Payroll is a critical aspect of a company’s financial health. It involves more than simply issuing payslips; it’s about executing each step of the process with accuracy. Even the smallest payroll error can lead to significant financial consequences that businesses need to avoid.
Since 2020, UK businesses have grappled with the substantial financial ramifications of payroll reporting errors, totalling over £75 million in penalty charges. Notably, more than a quarter of these penalties (27%) were issued in the last financial year (1). These errors are not isolated incidents, but rather stark reminders of the high cost associated with improper payroll management. It’s no surprise that it was reported that 91% of businesses across the UK and Ireland admit to making payroll errors every month. Many admit their problems are being caused by a lack of investment in technology, with almost three quarters (72%) of companies still using manual processes for their payroll systems. (2)
What are the consequences of payroll errors?
Payroll errors can lead to fines, the main example being incorrect or late real-time reporting information and PAYE payments. Full Payment Submissions (FPS) must be delivered to HMRC on or before the payday, failure to do so will almost certainly lead to fines (however first offences are tolerated within a 30-day period). Fines can range from £100 to £400, depending on the size of your business (3) which is money that could have been better used to invest in innovation, expand operations, or reward hardworking employees.
Payroll errors can also damage your business beyond the monetary fines. Internally, they undermine trust and employee morale, while externally, they tarnish your reputation, raising doubts among customers, clients, and partners.
The benefits of using an outsourced payroll service provider
If you find yourself amongst the 91% of businesses experiencing payroll errors, you could consider outsourcing your payroll to an experienced service provider. This would give you access to a team of professionals with an expansive knowledge of payroll regulations, tax codes, and compliance requirements. By leveraging their expertise, you would free up your internal resources to focus on core business activities, rather than having the burden of payroll duties. You would be ensuring that your payroll processes align with the latest tax requirements, whilst also identifying opportunities for tax savings and potentially reducing your tax liability.
The overhead costs associated with maintaining an in-house payroll department can be expensive, from salaries and benefits to software and hardware, outsourcing payroll can reduce these expenses, making your business more cost effective.
Here at Sapphire Accounting, our payroll experts have worked within various industry sectors, giving them the knowledge and understanding to provide a tailored payroll service. We offer a full range of payroll services and with seamless integration with Xero and other accounting software, we’re also able to provide detailed transactions and profitability reports to make your life that little bit easier. Get in touch to find out more about our payroll services on 01625 919162.
