Managing payroll can seem straightforward, but it’s easy to stumble into pitfalls that could cost you both time and money. We’ve gathered insights from our experience to help you steer clear of these common mistakes. After all, our goal at John Potter & Harrison is to simplify your financial tasks, making your business operations smoother and more efficient.

Not keeping up with legislation changes

One of the biggest challenges in payroll management is staying updated with changes in legislation. For the 2024/25 tax year, there are several updates in UK payroll regulations that require attention. Failing to keep up can lead to non-compliance and hefty penalties. Our advice? Regularly review the HM Revenue & Customs (HMRC) updates and consider subscribing to our newsletter for timely advice. Remember, we’re here to help you stay informed and compliant.

Misclassifying employees and contractors

It’s easy to blur the lines between employees and contractors, but this misstep can lead to serious tax implications. The key difference lies in the level of control you have over the work being done. Employees are typically subject to PAYE (Pay As You Earn), while contractors handle their own tax affairs.

Getting this wrong could result in failing to meet tax and employment legislation, which might invite penalties. We recommend conducting regular reviews of all contracts to ensure compliance with HMRC guidelines.

Incorrect data entry

Simple errors in data entry can have complicated consequences. Typing errors in employee details, such as incorrect National Insurance numbers or wrong addresses, can delay processing and affect the accuracy of tax submissions. We suggest double-checking all data entries and implementing a secondary review process to catch these errors early. It’s a small step that can save a lot of trouble down the line.

Failing to record changes in employee details

Life changes, and so do your employees’ details. Whether it’s a pay raise, a change in marital status, or a new address, failing to update this information in your payroll system can lead to incorrect tax calculations and unhappy employees. Make it a habit to update employee details as soon as you receive them. Better yet, why not automate alerts for when updates are due?

Overlooking employee benefits

Employee benefits like pensions, health insurance, and bonuses are not just perks but are also subject to tax regulations. Not correctly accounting for these benefits can result in underpaid taxes and potential issues with HMRC. It’s important to ensure that all benefits are properly recorded and reported in your payroll system. Our team can help you set up a system that captures this information accurately, ensuring you don’t miss a beat.

Neglecting to backup payroll data

Imagine losing all your payroll data to a system crash or cyberattack — scary, right? Yet, many businesses overlook the importance of regularly backing up their payroll data. We advise setting up automatic backups and using cloud storage to ensure your data is secure and accessible when you need it. This is a straightforward fix that can prevent a mountain of stress.

Late payroll submissions

Sending payroll information to HMRC late is a common error that can lead to penalties and strained employee relations. Our tip here is simple: set reminders for submission deadlines and allow sufficient time to gather and review all necessary information. Consistency and punctuality in payroll submissions go a long way in maintaining smooth operations.

We’ve been supporting businesses across Blackpool for over a century, and we understand that mistakes happen. But with a bit of guidance and preparation, you can avoid common payroll errors and focus on what you do best — running your business. At John Potter & Harrison, we’re more than just accountants; we’re partners in your business growth. We take pride in offering personal, practical advice that helps you grow not just as a business, but as a team of people thriving together.

If you’re looking for straightforward, practical advice, or need help with your payroll, don’t hesitate to get in touch with John Potter & Harrison. We’re here to make your life easier, one payroll cycle at a time.