In the fast-paced world of payroll management, even the most diligent businesses can sometimes stumble into pitfalls that could lead to complications, penalties, and unhappy employees. At Eternal Engagements, we’re committed to helping you navigate these challenges smoothly and efficiently. Let’s take a closer look at some of the most common mistakes in payroll and how you can avoid them.
Not paying minimum wage.
You must pay at least the minimum wage to all employees on your payroll. There are different minimum rates to pay to each employee depending on their age. Minimum wage rates tend to increase on 1st April each year, subject to the government’s budget announcements each year. Many employers make the mistake of not paying the correct wage rates to their staff as a result of the increase in April or fail to note when their employee has a birthday which requires an increase in Minimum wage.
Not paying holiday pay.
From the moment staff are employed, they accrue holiday pay. It doesn’t matter if they are part-time, full-time or casual workers etc. everyone is entitled to holidays and holiday pay. Upon cessation of employment, you must still pay any untaken holiday pay accrued up to the point of leaving to your worker. If your employee leaves without working any notice, untaken holiday pay again must be paid.
Not submitting information to HMRC.
With each pay run you process, you must submit your payroll information to HMRC. For the normal pay run, you will need to submit an FPS which has the gross, tax and NIC deducted from your employees as well as the employer NIC amounts. If you have no staff on your payroll, you must still submit a return to HMRC, this return is known as an EPS and lets HMRC know that you haven’t paid any employees for the month. These submissions need to be made on or before your pay date.
Using the wrong tax code.
When an employee joins your business, they should give you a P45 from their previous employer. You will need to use this P45 in order to add them to your payroll software and use the correct tax code for them. If they do not have a P45, your employee will need to complete a P46 new starter form in order to ensure the correct amount of tax is deducted from their first wage. HMRC will normally issue an amendment to the tax code if needed once they have received the FPS submission with the employee’s information.
Not being consistent.
You should process your payroll on the same day each week/month and pay your staff on the same day each week/month in order to ensure consistency. Failure to be consistent with pay dates can lead to issues with underpaid tax.
Not paying the correct amount to employees.
After a payroll has been processed and pay slips have been produced by your payroll software, you need to pay each employee the net pay as per their pay slip not the gross pay. The gross pay is the amount prior to tax, nic and pension deductions taken from their wage. The net pay, is the amount after these deductions have been made.
At Eternal Engagements, we’re here to ensure your payroll management is smooth, precise, and compliant. Our expert team helps you steer clear of these pitfalls, making sure your employees are paid accurately and on time. With our guidance, your business can thrive while avoiding these common payroll challenges.
By Hannah Fossett, Payroll Administrator at Eternal Engagements. Check out our meet the team section on our Careers page to find out more about the team at Eternal Engagements.