Payroll mistakes are almost always time-consuming to resolve and often involve additional costs for the employer. The start of a new year is a good time to check that your procedures are in order, says Nikki Johns.
Running a business seems to get more complicated all the time. Payroll, in particular, can be a very time-consuming and stressful task especially if you have employees on different pay rates and working different hours.
Set out below are eight areas where mistakes often occur along with tips on what you can do to avoid them.
1. Payroll submissions to Revenue
Top of the list of errors to avoid are incorrect payroll submission requests to Revenue. If you do make a mistake, always correct it as soon as possible either through your payroll software or through the Revenue Online Service (ROS).
2. Failure to keep up to date
Employment legislation changes all the time and because these changes often impact payroll, it’s important to ensure that your payroll provider keeps up to date. Always check that your provider is properly qualified and invests in ongoing training and development. If you don’t have in-house capacity to keep up to date, it may be time to outsource your payroll.
3. Poor record keeping
Poor record keeping will inevitably lead to mistakes. Overtime and employee annual leave entitlements may be miscalculated. Timesheet errors may go unnoticed. Sick leave absences may not be recorded. Employees may be on an incorrect pay scale. Leavers may not be removed on time. All of these issues are time consuming to sort out, particularly if they go unnoticed for a prolonged period. Time invested in ensuring that your record-keeping processes are accurate, up-to-date and robust will help you avoid expensive headaches down the line.
4. Calculation errors
Incorrect calculations are another potentially expensive mistake. Payments to part-time employees are often the culprit in this category, particularly where the hours worked vary from week to week. Errors calculating maternity pay and holiday entitlements can also crop up. Implementing a reliable system for recording time worked will help avoid these mistakes but you need to make sure your employees, managers use the system correctly.
5. Payroll backups
Failure to backup your payroll data is another common mistake. Regular backups will protect you if things go wrong.
6. Incorrect operation of Government Covid-19 support schemes
Failure to comply with the terms and conditions of Government schemes like the Employment Wage Subsidy Scheme is another mistake that can crop up. It’s very important to ensure that you understand the scheme rules and comply with the relevant requirements.
7. Classification of employees and contractors
Misclassification of employees and contractors is another mistake that can prove very expensive because it affects the employee’s income tax and PRSI payments. Guidance on how to determine employment status is available on the Revenue website. See also this updated Code of Practice for Determining the Employment or Self-Employment Status of Individuals.
8. Third party service providers
You don’t want to end up being liable for someone else’s mistakes so if you are using third party service providers it’s very important to check that their procedures, including data protection procedures, comply with relevant Revenue, employment and anti-money laundering regulations. As mentioned above, it’s also important to make sure that your payroll operator is properly qualified.