all costs. It is for this reason that more and more employers are choosing to outsource their payroll processing to a tried and trusted payroll provider.
If you’re struggling with payroll, there’s no need to go it alone. Why not get in touch to find out what we can do to help?