Payroll Compliance: Avoiding Common Mistakes

The Importance of Payroll Compliance

Payroll compliance is crucial for maintaining good relationships with employees and avoiding penalties from HMRC. Even small mistakes can have significant consequences.

Common Payroll Mistakes

1. Incorrect Tax Codes

Using wrong tax codes is one of the most common errors:

Always use the latest tax code from HMRC
Update codes when notified by HMRC
Check emergency tax codes regularly
Verify codes for new employees

2. National Insurance Miscalculations

NI calculations can be complex:

Understand different NI categories
Apply correct rates for different age groups
Consider directors' annual earnings periods
Handle multiple employments correctly

3. Statutory Payment Errors

Statutory payments require careful handling:

Statutory Sick Pay (SSP) calculations
Maternity/Paternity pay entitlements
Shared Parental Leave payments
Adoption pay provisions

Auto Enrolment Compliance

Workplace pension auto enrolment has specific requirements:

Assess all workers for eligibility
Use correct contribution rates
Submit data to pension providers on time
Handle opt-outs and re-enrolment correctly

Record Keeping Requirements

Maintain comprehensive payroll records:

Employee personal details and contracts
Pay and deduction records
Holiday and sickness records
Pension scheme documentation

RTI Submission Deadlines

Real Time Information must be submitted correctly:

Submit FPS on or before pay day
Send EPS by 19th of each month
Correct errors promptly with EYU
Submit final FPS for the year

Best Practices for Payroll Management

Use reliable payroll software
Implement regular review processes
Train payroll staff adequately
Stay updated with legislation changes
Consider professional payroll services

When to Seek Professional Help

Consider professional payroll services if you:

Have complex payroll requirements
Lack internal expertise
Want to reduce compliance risks
Need to focus on core business activities