Key considerations for getting your payroll right

Payroll is one of the most important aspects of any business and can have the largest impact on your employees and your business success. Employees quite rightly expect to be paid accurately, and on time, and when this goes wrong it can often undermine their trust and confidence in their employer.

Whether you are a new business or have been running for decades, there are important risks and key considerations to be aware of.

What should you consider when setting up your payroll?

Setting up your payroll as a new business can seem daunting, but these key considerations can help make the process smooth when the time comes.

First, make sure to obtain all the relevant personal data of employees so records are up to date and set up correctly when registering with HMRC.

Second, workplace pension duties are applicable to all employers, even if just to remove the duties for non-contractual workers. This means a pension scheme is required for eligible employees to enrol into, whilst also being made available for non-eligible or entitled workers to opt in to.

Third, be aware of the Government benefits available and the statutory payment recoveries. The Government offers an employment allowance of £5,000 which covers employers National Insurance contributions. You are also able to recover statutory payment from the Government for things such as maternity or paternity pay.

Fourth, you can account for employee benefits as part of payroll, such as company health insurance. This is becoming a more popular way to process benefits in kind.

What risks are associated with payroll for your business?

Payroll is often misconceived as easy as a push of a button, but there are a lot of complexities and risks associated with payroll. It’s important that you understand and mitigate these.

Risks range from ensuring you comply with minimum wage legislation and salary sacrifice to how you deal with an employee on jury service. Depending on the size of your business and if you are part of a group or umbrella company, you will also need to consider the apprenticeship levy and employment allowance eligibility, among others.

You will also need to get to grips with an attachment of earnings order, often applied to payroll to enforce salary deductions by a governing body, such as child maintenance payments.

What does automatic pension enrolment mean for your payroll?

Automatic pension enrolment means that if you are an employer with one employee, whose age and earnings fall within the eligible bracket for a workplace pension, then a qualifying scheme must be chosen, set up and applied to your payroll system.

Letters must be provided to all staff to advise them of their eligibility and detailing their options.

Employees enrolled but not wishing to pay into a workplace pension scheme, should opt out directly through the pension provider.

How can you simplify the payroll process as much as possible?

To simplify your payroll process as much as possible, there are a number of elements you should decide upon when setting up your payroll.

First, you must consider how frequently your employees are going to be paid and then determine the period for which they are paid, known as the ‘pay reference period’.

Second, how and what will they be paid? Will they be paid for hours worked each period or a set salary? Nowadays pay to staff is often directly transferred to an employee’s bank account, other options such as cash are much less common.

Third, keep timesheets and records which will save you time in the future.

Finally, if you use professional payroll services, it’s worthwhile contacting them for assistance with collating the data to streamline their process.

What changes are expected in payroll processes in the future?

The requirements around how businesses process payroll is constantly changing. Currently there is an ongoing review into holiday pay legislation. The existing legislation for irregular zero-hour workers stipulates it should be calculated on the 5.6 week minimum accrual, using an average of 52 worked weeks. They are looking to simplify this as it can be a timely and a somewhat confusing process for employers.

Who is automatically enrolled in a pension scheme, and at what age, is also under the spotlight. Government is considering reducing the minimum enrolment age from 22 to 18, but this is still under review. Similarly, they are considering removing the qualifying earnings minimum pension calculation, meaning all employees would be subject to deductions on their full earnings not the reduced amount. This would have important repercussions for your payroll and your pension schemes.

Staying on top of changes is difficult, which is why Westcotts can offer a helping hand. For more information, please get in touch with our Payroll team.