The 10 common pitfalls payroll professionals face in 2022

Finding the time to optimise your payroll service can be a real challenge when you’re busy with day-to-day operations – no less so these past few years.  

Doing so requires you to give yourself enough time and space to stand back and objectively review how things are done and evaluate what may need to change.  

A new year is always a good time for new resolutions – and Zellis is here to help! 

We set up a payroll advisory service in April 2020 and, using the expertise of our managed services team to support in-house customers, we have conducted innumerable rapid payroll health checks that uncover the biggest pain-points in our field.  

Based on these insights, our Chief Operating Officer, Abigail Vaughan, has shared the 10 most common pitfalls that payroll teams should look to avoid in the coming year: 

1. Absence of a contingency plan 

When a situation unexpectedly occurs leaving you short of people to run your payroll there is a real risk of not paying your colleagues. 

Be on the front foot! Have a plan: who could step in to help? Where might you get help externally? What are your priorities? 

2. Lack of process documentation 

Too often, we see businesses suffering due to process documentation that is not maintained properly or up to date. Teams are not working from clear timetables or checklists, which introduces a risk of possible missed deadlines and overlooked tasks. 

The creation of a consistent, pre-agreed payroll processing tick list that can be used every pay period significantly reduces this risk – and doesn’t take long to prepare and maintain.   

3. Gaps in good practice 

Are you familiar with the expression about bad apples spoiling the bunch? Well, even if your processes are good overall, a few key gaps can really hurt in the long run. For example, late and poor-quality data coming into payroll teams in the wrong format.  

Checks and controls relating to reconciliation can also be missed along with a poor segregation of duties, leaving a considerable risk of process error, particularly in critical areas such as making BACS or SEPA payments.  

4. Inconsistent housekeeping 

While it may not be the most exciting subject in the world, we see many examples of data being retained for longer than seven years, creating pileups and confusion. Audit data is frequently not being maintained and leaver information is not effectively archived, which affects system performance.  

Where we see significant holes in disaster recovery and business continuity processes, we can usually tell there will be a serious impact on the organisation in the case of an emergency.  

Therefore, conducting regular data cleanses and prioritising the creation of robust end-to-end business continuity and recovery processes can help to mitigate these risks. 

5. Failure to move with the times 

Some payroll teams are not as reactive to changing legislation or requirements as they should be. For example, very few organisations have moved over to using average holiday pay in line with current legislation updated in April 2020, with many still using rolled-up holiday pay instead. 

Not only does this increase the chance of costly compliance breaches, but also the risk of incorrect calculation and payments. 

When we ask why people are still manually submitting P11D forms at the end of the tax year rather than using HMRC’s Payrolling Benefits in Kind online service, the most common responses are about concerns over the transition itself.   

The process, we’re always pleased to confirm, is not as complex as people think. Organisations should take the time to review the options for automated, online processes which save valuable time, effort, and reduce the risk of manual errors.  

6. Non-compliance with the National Minimum Wage 

While we’ve never seen a deliberate attempt to avoid complying with the National Minimum Wage (NMW), overreliance on manual checks means we do find errors. Something as simple as a £1 admin fee for a court order can send you beneath the legal threshold.  

Although our out-of-the-box NMW and National Living Wage compliance functionality in ResourceLink was designed to be as simple as possible to set up and configure, not everyone has yet implemented it.  

Overcoming compliance challenges is a perennial issue – you can read more about how to tackle them in this blog.  

7. Incorrect statutory parameters 

We see many examples of statutory parameters being incorrect, usually because users are entering update files manually rather than uploading them digitally, which creates significant compliance risk due to simple human error. 

Investing in automated and intuitive payroll software takes the pressure off payroll teams by removing the need for manual uploads.  

8. Conducting unnecessary manual work  

Rather than configuring a service like ResourceLink to automate processes, many activities in areas such as statutory pay, alabaster calculations and kit days are still calculated off-system. Shockingly (to us, at least) some companies today are still transmitting to HMRC manually!  

Using automated technology designed by payroll experts helps to boost accuracy, reduce risk, and save valuable time that can be spent on conducing more crucial, value-add tasks.  

9. Failure to check on pensions auto enrolment status 

Auto enrolment pension letters are not always being issued by the Pensions Regulator as required. Payroll teams must fully understand the correct auto enrolment process to be sure that the correct actions are being taken, and the right employees are being enrolled. 

Alternatively, organisations can look to a payroll advisory service for hands-on pension support, or a managed payroll service for complete peace of mind.   

10. Incorrect reporting 

Paying the right values to HMRC and reporting them correctly is one of the most enduring payroll challenges. Unfortunately, some of the easiest to fix causes of reporting problems are among the most persistent.  

For example, few companies have implemented the required April 2020 changes to employer Class 1a National Insurance contributions and termination payments and are, therefore, reporting incorrectly.  

Cycle-to-work schemes and P46 car submission forms are also notorious for causing reporting errors especially when people leave the business. Consistency for both current and former employees is important for avoiding frustrating fines. 

If you need help with any, or all, of these challenges, send us a message today. We offer process and system reviews to ensure process accuracy and efficiency and to check you are making the best use of our technology.