An Accountant’s Guide to Understanding UK Payroll and Battling its Complexities

Payroll computation is complicated. Although each company handles its payroll differently, there is a systematic process for calculating an employee’s payroll. This involves a series of calculations and considerations, making payroll highly difficult to comprehend.

Every country has different laws and legislation for payroll. This is per the taxes payable by employees, nature of employment, benefits offered by the government, and more. Besides, HR professionals also take into account critical employee data, such as attendance and leaves, expenses, compensation, etc., while calculating payroll.

Owing to the complexity of payroll, HR professionals alone may not be equipped to manage it. Companies need a dedicated team of payroll administrators to understand its nuances and process it efficiently. This is one of the primary reasons companies and accountants depend largely on UK payroll service providers.

In this blog, we will break down UK payroll and explore some surefire ways to battle its complexities while not losing focus on your practice.

Your Payroll Components Checklist

In order to manage a company’s payroll, it is important to understand its most important components. As an accountant, you are already familiar with this, but there’s always a chance of oversight if you do not have a checklist handy.

Here’s a quick checklist to help you compute your clients’ payroll.

• Income tax payable
• National Insurance contribution
• Auto Enrolment
• CJRS grants
• Nature of employment (full-time, part-time, or contractual)
• Employee work hours
• Attendance and leaves
• Claims and expenses
• Incentives, bonuses, and rewards
• Additional employee benefits such as maternity or holiday pay

The Challenges with Payroll Computation

No two employees’ salaries are the same. Thus, payroll cannot be generalised. Payroll administrators calculate each employed individual’s wages separately, making it a highly time-intensive process. Accountants, therefore, heavily rely on payroll software, automation technology, and payroll outsourcing services to get the job done.

Let’s address some of the common challenges accountants encounter with payroll management.

Regulatory changes: Governments periodically make changes to the legislation pertaining to taxes, grants, and other important schemes, which have a direct relation to payroll. These regulatory changes are difficult to comprehend and regularly keep track of.

Technological challenges: The accounting world also faces a challenge with respect to technological advancements. Payroll has evolved massively in recent times, thanks to the latest technology, such as cloud computing and AI. However, working with these technologies requires a great deal of expertise.

Moreover, accounting firm owners must train their teams before integrating these changes into their processes, making it both time- and cost-intensive.

Staffing capacity: Staffing is currently a global issue in the accounting industry. An article by Accountex earlier this year quoted that nearly half (49%) of UK accountancy firms were affected by the ongoing skills shortage. This massively affects firms’ capacity to dedicate sufficient resources to each client. Moreover, hiring and retaining top talent is also a challenge for accounting firms.

Time crunch: Fueled by staffing shortages, time crunch is another major issue facing accounting firms. Since payroll is a cumbersome task, a lack of time and resources can significantly affect the payroll process.

No scope for error: Lastly, payroll has no scope for errors. Even the slightest mistake in this task can result in dissatisfied clients, unhappy employees, and hefty fines from HMRC.

Also read: The Biggest Payroll Challenges and How to Overcome Them

Dealing with the Complexities of Payroll

Considering the complexity of payroll and the challenges facing the accounting world, accountancy firms have two ways out – relying on the latest technology or outsourcing payroll services.

The tech solution

The future of payroll is technology. Modern payroll software helps automate complex payroll calculations so that you do not have to manage them manually. Moreover, with the help of technology, these software solutions also capture and implement the changes in legislation.

Technology, thus, helps minimise errors in payroll and makes it an efficient and hassle-free process. Moreover, it also saves time and effort on the part of the payroll administrator.

Payroll outsourcing

While technology is a viable solution to combat payroll challenges, it can be cost-intensive to set up. Therefore, an easy way to tackle all your payroll challenges is to outsource payroll.

Outsourcing gives accounting firms access to global talent, thus helping them scale effectively whenever required. Outsourced payroll professionals have sound technical knowledge, vast experience, and up-to-date knowledge of the changing legislation. By outsourcing payroll services to an industry leader like QXAS, you can create capacity for your firm and provide top-notch services to your clients.

To discuss your firm’s challenges in detail, book a free consultation with one of our expert advisors today. To learn more about our services, call us at +44 208-146-0808, drop an email at [email protected], or log on to Outsourced Accounting, Bookkeeping, and Payroll Services | QXAS UK (qxaccounting.com).