A survey* revealed that 1 in 4 UK SMEs might struggle to meet their payroll obligations this Spring. With supply chain delays and rising costs to contend with, could now be a good time to re-evaluate your payroll process?

The 5th of April marks the end of the current tax year and the beginning of a new one. 

Supply chain issues and Covid aside, that makes this a hectic time of year for HR, finance and payroll professionals alike. From making sure employee benefits are correctly recorded to submitting P11Ds on time, many tasks can make their way onto your plate. 

All that said, the run-up to April provides businesses with a fresh opportunity to reassess their current payroll processes and improve on them as the new tax year begins.

Why now is an excellent time to evaluate your payroll process

After the 5th of April, the data you’ll need to migrate to a new system will be minimal. There will also be fewer critical deadlines to hit, giving you and your team the breathing space to test out new software.

It’s also worth noting that many payroll solutions only offer onboarding in April to ensure a smooth transition. However, most software providers will still support specific year-end tasks such as submitting P11Ds from the previous tax year.

Payroll mistakes cost time (and talent) 

Running payroll may not seem like a high-value task compared to more strategic thinking and planning. But it can become a real headache if your processes aren’t optimised. If your team is constantly bogged down by manual, repetitive work, they’ll be less focused on activities such as attracting the best talent or improving fulfilment.

In any organisation, time is limited. So is specialism, such as in areas like payroll regulation and compliance. As headcount increases, these issues become even more of a liability (think fines and penalties from HMRC).

Perhaps the biggest reason to reassess your payroll process is to reduce the likelihood of payroll errors. We’re only human, after all. Mistakes, miscalculations, and missed salary adjustments all happen. But one too many of these blunders could lead to valuable talent feeling dissatisfied, or even worse, walking out the door.

2021 is considered by many as the year of the Great Resignation, with over 4.5 million people quitting their jobs at the end of November. That trend is likely to continue into 2022 (though at a slower pace). That makes it more critical than ever before to retain good talent. If you want to improve employee engagement, you need to start thinking about the systems and foundations that support this. 

How to evaluate your payroll processes

One of the best places to start re-evaluating your payroll process is an overview of your current systems, tools and processes. 

You could start by reviewing what your current workflow looks like. What systems and tools are currently being used to run payroll? Do you rely on excel and google sheets, or is there a cloud tool in place that auto-updates with HMRC changes?

Another consideration is how manual this process is. In other words, what aspects of your workflow (think absence calculations and adding new starters and leavers) rely on manual data entry – and could any of these tasks be automated? 

Another crucial area to look at are the controls that are in place to minimise human error. That could look like segregating specific duties or building multiple layers of sign-off into your workflow before publishing final payslips. Is there a set process for catching and correcting payroll errors? How quickly do you recognise and repay underpayments, for instance? If these controls aren’t robust enough, costly payslip and pension miscalculations are more likely to slip through the net.  

While there are many things you need to be accountable for from an employment standpoint, don’t forget your employees are also stakeholders in this process. For example, can workers access their payslips, and how much do they engage with and understand these? Do employees feel they have enough ownership over their information? For instance, would they be able to access their P60s easily if they left the business?

Preparing for the end of the tax year

As mentioned at the beginning of this article, this can be a particularly busy quarter for those involved in the payroll process. That includes HR professionals. Making sure employees receive their P60s and that benefits are properly reported are a few of the essential tasks you’ll be pulled into before the beginning of April.

Here are some of the key tasks you should be focusing on at this time of year:

• Check for leavers and new starters – it can be easy to forget about new starters and leavers, especially if your database hasn’t been updated with their details yet. 
• Send final FPS (and EPS if required) – The Full Payment Submission (FPS) is a document you usually submit to HMRC every time you pay an employee. It can be easy to forget to send through the last few ones of these when you’ve got other things on your plate. You may also need to send HMRC an Employer Payment Summary (EPS) to record additional values. 
• Produce and send all p60s – The P60 is a crucial document that every one of your employees needs for their record keeping. It’s good practice to ensure employees receive these in a timely manner.
• Record employee benefits (both regular and irregular) – Whether it’s an irregular expense that goes on your PSA1 or taxable benefits you include in your P11Ds, good record-keeping is crucial when it comes to providing benefits.

Changes to look out for at this time of year

As always, there are a few new legislative changes that HMRC plans to roll out at the beginning of April. These include changes to the National Living Wage, Statutory and Sick Pay, and National Insurance rates. 

There’s also the new Health and Social Care Levy, which is part of the government’s latest annual £12bn tax rise to fund NHS and social care backlogs. 

You can find out more about these changes from the Chartered Institute of Professional Payroll (CIPP) updates or the .gov website. 

*Survey run by accountancy today