While processing payroll can be one of the biggest sources of frustration, it is unequivocally one of the most important parts of your business.
Your employees are your most valuable asset, and as such, they deserve to be paid correctly and on time. While payroll is often the biggest expense for a company, it can get even pricier when mistakes are made.
Making mistakes when running payroll can be costly not only to your employees, but to your business too – both financially and reputationally. Such mistakes might include overpaying or underpaying tax, paying employees late or incorrectly, making incorrect pension contributions and much more. Not only do you risk incurring penalties or interest charges from HMRC, but you risk the morale and trust of your employees.
Below, you’ll find six handy tips to ensure payroll in your company goes without a hitch.
Understand your responsibilities
While it seems obvious, having a clear understanding of your responsibilities when running payroll is imperative to its success. Your employee’s financial wellbeing is at risk if any part of your role is overlooked or if mistakes are made.
As an employer running PAYE, you need to complete certain tasks during each tax month. It is important to make sure your employees are paid correctly, their pay is recorded, tax and NI contributions are accurate, payslips are produced and Full Payment Submissions are submitted to HMRC on or before your employees’ payday. This task is fairly straightforward if your employees are salaried and aren’t in receipt of any other payments such as tips, bonuses or commission.
But with hundreds of employees, varied shift patterns and rates of pay, it becomes increasingly difficult to manage these additional payments and employee entitlements to statutory payments like sick or maternity pay.
Payroll departments thrive on clarity and organisation. Every month, you must be aware of any employee bonuses, changes in pay, hours worked and entitlements in order to record and process their pay.
Choose a system that’s right for your business
Whether you choose to process payroll yourself, use software or outsource to a third-party bureau or accountant; it is key that whichever method of processing payroll you choose is right for your business and your employees.
While outsourcing payroll to a third party can alleviate a lot of the stress of processing payroll, it can be costly and still requires some level of involvement from your side.
Payroll software can be useful to manage hundreds of employees as it can handle the majority of calculations, deductions and HMRC submissions, but it can be overkill if your workforce is not that large and your pay structure is uncomplicated.
Regardless of which method you choose to process payroll, it must be manageable and suited to your individual needs as a business. It is entirely possible to process payroll by hand if that is what suits your business and you’re qualified, able and willing to invest your time in doing so.
Keep your payroll policies simple
The more complicated your attendance, paid leave, commission structure, expenses and mileage and other polices are; the more complicated your payroll process will be. Where possible, keep your policies as simple and straightforward as you can.
Different payroll policies for different levels of your employees or complicated policies will only to make your payroll process unnecessarily complex.
Try to keep your company payroll policies simple, easy to understand and clear for all employees. Not only will your employees appreciate the clarity, but it will minimise the volume of administrative tasks that form part of your payroll process.
Distribute electronic payslips
Paper payslips are already becoming a thing of the past. As businesses fall out of favour with preparing and delivering paper payslips, electronic payslips are increasingly being adopted by businesses.
Not only do they save paper and money, most payroll software will automatically generate and distribute these to your employees without you having to lift a finger.
Create a payroll calendar
Having a payroll calendar can help in ensuring you stay on track when processing payroll. A calendar can help you keep on top of your pay periods, cut-off dates for commission payments, expenses and mileage claims, and help you to manage the tasks that need to be done each month.
With a clear picture of what needs to be done, and by when, you can keep track every stage of your payroll process. This will keep your payroll department on the same page and aware of what has been completed and what is yet to be done to process this month’s payroll.
Use integrated HR and payroll software
Integrated HR and payroll software can help to manage your payroll and ensure its success. With one system to manage your HR and payroll departments, any changes in human resources that impact payroll (such as new starters, leavers or changes in salary) are automatically updated in one system and can be included in one main pay run.
Whenever HR adds a new employee, makes a salary change or an employee is marked as being on sick leave, this is automatically reflected for payroll to see. This ensures that both departments are working in harmony and neither team is using erroneous information.