Payroll. A Compliance Guide for SMEs


Payroll can be complex, even more so if you’re a new business owner or have a lot of employees. And let’s be honest, payroll will only become more complex as your business grows, with varying factors such as pay scales, employee classifications, promotions and new starters/leavers to deal with.

It’s important to comply with payroll legislation relating to tax, whilst ensuring things like pensions and student loans are being deducted where applicable. If you fall foul of this, or get something wrong elsewhere, you could end up facing hefty penalties.

As a business owner with employees, ensuring your workers are being paid properly is a top priority. That’s why we want to help you stay on top of payroll changes.

You might start doing payroll yourself, but with growth, it may become something you need help with. This is where an accountant can really help.

At Blue Rocket our expert accountants can offer a variety of options to help and support you, when it comes to managing your payroll processes depending on your needs and budget. If you’d like to find out more about how we can help manage your payroll, please get in touch.

Until then, we’ve provided a handy checklist below for all you need to consider when running payroll.

With this in hand, you can ensure you’re doing all you can to remain compliant with relevant legislation and that your staff are being paid the right amount, on time.

Payroll Compliance Checklist


1.    Accurately record personal data

This first point is paramount when it comes to compliancy.

You need to make sure the data you record about your employees is correct, relevant, and up to date. This sounds like data compliancy 101 we know, but you’d be surprised at how many companies get their payroll wrong because of incorrect employee data.

There are many variables that can change personal data and if you have many employees its easy for people to get overlooked.

With this in mind, make a conscious effort to immediately record things such as:

·      Promotions

·      Maternity leave

·      Sick pay

·      Pay reviews

·      Overtime

It might be tempting to leave it until later, but it will make your job infinitely easier when the time comes to run payroll.


2.    Manage expenses effectively

Payroll can fluctuate month to month depending on things like promotions, extended leave, and pay reviews, but another variable which can impact your monthly payroll are expenses.

You may cover some of your employee’s expenses from time to time, but without clear limits, you could find things become messy on the payroll. To avoid this, make sure you set clear boundaries with your employees on things which could lead to deductions and ultimately impact their pay.


3.    Keep up to date with new legislation

To keep in line with things like minimum wage increases, payroll legislation changes frequently. Therefore, you’ll need to make a conscious effort to keep on top of payroll laws that change or come into force. If you fail to keep up to date with changes you could land in hot water as a result.


4.    Factor in workplace pensions

Whether you have one employee or one hundred, you are bound by the workplace pensions law introduced in 2012.This means you need to offer your employees the opportunity to pay into a pension scheme which you will then match, but that’s not where the duties end.

You will have multiple responsibilities surrounding workplace pensions as an employer. If you’d like to find out more about your duties, check out Workplace Pensions: What Are My Duties As An Employer?

Variations in age, pay, opt in and enrolment criteria from person to person can make payroll requirements tricky. If you’re at all unsure about pensions payments and deductions speak to an accountant or the pensions regulator for further advice.


5.     Meet deadlines

It’s common knowledge that HMRC won’t hesitate to penalise you if you miss an important deadline. The problem is that there are so many, and most of them relate to payroll in some capacity. With this in mind, it’s important that you’re well versed on the topic of HMRC deadlines, otherwise, you risk compromising your payroll tax compliance.

We advise you take a note of important dates such as tax deadlines and quarterly reports, and make sure you hit them every time. This includes handing out P60s to your employees on or before 31 May during your payroll year end.

If you want reminders of important dates for your diary, follow Blue Rocket Accounting on social as we regularly post ‘dates for your diary’.


6.    Learn about international payroll legislation

If you are a UK business which has offices and/or employees abroad its imperative you understand the separate legislation international employees are subject to when it comes to their pay. They will not fall under the same payroll rules as their UK counterparts.

Always do your research regarding payroll tax compliance, exchange rates, deductions, wage laws, and record keeping. It will save you time and energy in the long run.


7.     Look into audit trails

There’s a lot at stake when it comes to dealing with payroll, especially in the way of protecting against fraud and monitoring your business processes. Failure to document your activities will result in vulnerabilities, and if you don’t have a record of what happened and when, any money that is lost may never be accounted for.

In addition, there’s every chance you could get audited by a regulating authority, in which case you’ll need to produce a paper trail. To protect both yourself and your employees, it’s best to look into audit trails and ensure they are being kept.

Most payroll software will offer this, but if you’re not using one yet, make sure you start.


As a final point

Whatever you do, keep track of payroll changes, such as around National Minimum Wage increases, rises in National Insurance contributions, and introductions of new legislation such as the Health and Social Care Levy.


Payroll is one of the most important accounting processes a growing business has to undertake, so if you need assistance, software or anything else to ensure yours runs smoothly and compliantly, Blue Rocket Accounting are on hand to help.

If you’d like to discuss your business payroll, contact us today on 01322 555442.

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