As an employer, you may be wondering how to reduce the chance of payroll errors in your care business and efficiently manage payroll. Should you run it yourself, employ someone or outsource it to a payroll professional like Fresh Clarity?
Before making that decision it’s useful to understand what it takes to successfully process payroll.
To run an efficient, successful business and keep your employees happy, you need to get the whole payroll process right.
No one wants to be the person that gets payroll wrong. When things go wrong, it creates extra unnecessary work dealing with employee queries and complaints that don’t need to be on your to do list.
What problems are caused by payroll errors?
Unhappy employees
Employees quite rightly expect to be paid correctly for the work they have done for you. When you get their pay wrong, it can cause them to feel undervalued. It may cause financial stress if they’ve been underpaid.
Additional unexpected work
Having to re-run payroll adds to your workload when you didn’t plan for it. This can cause additional stress for you and may result in the errors not be corrected properly if you are rushing. Then further re-runs needed.
Incorrect HMRC filings
Payroll must be submitted to HMRC every pay period. Errors in payroll may affect tax liabilities which can cause financial issues for the company and your employees.
How do you set your payroll process up for success?
#1 Set your payroll system up for success
Make sure the software you chose to gather employee hours, rates of pay and holidays is set up correctly. As with any software, what you put in is what you’ll get out – put in the wrong information you’ll get the wrong information out.
This is especially important with hourly paid employees with different rates of pay.
You may find you need more than one system e.g., care management software where all the hours worked and mileage is recorded, and payroll software to process the payroll.
#2 Set a suitable payroll frequency
How often will you run payroll? While employees might like to be paid weekly this can be an administrative nightmare to be tied to running payroll every week, especially as your workforce grows.
#3 Set a suitable pay date
When you have employees who work variable hours it is tricky to know what they will be working up to the point when payroll is to be run. Setting a cut-off date each month for hours to be submitted means that you avoid last minute changes, for example, if employees are sick. This is an important boundary to be set.
Pay date = the date you will pay employees
Pay period = the period that you are paying them for
Cut-off date = the last date for expenses etc to be submitted for the pay period
Think about the direction you want your business to go in when setting these dates. They will need to work for you when you have higher employee numbers and need more time to process payroll.
If you make the cut-off date too close to the pay date, this does not allow suitable time to process the payroll. You may then be estimating the hours at the end of the pay period which can often lead to last minute amendments if hours are not fulfilled. You don’t want to overpay the employee to then have to reclaim it back.
Allowing time to collate and check the payroll information is important and should be done at a time you have complete focus and attention. Submitting incomplete payroll will only slow the process down and lead to queries.
#4 Register for access to your PAYE account on your HMRC portal
Regardless of who runs your payroll, make sure you have access to your PAYE account on your government gateway (HMRC Portal) log in. This allows you to see submissions, tax code changes, employer notifications and how much you owe HMRC. It now also allows you to set up a direct debit for HMRC to collect your PAYE due.
So how do you reduce the chance of payroll errors?
Step 1 Check the payroll information before processing it
You’ll need to check the payroll information to ensure nothing is missing that happens outside of any software. Doing this before inputting the data to process payroll will help reduce payroll re-runs.
Although care management software can produce payroll information, this isn’t always right. There can still be a great deal of manual checking. For example, wrong shifts may be showing for employees that didn’t work, or hours worked not being recorded because the employee didn’t register the client visit correctly, or even wrong hourly rates are set in the software.
A quick checklist of what you need to consider:
- Have employees incurred any expenses that need to be reimbursed?
- Have any employees received an advance on their wages? This needs to be deducted on the wages.
- Have you got sick notes for any periods of sickness?
- Are any employees going on maternity leave? If so, make sure you have the MATB1 form
- Have you received an earnings order request that needs to be processed
Step 2 Check starter and leavers
With new employees, be strict! Make sure the starter form completed to its fullest and legible! There is nothing worse than making time to run payroll to find that boxes are left blank or the handwriting is unreadable.
All new starters should complete a ‘starter checklist’. One major cause of tax problems for employees, is the incorrect completion of the starter checklist – In particular, picking the wrong employee statement (A, B or C). What statement you pick, decides what tax code to use for the employee.
If you have any leavers make sure you have their leave date and details of any accrued holiday they are owed.
Step 3 Check for any advances paid
Advances are common in the care industry; you may be paying out regular advances throughout the month to help employees cover both expenses and fuel.
You need to keep a record of these advances and adjust for them when you run payroll. This should be documented via your bookkeeping software. Some software used in the care industry has a built-in advance facility that employees can draw on. Withdrawals can be capped to a percentage of their pay and withdrawal fees are applied. This is automatically picked up when payroll is exported from the care software. This saves time in administration and monitoring.
The full gross pay is included on the employee payslip with advance payments shown as a deduction. This ensures the employee pays the correct amount of Tax & NI.
Step 4 Check for any tax code changes
HMRC will use the payroll information submitted each pay period to check that the employee’s tax code is correct. Using the correct tax code helps to ensure the employee pays the right amount of tax on all their employed earnings. As the employer it is your responsibility to use the correct code. You will be notified of any tax code changes through your HMRC portal and by post.
Do you want to Reduce the Chance of Payroll Errors in Your Care Business?
Payroll is stressful, it takes time and focus to ensure it is correct. There is a whole qualification dedicated to payroll, so it’s no easy task understanding all the requirements and treating everything correctly for tax.
You could employ someone to run your payroll, but unless you have hundreds of employees this can be an expensive choice. Or you could employ someone who knows a bit about payroll, it gets added to their job, but no-one else understands payroll so their work goes unchecked. This leaves you open to future tax issues.
That’s why many business owners outsource their payroll to a payroll bureau like Fresh Clarity. We can ease the pain. It’s important to have a team who fully understands your Care Business and the payroll needs that come with it. This is a more cost-effective solution for many business owners. If you need help with your payroll, get in touch to see how we can help you overcome your financial headaches.
Can you answer employees queries about their payslips? To find out more, read our next blog here