All Posts By

Bob L

Minimise Payroll Risks

Minimise payroll risks by outsourcing your company payroll function to Payroll Options.  Outsourcing the company payroll has many benefits, some of which are sometimes overlooked:

Reliability

At Payroll Options we have taken numerous steps to ensure accurate delivery of your payroll on time, every time.  Payroll has to be able to meet deadlines and here are some of the steps we have taken to make this happen:

  • Staff – one of our aims is that any member of staff can process any payroll. Although a company’s payroll is frequently managed by a small team, if that entire team were absent, with no notice, for any reason, another payroll team could take over.  The payroll would be processed in the usual way, the only difference being the names on the payroll report.
  • Technology – We cannot have our systems fail if we need to process payrolls, so we have taken steps to ensure that we minimise the risk of ‘system outage’. We use live parallel duplicate payroll systems, providing excellent system redundancy.

We also have incremental and offsite backups, and for a worst case scenario we keep a back-up disaster recovery site, that would enable a quick restore and back to operations in the case of a catastrophe.

Expertise

Do you have time to keep up to date with the payroll legislative changes?  Mistakes can be costly, both in terms of possible HMRC fines and the time taken to rectify them.  Payroll only seems to become more complicated each year, and the advent of auto-enrolment pensions has added another layer of worry.  Allow Payroll Options to take on this burden and gain peace of mind.

We employ payroll qualified staff and specialise exclusively in payroll.  We keep our people, and systems, up to date so you don’t have to.

Security

Fraudulent behaviour by employees is a very real problem, and employers should take steps to manage this risk.  Payroll fraud does happen and one possible, relatively simple, step that can be taken is to outsource the payroll function, and so divide the chain of the payroll process as well as an external source looking at the payroll.

The person producing the data, should ideally not be the person reviewing the payroll.  Payroll Options can send the payroll reports to nominated contacts, and so it is straightforward for a company to control the audit chain for payroll.

Outsourcing the payroll can be a practical step to minimise the risk of payroll fraud.

If you want more information on how Payroll Options can help your company minimise payroll risks, contact us today.

PAYE Reconciliation

HMRC has just announce they are starting their reconcialtion process for the PAYE system for the 2014/15 tax year, and expect to be completed by October. PAYE (Pay As You Earn) tax is that which is collected through the payroll, and is effected by the tax code.

 

There were issues last year but HMRC seems confident that the vast majority of PAYE tax payers will be correct and no action will need to be taken. If tax was overpaid a P800 notice will be issued, followed by a cheque within 2 weeks. If tax was underpaid then P800 notices will still be issued but you will be offered a few options which will also depend on how much is owed.

 

There is further guidance on what happens if a P800 notice is issued here, but as HMRC have said, very few people will receive them!

AE Pensions Simplified

We are about to start becoming very busy with new companies staging for auto-enrolment, but The Pension Regulator has made life a little more straightforward. The new ‘step by step’ guide seems to have been well thought out, and although there may well be pitfalls it seems a much more readable than some of the lengthy documents previously produced.

 

The single page check list is very helpful, and a simple way of seeing what is required. There is the proviso of seeking ‘legal or other specialist advice’ at the base, but we view this as a positive and constructive approach from The Pension Regulator.

 

What has been less publicised is the reduced correspondence burden. There are less letters to be handed to employees, and although there are still duties, one of the changes is that it appears there is only the requirement to contact an employee the first time their status changes, rather than repeated correspondence. Also several documents have been combined.

 

The Pension Regulator is clear that giving more information than the statutory minimum is still acceptable, if companies already have a system in place. The link to the detailed guidance document can be compared with the step by step guide, and shows that The Pension Regulator is trying to simplify and explain. Long may this continue.

Be Cautious with Holiday Pay

There have been various opinions on what constitutes holiday pay, and some companies have changed their policies already. We did suggest caution as there is no definitive position yet, and companies need to be careful they do not implement policies that may need to be rewritten within months. On May 5th it was announced that British Gas were appealing in the ‘Lock case’. This is one of the cases referring to commission payments that is regularly referenced, and this appeal will only add to the ongoing uncertainty with holiday payments.

 

We do not have the answer here, we have many strategies that companies have used following advice from their HR departments or advisors, but we cannot advise on what the best way forward is at the moment, or in six months’ time. Following the election maybe we will get a dynamic and conclusive answer?

Marriage Allowance

The start of the new tax year has brought a few changes, one of which is the ability to transfer tax allowance between spouses or civil partners. This is not terribly straightforward and at the moment you are still having to ‘register an interest’.

 

If an employee manages to successfully transfer part of their allowance, both parties will receive a new tax code and we expect a P6 tax notification to be issued. The maximum that can be transferred is £1060 for this tax year and the income of the person donating the tax allowance should generally be less than £10 600pa.

 

For further details you can visit the government website here.

