Employees are the backbone of any SME, so paying them correctly and on time is imperative to upholding an effective working environment. However, for the average small business owner, there are enough tasks to worry about without having to deal with the stress of a tangled payroll.
Here, we’ve listed three of the most common mistakes made by UK businesses when dealing with the payroll system.
1. The hand of an amateur
For anyone without an extensive background in accountancy, payroll administration is an incredibly complex undertaking with a plethora of factors to take into consideration.
Each employee’s pay will have different deductions or amendments depending on their circumstances and, by law, the correct amount of National Insurance and PAYE tax must be taken off their earnings. By failing to outsource accounting to a professional, employers run the risk of making incorrect adjustments and experiencing problems further along the line.
Some of the more common amendments or deductions in employees’ salaries include maternity or paternity pay, sick pay, and student loan repayments.
2. Missed deadlines
Since October last year, HMRC’s payroll bureau has been actively chasing up small companies that continually miss deadlines and fail to meet other statutory requirements, so small businesses that don’t keep on top of their administration can easily land themselves in trouble.
Missed deadlines will see fines piling up on top of monies already owed, unnecessarily denting a company’s cashflow and giving owners something of a headache. A professional, of course, would be fully aware of the fiscal calendar.
3. Poor records
A common mistake made by small businesses that blindly prioritise increasing profits and brand awareness, failing to keep accurate records will seriously harm payroll efficiency.
HMRC asks that every business keep detailed and accurate payroll records covering at least the previous three tax years; those that don’t run the risk of being hit with a £3,000 fine.
Storing all the essential payroll details of the last three years is a matter of routine for a reputable outsourced provider of payroll services.
With the introduction of Real Time Information, business owners now have much more to think about than they previously did when it comes to paying their staff properly.
The Chartered Institute of Taxation has stated that as many as half of the UK’s small businesses are finding the new system time-consuming, prescriptive and, in some cases, unworkable – so perhaps there has never been a greater need for the services of a professional accountant.