Payroll is the backbone of any business, establishing employee satisfaction, legal compliance, and financial stability.
A well-managed payroll system not only keeps employees motivated by ensuring timely and accurate payments but also safeguards the business from costly penalties due to non-compliance. With businesses in the 21st century navigating remote work, global hiring, and post-Brexit alterations to legislation, it’s becoming increasingly challenging for them to manage payroll systems on their own.
To guarantee the smooth operation of payroll – and the business as a whole – organisations should invest their efforts into optimising their payroll system. As part of National Payroll Week 2024, this article will highlight the five key points that every organisation should prioritise when it comes to payroll.
A minor error made when processing payroll may seem insignificant, but a lack of accuracy can have a much greater impact. In a study of UK PAYE employees, the Global Payroll Association reported that 25% of participants had received an incorrect paycheck, with 46% of inaccuracies being a result of human error.
Making corrections to inaccurate payroll can take up valuable time and resources – 80% of businesses reported spending 12 hours or more each month correcting payroll errors. That’s equivalent to 18 whole days per year!
To combat the likelihood of human miscalculations and oversights, businesses should incorporate payroll management systems into their payroll processes. This ensures accurate pay and deductions for employees, generates trust amongst the workforce and maintains compliance with government regulations.
Maintaining a satisfied workforce is paramount to thriving as a business, and prioritising payroll is an effective way to boost morale among employees.
Providing clarity in payslips allows employees to understand exactly how their pay is calculated and why any deductions have been made. This transparency should be extended when responding to any queries from employees about payroll. Take their feedback into consideration, as the thoughts and opinions of employees can often provide beneficial insight and new perspectives that may have been previously overlooked.
When a business is open and honest with its employees, it fosters an atmosphere of respect and trust, increasing retention rates and boosting productivity due to satisfied workers. According to an MIT study, people who trust their employer are 260% more motivated to work and 50% less likely to seek alternative employment.
With ever-changing payroll laws, regulations, and tax codes, staying compliant with government legislation can be complex. Businesses need to stay updated on frequent legislative changes that can directly impact payroll processing, including income tax rates, National Insurance contributions, and data protection laws. HMRC reported that in 2023, 202 businesses faced combined penalties of nearly £7 million due to non-compliance with minimum wage regulations, demonstrating the serious nature of non-compliance penalties.
Adding another layer of complexity, different industries often have unique regulations, including sector-specific tax breaks or requirements for additional reporting.
To stay compliant with changing legislation, organisations can leverage automated payroll software to keep track of and update any important changes. By prioritising compliance in this way, businesses can minimise the risk of legal penalties, protect their financial health, and maintain smooth, uninterrupted payroll operations.
Manual payroll is often inefficient. From data entry to calculations, HR and financial teams spend valuable time and energy on repetitive tasks that are naturally prone to human error.
Having an efficient system in place to process payroll should be a priority for every business. By doing so, they can minimise labour costs associated with manual processes like payslip generation and reduce the risk of financial penalties from non-compliance. Furthermore, for growing businesses, a payroll management system can make scaling payroll operations much easier, ensuring that increased complexity can be handled without placing additional strain on resources.
By focusing on these key aspects of payroll, a business is sure to operate as smoothly as possible. However, the constant maintenance of timing, compliance, and accuracy can prove costly for businesses, requiring a high level of time, attention, and money.
The solution? Managed payroll services.
These services streamline the payroll process by outsourcing payroll to an expert third-party provider, ensuring businesses process pay accurately, on time and in compliance with the law. This means that organisations can dedicate more time to other projects and operations to further grow their business.
At Phase 3, we give businesses peace of mind by taking care of as much or as little of the monthly payroll processes for them. To learn more about our managed payroll services, don’t hesitate to contact one of our experts.
Assad founded Phase 3 in 2004 and is responsible for the strategy, growth and finances of the business.
