Any company, big or small, must have a system in place for payroll processing, including all the necessary activities. After all, payroll is so much more than paying employees! The tasks for payroll range from completing all necessary governments forms to paying taxes, benefits and voluntary deductions, correctly and on time. On top of that, there are assorted aspects to payroll especially in larger business when you have to factor in different things such as wage rates, bonuses, commissions, etc. All in all, it can be a laborious task and mistakes can be made. To help avoid this here are 5 of the most common mistakes to be aware of on your payroll.
Missing Tax Deadlines
It’s crucial that you mark your payroll calendar with important dates for tax deadline dates with Revenue or HMRC. It’s shockingly easy to be so busy that you don’t realise you’ve missed a tax deadline. Long gone are the days where forms were sent via the post, which served as a gentle reminder that they were due! Most payments are now expected to be paid using EFT (Electronic Files Transfer) which must be kicked off several days before payment is due. Therefore it’s necessary to plan and prep for these deadlines.
If not, late payments of taxes can land businesses in hot water. Resulting in penalties and interest charges that you just don’t want. So meeting important tax deadlines to the proper authority is important to get right from the get go. Doing this ensures that all payments are made promptly and avoids the unwanted consequences.
Poor Record Keeping and Data Entry
There are penalties for a business when accurate records are not kept or information is wrong. Manual inputting data can result in mismatched records such as names and PPS or NI numbers, making it a very messy situation to have to sieve through. While poor recording keeping for time sheets, etc. can make your next audit a bigger hassle than it needs to be. Data entry mistakes and poor record keeping can cost companies a lot of money each year and may even result in penalties from governing bodies. So keeping on top of this is important or you might consider looking at an integrated Payroll and HR Software to eliminate some of the risks.
Missed Regulatory Changes
Laws or new regulations from Revenue and HMRC that affect wages, taxes, and other compensation change frequently and tend to be very intricate. Unless you’re a policy enthusiast, these may arise without you noticing. So it is important to keep informed of changes that affect payroll and employment laws. Making sure you avoid penalties for unintentional non-compliance.
With the growing attractiveness of flexible working, temporary employees and other independent contractors, it is essential that you correctly determine the classification of everyone working for you. This is so you can determine how or if you need to report payroll information for tax purposes to the relevant government bodies. After all, not everyone who works on your companies grounds is classed as an employee. If you have contractors or freelancers you’ll need to check the rules for classification carefully. For example, you could have a free-lancer in your office with their own desk but they may not be considered an employee.
Misclassifying workers can also help to avoid under or over paying employees when it comes to overtime. Cases have increased in recent years claiming that employees who were treated as “exempt” employees and therefore not entitled to overtime were misclassified. Some guidelines must be followed when establishing overtime pay for certain employees.
Even if a misclassification of a worker is an unintentional mistake, it could cause your company an enormous financial and legal upheaval. Including fines, penalties, back taxes or additional monies owed for overtime. Ensuring you have this information right can save you a major headache down the road.
Not Paying on Time or Correctly
Disagreements about the payment of wages are common in businesses. With most of them being about non-payment, late payment, or deductions from wages. However, as an employer, it is your responsibility to adhere to a regular pay schedule for your employees with all payments correctly completed. The pace of business can lead you to forget about signing off on the payroll, recording that employee bonus check or compensating that business expense? But employees don’t forget! After all, they have bills to pay.
Late or incorrect payrolls, especially if they happen regularly, can quickly turn into a low employee morale and retention problem for your business. So attentiveness and regulation are your best tools in this situation.
Luckily for us, this is the generation of technology and managing the payroll ledger by hand with pen and paper is a thing of the past! Good payroll software will help you keep on top of all of the above points and so much more. Payroll is an important function for your business so avoiding these common mistakes is one of the keys to success for your company and employees.