Tax & National Insurance

Tax & National Insurance for the 2015/16 Tax Year

We have picked out some of the headline Tax and National Insurance rates for the year ending April 2016:

PAYE Tax

Allowances April  2015 – March 2016
Personal Allowance £10,600
Tax Rates Taxable Income
20% Up to £31,785  Basic Rate
40% over £31,785 up to £150,000 Higher Rate
45% over £150,001  Additional

 

National Insurance

Employees
Lower Earnings Limit Primary Threshold
(12% contributions)
Upper Earnings Limit
(2% contributions)
Weekly £112 £155 £815
Monthly £486 £672 £3532
Yearly £5824 £8060 £42385
NI Category A Most employees not in a contracted out pension scheme
NI Category C Employees over the state pension age
NI Category M Employees under 21 not in a contracted out pension scheme
NI Category X Employees don’t have to pay National Insurance

These are the commonly used categories, for more information visit the HMRC website

Employer
Lower Earnings Limit Secondary Threshold
(13.8%)
Upper Secondary Threshold* Upper Earnings Limit
(13.8%)
Weekly £112 £156 £815 £815
Monthly £486 £676 £3532 £3532
Yearly £5824 £8112 £42385 £42385

*Point where 13.8% contributions commence for NI category M

NI Category A Employers contribute 13.8% above the Secondary Threshold
NI Category C Employers contribute 13.8% above the Secondary Threshold
NI Category M No Employer contributions until the Upper Secondary Threshold
NI Category X No Contributions

If you want manual tax calculation tables please see here, and for manual National Insurance calculations see here

 

Payroll Options have put this very simple guide together to give an indication of bands and contribution rates.  This should not be relied upon for calculations and for further guidance please contact us.

Statutory Payments to April 2016

Statutory Payments for the 2015/16 Tax Year

Statutory Sick Pay (SSP) 2015/2016
Minimum weekly earnings to qualify £112.00
Weekly rate of SSP £88.45
Statutory Maternity Pay (SMP)
Minimum weekly earnings £112.00
Higher weekly rate for first 6 weeks 90 % of average weekly earnings (in the qualifying period)
Lower weekly rate for 33 weeks is the lesser of £139.58 or 90% of average weekly earnings

SMP is now paid for up to 39 weeks within this period an employee may have 10 keep in touch days (KIT) which will not effect the payment of SMP

Ordinary Statutory Paternity Pay (OSPP)
Minimum weekly earnings £112.00
Weekly rate for up to 2 weeks is the lesser of £139.58 or 90% of average weekly earnings
Statutory Adoption Pay (SAP)
Minimum weekly earnings £112.00
Weekly rate for up to 39 weeks Is now in line with SMP

All employers are entitled to recover 92% of the SMP/OSPP/SAP they pay.

If you qualify for Small Employers Relief (annual liability for National Insurance less than £45,000) you are entitled to recover 100% of the SMP/SPP/SAP you pay plus 3% for payments made after 6th April 2014.

Statutory Redundany Pay

The statutory redundancy rate is £475.00 maximum per week

You can also visit the HMRC website for more details.

Directors National Insurance

National Insurance for Directors is classed differently from that of employees.   There are two methods which can be used for Directors National Insurance namely Cumulative (or Directors) and Table Method (or alternative).

Cumulative Directors National Insurance applies Annual Thresholds for calculating the amount due and as such no National Insurance is due until the earnings for the tax year exceed the Annual Earnings Threshold.  National Insurance is then paid on all earnings until the Annual Upper Earnings Threshold is reached at which point all remaining earnings until the end of the tax year have a rate of 2% Employee National Insurance applied.

The effect of Cumulative Directors National Insurance which is most often noticed is that the Employees National Insurance deducted can fluctuate considerably with each payroll even if the payment is the same.

Table Method Directors National Insurance applies the appropriate thresholds for the payroll frequency, ie if paid monthly the monthly Thresholds are used.  The amount of National Insurance deducted by Table Method Directors National Insurance is identical to that by standard Employee National Insurance, other than in the final payment of the tax year the total amount of National Insurance is recalculated for the complete tax year.

In total for a complete tax year the amount of Employees National Insurance deducted by either method of Cumulative or Table Method Directors is the same, the main difference is that with Cumulative Directors National Insurance the deduction fluctuate with each payroll whereas the Table Method are constant so long as the payment is the same.

If you wish to discuss outsourcing your payroll to Payroll Options, please contact us

National Minimum Wage to October 2015

From 1st October 2014

Age Rate / Hour Comments
21 years and over £6.50
18 – 20 years £5.13 also for those aged 22 years and over on accredited training course
16 – 17 years £3.79
Apprentices under 19 £2.73 also apprentices over 19, but in the first year of their apprenticeship

 

 

Visit HMRC for the most up to date information

End of the Tax Year

We are now drawing to a close the 2014 /15 tax year. This is a very busy time of year for us as we complete year end procedures and then move all the payrolls through to the new tax year. There are several changes for April 2015, as have been mentioned previously, and we have to be prepared to meet these.

 

The P60s will be produced once all other procedures are successfully completed, and will generally start to be sent out at the beginning of April. All employees employed on the 5th April should have received their P60 by the 31st May.