6 Common Payroll Mistakes that Small Businesses Make

Getting your payroll right is important. But, especially for smaller businesses, getting it right can be difficult, not least due to limited time, resources and expertise. with limited resources and expertise. Getting it wrong can lead to fines from HMRC and, of course, disgruntled employees. In this article, we look at 6 common payroll mistakes – all of which can be easily avoided by using an external payroll supplier.

1. Inaccurate Data

This is perhaps the most common payroll mistakes. Inaccurate data is almost always caused by human error – specifically at data input time – and that includes not updating data when it should be. HMRC requires all UK businesses to maintain accurate and detailed financial records, and it doesn’t allow for excuses. So, inaccurate data and data entry can be very costly for businesses because it can result in big fines.

2. Inexperienced Payroll Staff

Smaller businesses often do not have the budget to employ experienced payroll staff or provide the necessary training – and yet the role does require knowledge, experience and qualifications to ensure accuracy and timeliness.  Inexperienced and poorly trained payroll staff often leads to poor compliance with existing payroll legislation and that is what leads to mistakes.

3. GDPR compliant

GDPR compliance is vital with payroll. GDPR legislation that affects payroll, includes: an individual’s rights over their personal data and the way they receive their payslips. It also affects how payroll data is stored and how such data is provided employees. Being GDPR compliant is extremely important as non-compliance leads to fines. And yet, the whole area is complicated and often needs outside expertise.

4. Missing Deadlines

Payroll is characterised by deadlines, not just in terms of the date staff get paid, but by the reporting procedures and dates laid down by HMRC.  Typically, smaller companies without a dedicated in-house payroll team are the most at risk when it comes to missing deadlines. Likewise, when it comes to keeping up with changes in legislation which are a permanent fixture in this arena. Failing to keep to deadlines and on top of changes, can, as ever, result in fines.

5. Incorrect classification of employees

Classifying your employees can be time consuming and even confusing. Are they part-time or full-time members; temporary staff or independent contractors? The list is a long one, and it is important to get it right.  HMRC takes take employee misclassification very seriously. Which means, of course, that getting it right is important as the classification has implications for income and employment tax, and also determines whether the worker is entitled to benefits or compensation.

6. Poor Backup Systems

Payroll is run from software these days, and as with all software, good back-up and disaster recovery systems need to be in place should problems occur. This will ensure data is not lost.

Once again, smaller businesses tend to have only one person looking after their payroll and back-up systems that are either old and out of date or rely entirely upon that one person for its operation – or both. So, if ever there is a malfunction, or the person with responsibility for payroll is away from work, for whatever reason, then the outcomes can be a huge problem.

What’s the Answer? Outsourcing your Payroll

Outsourcing your payroll could be a way to solve all of the above issues. Here at JLP we have been running payrolls for our clients for over 20 years. They are all small business and our work means that they can get on with running their businesses whilst we look after the payroll. Call us or on 0121 422 0550 or contact us for a FREE initial chat.

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