Payroll – Much More Than Just A Payslip
Did you know that there are now over 4.5 million private sector businesses in the UK? That’s businesses just like yours, that are privately owned and often run by one person, or a small group of people. The shares aren’t open to the public, and you run your business as you see fit. Most of those businesses are one-man bands, who don’t hire in any staff and just work for themselves. But around 1.2 million of those businesses do hire some people in, and that means they need to pay them. After all, that’s a pretty important part of the employment game.
Unfortunately, it’s not as easy as just doing a bank transfer every month. HMRC requires a fair amount of paperwork to be done for payroll, with records to be kept in case the tax man comes a ‘calling. You will also need to work out tax and NI contributions for each person, and pay those too. All of this comes under the heading of ‘payroll’ – which it turns out is much, much more than just generating a payslip every month.
What Exactly Is Payroll?
Payroll’s responsibilities pretty much are what it says on the tin. The term ‘payroll’ refers to the process by which an employee receive their salary. The payroll department is responsible for processing, balancing and reconciling payroll data with the accounting systems, as well as processing any NI or tax properly. They will calculate any reimbursements (like expenses), bonuses, holiday pay and overtime due on a monthly and yearly basis. They handle any wage reductions, record keeping and verification of pay data before processing. Once pay has been processed they will print and deliver payslips and keep thorough up to date records of pay and tax for all employees. When paying employees is involved, payroll isn’t far behind.
The Payroll Bits You Don’t See
But it’s much more than typing some numbers into a spreadsheet and making some bank transfers. Payroll involves a lot of complicated processes, most of which you probably won’t get to see. This includes, but isn’t limited to:
- Making sure your workers are properly classified.
- Working out salaries and hourly rates, creating a correct payment amount for each month that, for salaried employees, adds up to the right number after 12 months.
- Making sure you’re paying your payroll taxes
- Managing pensions auto-enrolment
- Monthly RTI submissions
- CIS for subcontractors
- Monthly CIS submissions
Common Payroll Problems
If you have a payroll system in place that works, it’s great. But if even the smallest thing goes wrong, it can cause big problems. For example, using inexperienced staff to run payroll can lead to mistakes when filing paperwork, which can lead to fines. Navigating overtime pay requires a series of very complex calculations, including regular rate of pay, overtime rate of pay and the amount of overtime pay due, making its calculation one of the biggest challenges facing the person doing payroll – and all too easy to get wrong. And incorrect overtime payments mean very unhappy employees!
You may also struggle with staying up to date. For many businesses payroll is an undervalued administrative role, often thought of as more of a burden than a help. This is partly because the payroll and business environment is constantly changing, so whoever is in charge of payroll needs to be able to stay constantly up to date with changes in technology, legislations, work habits and environmental initiatives, since all of these factors can affect payroll and their processes. All of which leads us on to the next question…
In House Vs Outsourced Payroll
So, do you try to take care of your payroll in-house, or do you just skip straight to outsourcing it to a professional? Well, in-house is often the preference for small businesses, as it can help keep costs lower in the beginning. But what people tend to forget is that processing payroll takes up a lot of time, not to mention a dedicated member of staff to take care of it all – which costs money in itself. You might think that you can just give this role to anyone who’s good with numbers, but whoever’s in charge of running payroll will also need to have up to date knowledge of PAYE tax systems, returns, NI and other forms that will need to be sent to HMRC. They will also be responsible for informing HMRC when an employee starts and leaves. Payroll is a complex job that requires a lot of knowledge and time, as well as an aptitude for numbers, so it’s best not a job shared!
At Safe Hands Bookkeeping, our motto is to save you time and reduce your costs – and when it comes to payroll that’s exactly what we do! We make processing seem like a background task. Something that just gets done every month, but you don’t really have to think about. And because we use the most innovative technologies on the market, we can process your entire payroll in a fraction of the time it would take you – leaving you free to focus on your business (and us free to help you). If you want to know more you can call us on 01252 763123 or just drop us a line and have a chat – our door is always open!