Outsourcing is a practical and cost-effective solution for getting to grips with payroll complications, says Sarah Daly
Employers know all too well that anything involving people tends to be time-consuming. Payroll is no exception. Employees come and go, hours and pay scales vary, minimum wage rates get updated, annual leave, maternity leave, absences due to illness, bonuses, commissions, pension deductions, benefits-in-kind, incentives like the cycle to work scheme—all of these things affect the pay due in any given pay period.
Get them wrong, and you won’t just have employees complaining — you can also run into expensive legal and tax situations, especially if you don’t spot and correct the errors quickly enough.
Employers have always had contractual obligations under employment and tax law with penalties for failure to comply. However, since the introduction of PAYE Modernisation in 2019, each time that you make a payment to an employee, you have to report certain information to Revenue. This includes the payment amount, payment date and the Income Tax, Universal Social Charge and Local Property Tax deducted.
A Revenue eBrief issued four months after PAYE Modernisation came into effect highlighted numerous recurring mistakes made by employers when submitting their payroll, including:
- Mistakenly sending payroll data to Revenue more than once,
- Incorrectly creating duplicate employments for the same employee.
- Incorrectly including cessation dates for employees who are still in employment
- Applying emergency tax where an RPN is available.
- Failing to deduct USC for employees who are not USC exempt.
Revenue can impose a penalty of €4,000 per offence for persistent payroll errors.
More recently, Covid-19 has also added to the payroll burden. Disrupted work patterns, remote working, and the various wage support schemes introduced by Government to help businesses keep employees on during lockdown, all require careful administration.
Another issue that has been in the news recently relates to self-employed contractors who, in some situations, may in fact be employees. Employers and payroll operators need to pay attention to the classification of workers bearing in mind that, in law, there is a difference between a contract of employment (known as a ‘contract of service’) and a contract for service.
So, yes, payroll is complicated, and there are a lot of the reasons why.
Impact on businesses
For employers, the impact of these issues is that administering payroll is time consuming, stressful and tends to become increasingly complex as businesses grow. Rules and regulations change, codes of practice come into play in some sectors, and keeping up to date isn’t easy when you have many other calls on your time. The question is, what to do?
Usually, the solution will come down to one of two options — you can either recruit a qualified payroll administrator or outsource your payroll administration to a specialist service provider. For most businesses, outsourcing is the better choice as it tends to be more cost-effective and payroll service specialists like GroForth will help ensure you keep up with the latest rules and regulations.
Choosing a payroll partner
While outsourcing is usually cost-effective, it is still a major decision and because you are still responsible for ensuring that your business complies with the relevant tax and legal regulations. It is up to you to ensure that you keep your payroll partner informed of all relevant changes such as when a new employee joins or someone leaves as well as promotions, hours worked, leave entitlements and so on.
Previously on this blog, we shared tips on how to choose a payroll service provider. It’s important to check that they are properly qualified, keep up to date and have the skills and knowledge to do a good job on your behalf. You also need to satisfy yourself that they can provide a timely, efficient service and confidential service so that your employees will be paid correctly, securely and on time every time.
What services should you expect?
As we previously outlined in our article, Should I run my own payroll or outsource it, you should expect a payroll outsourcing service to:
- Provide a confidential, secure service
- Use industry-standard, compliant payroll software
- Calculate employee payments including overtime, holiday pay, sick pay
- Generate employee payslips
- Process PRSI, USC and tax deductions
- Process pension payments, health insurance, trade union membership subscriptions and other relevant deductions
- Report payroll information to Revenue including details of new employees and employees leaving your service
- Track annual leave
- Generate payroll reports
- Calculate employee share payments
- Calculate Benefit in Kind (BIK) on non-salary benefits
- Calculate redundancy payments
- Provide payroll support and training where required
GroForth provides all of this, and more. Check out our testimonials to see what our clients say about us. You can also find more information on our payroll services page. As always, I am happy to answer any questions you may have. Contact me to arrange a call.