When you run a small business, it’s essential that your payroll processes function smoothly. Not only because not paying your employees on time is a sure-fire way to demoralise them and lose trust, but because it can lead to a lack of productivity and disputes with HMRC too.
If you’ve decided to handle your payroll internally then there are several factors to take into account and ensure you’re getting spot-on.
Let’s look at what you need to consider:
Fulfilling all of the legal obligations that you’re required to abide to as a small business is your first priority. Tax law can be complex, so getting advice and the correct information is recommended if you’re unsure what you need to do. If you make mistakes then they can be incredibly costly – you could face fines or government audits which have the potential to bankrupt a small business that’s just starting out.
Accurate payroll accounting requires you to consider the following: maternity or paternity payments, insurance premiums, tax exemptions, holidays and holiday accrual, benefit plans, employee expenses and important tax deadlines for payments.
Employees or not?
If you regularly work with freelancers and contractors then it’s vital that you stick to rules and check regulations. It might be the case that not everyone that works for you is strictly classed as an employee for your business.
Liaising with your contractors and getting written confirmation that they have other clients, are self-employed and have their own tax codes means that you won’t be caught out by surprising tax bills.
Updating your payroll and keeping track of any changes with employees is really important because you need to ensure you’re recording the correct tax codes and right tax bands. If you make mistakes then you could end up having to pay out because of miscalculations. Tax codes can change for all sorts of reasons, so stay on top of employee changes.
If you take on freelancers or work with employees remotely in other countries then checking out that you’re fulfilling legal obligations for local payroll law is important.
Involving your employees in payroll decisions will make them feel more valued – they may have special circumstances that would favour being paid weekly or fortnightly and accommodating their specific payroll requests can be good for morale.
This means that if there are any errors, such as miscalculations and overpayments/underpayments then you’ve got a better relationship to involve employees in the process and work out what the best solution for all parties is.
Implementing a backup system for your payroll gives you comfort and security in case there are issues. Only having one employee, bank account or computer makes your system vulnerable if something goes wrong.
If you cannot access your main account then financial data and employee information can be at risk. Setting up a robust payroll system with quality cloud-based software can keep it secure and ensure that other people can access payroll if there are any problems.
As you can tell, payroll processes are complex, detailed and it’s integral that you correctly implement them. If you’re interested in outsourcing this element of your business, contact our APS Global team today.