Due to the frequent changes in the regulatory environment, managing the many facets of payroll can be challenging. Even though PAYE changes frequently, it can be challenging to stay on top of everything due to the complexity of the laws.
Failure to maintain compliance has financial and time costs for firms, which they feel the most.
Payroll errors require hours of labour to review and double-checking figures.
Payroll tax errors can result in penalties for small firms.
You must be knowledgeable about employment regulations, reporting requirements, and other compliance issues if you want to save your business against exorbitant fines and even litigation.
This article looks at common compliance issues raised by payroll professionals and provides best practises and solutions to make your payroll operation efficient and secure.
Typical payroll tax errors
Not being aware of local laws and regulations
Due to ongoing changes, regulation is become increasingly complex. Even the most informed payroll experts use a variety of resources to keep informed. Missing any crucial deadlines can have a big impact on a company, thus it’s crucial to invest in tools that have the knowledge to keep you updated.
Misclassification of contractors and employees
Because worker classification affects income and employment taxes, it is crucial to understand it and get it right. It also affects how the employee’s compensation should be recorded and whether they are entitled to any applicable deductions.
The complexity of payroll tax deadlines, particularly the payment due dates, is another factor. It’s crucial to keep a calendar that lists significant dates so that nothing is forgotten.
Lack of audit controls
Your company runs the risk of learning of inconsistencies after the fact if you don’t stay up to date with local laws and don’t have a mechanism in place to periodically check for compliance. Businesses that put mechanisms in place to regulate compliance are better equipped to handle an audit and can identify expensive discrepancies early.
Businesses that manage payroll data with outdated tools inevitably need to spend more time double-checking their numbers due to the higher risk of human mistake. 88% of spreadsheets have serious mistakes that could lead to overpayment, underpayment, or penalties.
TIP 1: Think about outsourcing.
If you don’t have a payroll specialist or accountant in your team, search for accounting businesses that can assist you with keeping current records, paying taxes, and filing returns. They can also offer you advise and spot inconsistencies in records.
Look into the cost of hiring an outside payroll vendor to handle all of your payroll requirements.
You’ll discover that outsourcing duties like gathering your employees’ time sheets, processing payroll, making direct deposit, and even paying your taxes with the appropriate authorities will make it easier for you to stay in compliance.
TIP 2: Maintain communication with staff members.
Make sure your staff members are aware of their responsibility for upholding compliance, such as following your spending policy or maintaining accurate time records. In order to protect yourself, teach your staff how to accurately record time and expenses. For all matters that have an impact on employees’ remuneration, create a thorough set of policies and procedures.
Employees can use this as a reference when they have questions about increases or decreases to their pay.
TIP 3: Encourage staff to use self-service options.
Payroll teams can use a self-service platform for workers to record and manage their personal information, work hours, sick leave, and time off requests, which speaks to the accuracy of personnel data. Accuracy is ensured, and time is freed up to handle other payroll-related activities.
Through a variety of employee self-service portal alternatives, you can keep your staff engaged even if your payroll is outsourced. They can keep your staff informed about new releases, guidelines, and practises.
TIP 4: Use automation.
Payroll management software is a very common method, and it has become more and more popular in recent years as cloud software has numerous advantages. Making a mistake is more difficult because payroll software is frequently created from the ground up with regulatory requirements like local tax regulations in mind.
The majority of suppliers who handle outsourced payroll have technology stacks that can automatically adapt to all the compliance quirks and other once manual procedures. Most of the time, they can remove them off your plate and free you up to better manage your company.
Compliance with personal data
In today’s digital environment, maintaining the security of your company’s employee and payroll data is crucial. When you choose to outsource your payroll operations, you give your payroll vendor the freedom to make sure the appropriate security precautions are in place and meet regulatory requirements.
Checklist for personal data security
Here is a data security compliance checklist to assist you avoid the most frequent data security errors, whether or not you outsource:
Combine your payroll and employee information.
If your payroll and/or personnel information is now strewn across numerous spreadsheets, consolidate it all into a single location as soon as you can. Your payroll team will be able to effectively manage it if this information is kept in one location.
Adopt pertinent laws and regulations.
You can make some of the security requirements of the legislation when they are updated and introduce new measures by adopting pertinent rules and standards.
3. Bear all available info in mind.
Payroll administration is a difficult concept since you have to take a number of various sorts of data into account. How are timesheets being handled and kept? emails or texts from staff members requesting holiday entitlement? Sick notes?
Manage payments with more security.
Do you put paper payslips on the desks of your staff members? If your company is still using printed payslips, you might want to switch to electronic payslips so that employees can access them safely. They might need to provide a password, for example, in order to view them.
5. If required, appoint or hire a data controller.
A data controller, who may be an existing employee or someone hired from outside your company, is required for several kinds of businesses. Public authorities, organisations that routinely monitor people on a wide scale, and businesses whose primary activity entail processing special categories of personal data on a massive scale are a few examples of businesses. The Data Protection Officer will assist you in keeping an eye on internal compliance and informing your company about its data protection responsibilities.
Keep in mind the information you can and cannot acquire.
If there isn’t a need for it and no consent has been granted, compliance means you won’t be able to gather and store a lot of personal data. Make that the payroll team only collects and uses the minimal amount of personal information required to fulfil each objective.
7. Allow employees full access to the information you have on them.
Employees should be aware of the personal information that your payroll staff and company may be holding about them. You will need to reply to their requests for either the rectification or deletion of their personal data in the interim. You do have the right to decline excessive or unjustified requests for personal data, but you must provide evidence of their unjustification in your compliance records.
Provide your staff with compliance privacy notices.
Inform your staff of the information to which they are entitled in accordance with any local rules requiring transparency. This must be done in an understandable manner.
Keep in mind that you must inform your employees before using their data for any other reason. Additionally, you might need to provide your staff with straightforward capability that lets them refuse to have their data used in various ways.
Who we are
Itas Solutions is a multi-award-winning Sage partner specialising in Sage Intacct for medium and growing businesses.
Having started in 1995 with just one customer, we now support over 200 clients throughout the UK. They know we are always there to provide a helping hand, whenever they need us. Trusted by our customers for over 20 years, Itas has been built on referrals from customers and IT professionals that love the expert yet personal service that we offer.
If you would like to know more about how Itas can help your business with finance automation, Sage implementation and improve purchasing control, you can get in touch at [email protected], call us on +44 (0) 1824 780 000 or contact us via our website at itassolutions.co.uk.