Evolving compliance requirements mean the goalposts for payroll compliance are regularly moving and the risk of financial penalties is increasing.<\/p>\n
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With HMRC marching towards automation, digital enforcement and stricter reporting guidelines, even well-meaning employers might find themselves breaking the rules.<\/p>\n
Understanding these common, yet costly, payroll compliance mistakes can help your business stay one step ahead.<\/p>\n
When an employee is incorrectly classified, errors in tax, National Insurance, statutory payments and pension deductions can arise.<\/p>\n
Incorrect classification can be easily done. For payroll, this might mean treating a team member as a temporary contractor or a part-time employee as a full-time worker, for example.<\/p>\n
For unpaid tax because of misclassification, HMRC can impose fines based on the \u2018potential lost revenue\u2019.<\/p>\n
If you can prove the payroll mistake was an innocent one, fines can be avoided. Where errors are non-deliberate but careless, HMRC can impose 30 per cent fines of lost revenue.<\/p>\n
As these fines are only add-ons, businesses are still legally required to pay back the full lost tax revenue as well.<\/p>\n
Giving workers correct classifications requires careful payroll due diligence, as carelessness might be costly for SMEs.<\/p>\n
The rising minimum wage floor might lead to accidental wage violations from employers.<\/p>\n
The statutory minimum pay has been rising consistently over the last few years, with the UK National Living Wage (NLW) increasing by 43 per cent over the past five years.<\/p>\n
As employees get older and enter new NLW pay brackets, employers need to track birthdays to make sure they are paid the correct wage.<\/p>\n