Quality and Compliance Challenges in Payroll and How to Deal with Them

Payroll is partly compliance and partly an accounting function. A product of complex calculations and several legislative considerations, it is highly cumbersome, to say the least.

In modern times, payroll is no longer confined to HR responsibilities alone but requires a dedicated team. This is primarily because of its growing complexity, especially in the aftermath of the coronavirus pandemic as companies switched to remote working and the UK government introduced specialised grants in the form of CJRS.

The sheer complexity of payroll makes it highly prone to quality and compliance errors. Although accountants are highly skilled with numbers, keeping track of the evolving technology and the ever-changing legislation is challenging. Consequently, payroll outsourcing has risen significantly in the UK over the past few years.

Common Errors in Payroll

Accounting firms in the UK regularly battle time and capacity challenges. If you serve multiple clients with a diverse, global workforce for payroll, it is likely that your team will be burdened with work. Amid the work stress, it is easy to oversee information or make errors.

Let’s look at the most common errors UK payroll outsourcing providers make while computing and processing payroll.

Miscalculations: Payroll calculations are complicated and, therefore, highly prone to errors. Accountants may sometimes underpay or overpay employees, miss incentives or overtime pay, or credit a salary rise before its effective date.

Faulty records: Reporting is crucial in payroll. Yet, many accountants and HR professionals make the mistake of maintaining records poorly, making manual entries, keeping multiple Excel spreadsheets, and so on.

Incorrect payment to HMRC: Every company in the UK is expected to pay corporation tax to HMRC. Apart from paying the right amount, it is also important that employers be consistent with their payments. However, accountants may sometimes miscalculate and underpay this amount, leading to an enquiry by the organisation.

Legislative errors: The UK government keeps making amendments to legislation pertaining to income tax, National Insurance contributions, pension schemes, and specialised grants. These changes are difficult to comprehend and keep track of, thus increasing the scope for error.

Global payroll woes: All authorised accountancy practices specialise in UK payroll service. But accountants dealing with global payroll may not fully comprehend the legislation of foreign countries, which may easily lead to mistakes and discrepancies.

What Happens When There are Errors in Payroll?

Companies entrust payroll to professional accounting firms in order to make their payroll process hassle- and error-free. The onus then lies on you to live up to your commitment to quality services.

But there are several factors that contribute to the quality of an accounting firm’s services. Your firm’s time and resource capacity, your team’s overall experience in payroll, the technology you use, and the review and reporting process you follow largely determine how well you can process a client’s payroll.

So, what happens if you fall short in any of the above areas and end up making an error?

Unhappy clients: The most obvious impact of messing up a client’s payroll is leaving them upset and unhappy. A client may eventually lose trust in your services and end the association.

Fines from HMRC: Another significant effect of making mistakes in payroll is upsetting HMRC. If you consistently make errors in payroll or underpay the organisation, it can order an enquiry and issue hefty fines.

Tainted reputation: To grow your practice as a trusted UK payroll service provider, trust and reputation are primary. But these can be compromised if you consistently err in your clients’ payroll.

Dealing with Quality and Compliance Challenges

Since payroll is cumbersome and involves risk, it must be handled by trained experts. However, considering the talent crisis in the UK accounting landscape, outsourcing payroll services for accountants is the most viable option.

In 2021, QXAS surveyed sixteen UK accountants and accountancy practice owners to understand their take on payroll outsourcing. Of the responses recorded, about 87% of firm owners already outsourced or planned to outsource payroll in the coming years. Additionally, over 40% of these respondents reported a spike in their payroll profitability after outsourcing their services.

Outsourcing helps accounting firms beat the staffing crisis by providing access to a vast global talent pool. Outsourced payroll professionals are trained in UK legislation and are constantly abreast of changes to it. Besides, these experts are certified in the latest technology and provide valuable advice to improve your processes.

Outsourcing payroll lets you get it done by tenured experts, thus minimising the scope for errors. Moreover, by integrating the latest technology into your processes, you can make your processes further efficient and hassle-free.

To discuss your firm’s payroll challenges with an expert today, book a free consultation right away, drop an email at [email protected], or call us at +44 208-146-0808.