FEATURE TOPIC
HMRC full payment submissions show that starter information accuracy is not overly brilliant either in capturing prior employer P45 information or application of a completed starter checklist. With annual significant increases of NMW, a comprehensive view of benefit and salary sacrifice arrangements is a must to ensure that accidental minimum wage breach is not occurring. Equally, the application of Optional Remuneration Arrangements and the tax and NIC position should be reviewed for accuracy against current and applicable rules. Emma Watson: To remain compliant as an employer, it’s essential to have strong relationships with internal and external stakeholders who assist with your business operations. I would recommend regular check-ins with these providers to ensure that the software and payroll processes / procedures are up to date. It would also be a good idea to subscribe with professional bodies to ensure the employer is notified of legislative updates to ensure compliance. Another recommendation would be for the employer to build a network. Joining social media channels such as LinkedIn is a great source of free information that will assist with being a compliant business owner. Making the right connections can open the employer up to a platform of knowledge, expertise, and experience. What checks should employers take on a periodical basis to ensure the software they have invested in is still compliant and defect free? PG: Payroll software will update with the latest tax table changes, but the timing of when your software is updated will depend on where your software is hosted. If it’s cloud based, the update is pushed to you and is relatively quick. You may not even know it has been updated unless there is in product messaging or some other communication. However, if your software is hosted on a server either at your premises (desktop payroll software) or elsewhere you may need to pull in the update or download the correct version. This may take a longer time to deliver to you. Remember the two mid-year NIC changes? The change not only had to be made and tested but there is also regression testing which takes longer,
especially the desktop versions. So, periodically check your software is up to date with the latest version, but especially at the start of a new tax year. JN: Periodic gross-to-net verification is a must and can be easily embedded into routine payroll output checks and carried out each period. This process can be effectively managed to ensure all payroll staff regularly receive refreshers on manual calculations as part of their performance development; basic calculations for new staff, escalating to more complex calculations as careers progress. Wider checks impacting all aspects of output should be carried out at least once a year and always following any system changes (upgrades, legislative parameter changes, system fixes, etc) prior to processing payroll in a live environment. Written procedures to follow should be created and where possible the checks should be carried out by different staff each time. I am a big advocate of the “fresh pair of eyes” concept as well as empowering employees. SP: Many aspects of calculation thresholds and rates are handled by the payroll software industry which will undertake some low key HMRC recognition processes. An employer may want to undertake a sampling test to ensure that calculations reflect relevant change points, such as 6 April or other change points which may apply. Ensure that the latest and relevant versions of solutions are being utilised and that any updates, patches and releases where relevant are in place. Of course, there are some more complex areas that may require a little more focus if utilised, such as directors, international employment cases where there are multinational tax and social insurance implications, and other complex, nuanced areas. Primary focus areas that can trigger an inspection are the employer’s application of tax- free payments as well as terminations payments. Is it best practice to integrate regular compliance checks into everyday workflow activities or is there a danger of it becoming an administrative burden on what will already be a busy payroll? PG: It’s always good to do compliance
checks because it can give additional peace of mind. You don’t have to do a full check each time. Look to check a section each month, as that way you are building on small checks which are easier, and it won’t cause a large administrative burden. SP: As a general principle, many aspects of compliance, especially in relation to calculations, are taken care of by payroll software services. The market is vast with choice, and consequently there will be some variance of maturity and accuracy. There can be a temptation to test and over test areas that are not of primary challenge, yet ignore the areas where dangers exist. Software calculation is only as good or as accurate in relation to the data provided. The old adage “rubbish in, rubbish out” is an accurate statement of fact. Review of the internal audit process is important and needs to be adjusted, along with other technology and business changes, so that it remains relevant and of benefit. Don’t be afraid to remove or introduce new elements – and to audit the audit. A scale of risk is worth being conducted to see where focus should be focussed yet maintain efficiencies at the same time as supporting accuracy. Many businesses are across multi-applications, so an important factor is reviewing process and looking for simplicity as that breeds better accuracy. Payroll faces what some may see as overcomplexity, which leads to error. The Keep It Simple Stupid (KISS principle) has importance. With the onset of the capabilities of artificial intelligence and its access to payroll data, there are potentials for an easier assessment of data accuracy review and identifying discrepancy areas. EW: I do believe it’s best practice to integrate regular compliance checks into everyday work activities. As a payroll bureau we have integrated compliance checks into our payroll process to mitigate the chance of error and non-compliance. These additional payroll steps may make the process longer; however, compliance is key into running payroll to the highest standard for the clients. Utilising what the payroll software has to offer is important for the efficiency of compliance. Learning what features are at your fingertips can help integrate compliant checks in the day-to-day workload. n
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| Professional in Payroll, Pensions and Reward |
Issue 105 | November 2024
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