Running effective payroll for retail requires an understanding of several key issues. These can become a problem if not dealt with properly.

Recently, major retailers have had to pay thousands of existing and former staff who were left underpaid due to payroll errors. Fortunately, you can take appropriate steps to mitigate against the risks in your retail business. Let’s examine the key payroll challenges and how you can solve them.

A variety of employment arrangements

The retail industry has a highly varied workforce with many different types of employment setup. These includes salaried and hourly workers, zero-hours contracts, seasonal staff, and part-time employees. Apart from regular working hours, employees are compensated for overtime, bank holidays, and more, making payroll management even more complex.

Impact of incorrect or late pay

Employers have the legal obligation not only to pay their employees’ wages but also to pay them on time. According to 2022 research by Zellis, 61% of British retail workers have reported discrepancies in their pay, while 29% claimed they were paid late at least once.

These errors directly impact the financial stability of these employees, with 32% unable to pay direct debits, 29% entering overdraft, and 25% incurring interest and bank fees.

Financial stress reduces motivation and productivity, as nearly a third of respondents report. It also causes a quarter to experience health issues, including stress and anxiety. Workers can become disengaged, form a negative perception of the organisation, and eventually leave. Employers may also face penalties and reputational damage.

More on financial stress and its impact on retail workers >>

Payroll for retail: key issues to note

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Part-time and seasonal employees

Many retail employees work part-time or seasonally, making payroll calculations more complicated. Zero-hour contracts and complex shift patterns make it extra difficult to accurately track hours worked and pay employees accordingly.

Overtime and shift differences

Retail businesses often require employees to work overtime or at different times of day, resulting in variable pay rates. Payroll systems must be able to accurately calculate overtime pay and shift differentials to ensure that employees get compensated correctly.

Minimum wage regulations

The government sets a minimum wage that retailers must pay to all employees, which varies depending on age and other factors. Retail businesses must ensure that they are paying their employees the correct minimum wage rate and staying up to date with any changes to the minimum wage.

Tax compliance

Administrators must keep on top of legal and practical changes to remain compliant with shifting tax obligations. Retail businesses must comply with various tax regulations, including income tax and national insurance contributions. These regulations can be complex and rely on accurate tracking and reporting of employee income and taxes.

Strengthen compliance with better retail payroll software

For retailers, non-compliance can result in several unnecessary financial, HR, and reputational issues. This adds to the pressure of already squeezed margins, increasing costs, and sluggish consumer confidence.

Using outdated systems with manual processes and spreadsheets for determining wages is often the root cause of most payroll errors. To avoid these problems, consider implementing a compliant and efficient system, to enjoy the benefits of a fully automated payroll process.

Discover more about Zellis’ award-winning retail payroll software retail here.