The first week of September is National Payroll Week, and this year sees the 26th one since its inception.
We are going to use this opportunity to highlight the common payroll practices that can often get overlooked by busy business owners.
What are my payroll obligations?
Obviously, the biggest obligation you have is to ensure that all employees are paid on time and with the right amount of money.
This will mean adhering to at least the National Minimum Wage (NMW) or National Living Wage (NLW), as well as ensuring that pension contributions and National Insurance Contributions are correctly paid and reported.
The current rates of NWM and NLM are:
You’ll need to keep a close eye on when your workers have their birthdays, as this is a common way of slipping into noncompliance.
If someone turns 18 or 21 during the time they are working with you, you will need to immediately adjust their pay immediately to ensure that they are in the correct pay bracket from their birthday.
Similarly, if an employee is aged 22–65 and earns over £123 a week, they must be automatically enrolled into the workplace pension within one month of starting work.
When they do become entitled, you will need to ensure that the minimum contributions are being met.
The current minimum total contribution for workplace pensions is eight per cent, and this should consist of a minimum of three per cent from the employer and five per cent from the employee.
If you want to help your employees, you can pay more, and the employees can pay less, as long as the total minimum of eight per cent is met.
For businesses that employ graduates, you should be aware of the impact of student loan repayments.
These are charged based on the total annual salary that a graduate is making, at which point they will be made to pay nine per cent of the income earned over the threshold back to the Government.
The only exception is for those on a Postgraduate Loan plan, where only six per cent of income gets paid back.
Currently, the income thresholds for each plan type are as follows:
| Plan type | Yearly income threshold | Monthly income threshold | Weekly income threshold |
| Plan 1 | £26,065 | £2,172 | £501 |
| Plan 2 | £28,470 | £2,372 | £547 |
| Plan 4 | £32,745 | £2,728 | £629 |
| Plan 5 | £25,000 | £2,083 | £480 |
| Postgraduate Loan | £21,000 | £1,750 | £403 |
The level of interest changes between undergraduate and postgraduate loans, with all the undergraduate loan plans carrying a 3.2 per cent interest rate compared to the 6.2 per cent of the Postgraduate Loan.
The plan a graduate is on will largely be determined by the time they began to course and the kind of studying they conducted.
How do I maintain good payroll records?
Beyond those unavoidable obligations, there are more subtle issues that can jeopardise your payroll compliance.
There can often be issues surrounding how payroll records are stored and for how long.
According to the recent Chartered Institute of Payroll Professionals (CIPP) payroll survey, only 65 per cent of businesses use fully digital systems, with 28 per cent relying on a mixture of digital and paper systems.
While that might not sound problematic, only six per cent of businesses have taken the time to create physical and digital records of all payrolling information, meaning that there are many businesses risking information slipping through the cracks.
It is important that you keep all of the current tax year’s payroll records, as well as those for the previous six tax years.
This will let you go back and check your information if any problems arise within that reasonable window of time.
This is an area where businesses are starting to improve, as there was an increase of 26.49 per cent in organisations properly retaining payroll records.
While it is imperative that businesses maintain good payroll records, many do not realise that the definition of good records changes across the UK.
What are the main differences in payroll between the UK countries?
Each of the devolved nations carries its own approach to payroll that can catch uncertain businesses off guard.
For businesses operating in Wales, it is vital to adhere to the guidelines imposed by the Welsh Language Measure 2011.
This will fundamentally change the way that you handle payroll records as the regulation requires public bodies, and some private employers, to translate core employment documents into Welsh when they are sent to multiple people or at the request of an individual.
Payslips fall under this criterion, so they will need to be translated upon request.
However, we would recommend that you adopt the practice by default if operating a business in Wales to show an understanding of culture and stay ahead of any compliance issues.
While not strictly about record keeping, Scotland does have its own payroll considerations that should be observed.
While they technically adhere to the UK’s National Minimum Wage, more businesses operating in Scotland are embracing the Real Living Wage campaign.
Under this scheme, workers receive £12.60 per hour rather than the £12.21 mandated by the National Living Wage.
Your business does not need to get involved if you do not feel it is right for you, but it may impact your ability to hire and retain talent if other businesses are offering better value.
Being proactive in this area could help your business to grow, but you should seek professional advice before promising this to ensure your business can afford it.
Payroll can feel complicated and challenging for businesses, but it does not need to be.
Our team I here to help guide you through your payroll responsibilities to ensure that you are doing what is best for your business and for your employees.
Keep payroll compliant wherever your business operates. Speak to our team today!
Jim Botton – Pleasure Beach (Skegness)
