This week, September 2nd to 6th, is National Payroll Week. “But there is a national day or week for anything these days!” you might protest. However, there is a serious point to be made by raising the profile of payroll and payroll professionals in the UK.
The Value Payroll Brings to the UK Economy
Payroll has a significant impact on the UK economy through contributing to the £310 billion* collected from Income Tax and National Insurance. As a matter of fact, payroll is the largest expenditure in most of our country’s organisations, and is often the number one concern for small businesses. Getting payroll right is important, to ensure that you pay the right tax at the right time. In addition, there are aspects of payroll that are now a legal requirement and being in breach of any of the 174 pieces of payroll regulations could mean that you will incur significant penalties.
More than Pressing a Button
Many people think that doing payroll is a necessary evil and simply a matter of pressing a button on your accounting software. But these days there is much more involved. The legislation is changing all the time. Whilst there is one piece of payroll legislation that dates back 150 years and is still current today, at least a couple of changes are introduced every year. Businesses need to stay on top of these regulations if they want to avoid paying more than they need to.
Leave it to the Professionals
Payroll, for firms of all sizes, should be managed by qualified professionals. In addition to making sure your payroll is accurate so that neither your business nor your employees pay too much tax, a professionally trained advisor can be a strategic asset to your business. By considering the payroll implications of your overall reward and remuneration package, a payroll professional can help you make strategic decisions that save your employees money (through salary sacrifice, for instance) and improve their wellbeing, motivation and morale.
Whilst modern payroll is a complex function, and we would always advise that, whatever the size of your payroll, to get a professional to do it. Nevertheless, there are some vital areas that we advise every business to be fully aware of this year:
- Minimum wage – From April this year the National Living Wage, the statutory minimum wage for workers aged 25 and over increased by nearly 5%. Make sure that you check you are adhering to the new hourly rate of £8.21. In addition, make sure that you conduct checks with your employees that they have ongoing entitlement to work in the UK. Whilst both of these areas are the employer’s responsibility, a good payroll professional will always help you stay compliant.
- Payslips – Another piece of payroll-related legislation that was brought in this April was the changes to payslips. Employers now need to provide all workers with an itemised payslip. This should clearly show the number of hours worked, for those with variable pay or variable overtime hours. This makes it easier for the employee to check they are getting paid, per hour, what they should be.
- Getting employees information correct – We are always amazed at how easy it is for employers to fail to collect and record the right type of information for their employees. This is vital and we have a new employee form to help our clients get it right.
- Auto-enrolment – Yet another change this year has been the increase in auto-enrolment contributions. Whilst this means that employees effectively benefit from a ‘pay rise’, it is vital that employers keep on top of the changes and apply it according to their staging dates to avoid fines.
- Employment status – A big change that the government is extending to the private sector from April 2020 is IR35 ‘off-payroll’ working rules. It is legislation that is designed to reduce tax avoidance by contractors whom HMRC believe to be ‘disguised employees’. Subcontractors in industries such as IT or construction, who work in a similar way to full-time employees but bill for their services via their limited companies may fall inside these rules. Being deemed inside IR35 will mean a higher tax bill, potentially for both the ’employer’ and the ’employee’. Although these new rules will be less likely to affect sole trader businesses, IR35 legislation is notoriously complex and ambiguous. Payroll professionals will be ideally placed to advise you.
Whatever the size of your payroll function, however many employees you have, Howards’ team of payroll professionals would be happy to provide you with a competitive quote. Call us on 01785 243276.