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How not to do payroll

Uncovering some common mistakes and assumptions that organisations make when doing payroll.


Do everything manually

People never make mistakes, right? Organisations can be concerned about losing control over the overall payroll process and want to retain their internal procedures for collecting and checking pay data. Checking data can still be done manually even when using payroll software.

Organisations may also worry that outsourcing payroll means losing people who understand the company and its specific payroll needs. This doesn’t have to be the case.


Keep all your eggs in one basket

Small and medium sized organisations often have an over-dependence on a few people to keep things running smoothly.

As well as carrying out day to day processing and ensuring employees get paid on time, payroll staff also have to stay on top of legislation changes, manage software updates, carry out HMRC reporting, deal with leavers, joiners and exceptions, handle queries from individual employees, and more.

With little slack to spare, losing the person or one of the people who manage payroll can put the whole system at serious risk of generating errors or becoming non-compliant. And don’t even go there about late payments to employees!


Buy expensive payroll software

Buying payroll software can help organisations relax in the knowledge that payroll is being processed accurately, on time and in line with current legislation.

By using this software, things such as incorrect payments to staff, late payments and so on are less likely to happen. The software needn’t cost a fortune though!


Spend lots of time on it

It takes time to get everything right so that you can pay your staff properly and make accurate deductions. Payroll legislation is regularly changing and it can be time consuming and stressful to keep up.

In small organisations, it’s not time efficient for staff to spend their time researching these changes and ensuring that payroll is processed correctly.

Using a managed payroll service frees up staff to focus on the organisation’s core activities. It provides the smooth running payroll processing enjoyed by large businesses, with none of the hassle. With managed payroll, wasted administration time is also saved by avoiding small errors which then need to be corrected.


Make mistakes and rectify them later

Paying employees late or incorrectly can cause major problems in your organisation. Errors over wages can be extremely upsetting to staff, particularly if this results in essential payments to their mortgage or credit card company being missed.

Using a managed payroll service will ensure the smooth running of your payroll, an important element in maintaining a happy, motivated workforce. All wages will be paid correctly and on time by BACS and employees will receive details of their earnings in a choice of security sealed payslips, or more frequently via a secure online portal or email.


Assume that HMRC reporting/legislation never changes

Falling foul of the HMRC and their ever-changing reporting requirements is another risk for those managing payroll in-house.

The penalties for non-compliance can put a serious hole in the cashflow of some organisations, not to mention the consequences of being asked to pay significant sums at short notice if HMRC have reason to believe that money is owing.

With the UK tax, benefits and pension systems currently undergoing major upheaval, and more changes to come over the next few years, many organisations may feel that the cost of trying to keep in-house expertise up to date makes the costs of outsourcing better value.


Think that payroll data is safe

Often overlooked is the issue of data security around payroll systems. Centred as it is around the personal and financial details of employees, a payroll system needs to have adequate security to ensure confidentiality and appropriate authority to carry out data changes.

This means not simply passwording all systems involved in holding or processing payroll data, but ensuring the physical security of relevant computers. Then, a secure and regular backup regime is required, along with disaster recovery plans in place in the event that data is lost.

Putting all this in place to an adequate level can be a significant cost and admin headache for many organisations. Moving to outsourcing will mean that this all becomes the responsibility of the provider, who will typically already have the necessary security and backup measures in place.

The antidote to risk, of course, is predictability – an increasingly prized asset when other aspects of running an organisation look uncertain. With outsourcing, budgeting for a company's payroll costs become highly predictable and, importantly, in proportion to the actual size of its workforce.

Further information

The information in this how-to guide has been provided by FMP Payroll Services, an NCVO Trusted Supplier.

NCVO helps voluntary organisations cut costs and become more effective by negotiating discounts and preferential arrangements for its members on a wide range of products and services. Find out more about NCVO membership.

FMP Payroll Services offers a range of payroll solutions to support your organisation through a completely/partly outsourced payroll service.


Page last edited Jan 22, 2018 History

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