Common payroll errors cost businesses thousands of pounds

Businesses in the South West are at risk of making costly payroll errors resulting in significant penalties and missing out on employee benefits that could run into thousands of pounds each year.

As we mark National Payroll Week (5-9 September 2022), we are urging companies to act sooner, rather than later to avoid getting into trouble.

Updating annual tax codes, complying with National Minimum Wage and Living Wage regulations, and calculating holiday allowances are three areas where businesses can fall foul of the legal requirements placed on them.

Other common mistakes are often made when deductions are made incorrectly for tax and National Insurance purposes to employee salaries, as well as tax and NI payments when staff leave the business, or their contract is terminated.

Salary sacrifice can also be a problematic area for business owners, as well the automatic enrolment, setting up and correct processing of staff pensions, so it is important to get it right from the outset.

Payroll and employment legislation is changing all the time and compliance is not optional. When companies get it wrong, they are at risk of facing substantial penalties due to non-compliance and other repercussions. Coupled with this, pay is a highly emotive subject especially at a time when the cost-of-living crisis is such a big issue for many people – it is important that employees receive accurate pay without causing extra undue stress or anxiety.

Payroll is a key administrative function for any business. These errors, which can be simple to make, are real risks to businesses and could cost them hundreds, if not thousands of pounds in liabilities and potentially investigations by HMRC (HM Revenue & Customs) if not handled correctly. They could be easily avoided by taking the right steps at the right time and we are urging companies to review their payroll processes on a regular basis.

Eligible businesses could also be missing out on thousands of pounds each year from Employment Allowance – a benefit designed to support smaller employers reduce their National Insurance liability by up to £5,000 per year from 6 April 2022. In previous years, the Allowance has been less than 2022, between £3,000 and £4,000

Certain criteria applies and eligibility rules changed in 2020, so employers must apply each year for the allowance. However, this can be backdated for the previous four years, which could mean a substantial benefit of up to £18,000 plus £5,000 for the current year.

We recommend that small businesses audit their payroll at least once a year, prior to the end of the tax year and medium to larger businesses more regularly.

We have a dedicated payroll team of experts and specialists who can offer businesses of all sizes a comprehensive ‘health check where our team will review:

• Payroll software and processing
• Employment status of ‘workers’ not on the payroll
• General payroll processing
• National Minimum and National Living Wage
• Holiday calculations
• Salary sacrifice
• Ensuring deductions are treated correctly
• Payroll checking
• Leavers and termination payments
• Pensions payroll and automatic enrolment
• Payroll reporting to HMRC, making corrections
• Treatment of expenses and benefits
• GDPR

During National Payroll Week, we are highlighting the importance of accurately running payroll. Payroll is one of the most important tasks in running a business and outsourcing can provide several benefits. Having an outsourced team devoted to payroll reduces the risk of mistakes being made, we can ensure that PAYE submissions are filed accurately and on time, reducing the risk of penalties.