Payroll processing: 10 key things payroll managers should know

How do I prepare for payroll?

Payday is a day all employees look forward to, but for many business owners, it’s not exactly the highlight of the month. Running payroll can be a stressful and time-consuming task, one that can have serious repercussions if done incorrectly. When payroll mistakes are made, you risk your relationship with employees, you lose time correcting errors, and you may damage your reputation.

Although payroll is complex and can have a variety of moving parts, the challenges of payroll processing can be managed. Here are the critical points all payroll processors should do to ensure payday is a success.

1. Accurate data

It’s no surprise to hear that collecting and inputting the correct payroll data is essential. The best way to achieve this is to ensure you have an organised workflow between human resources and payroll. Make sure all relevant data is gathered, including employees’ additions, deductions, and the tax codes to use. Ideally, the information you collect should be verified by the employee before the first payroll is run.

2. Essential data

Make sure the data you collect is the minimum amount of personal data you need to carry out your payroll duties. This will ensure that you comply with the regulations set out in the GDPR. This information should be kept up-to-date and be accessible to employees at anytime. BrightPay Connect, an online cloud tool can help you achieve this by enabling employees to update their personal information from anywhere, at any time.

3. Track employee hours

It’s vital that the employee hours are complete, accurate and current. The best way to achieve this is to have an efficient tracking system in place that fits within your workflow. An internal control check can be useful – supervisors must approve the hours worked.

4. Enrol your employees in a pension scheme

Under the Pensions Act 2008 you must enrol certain staff into a workplace pension scheme and contribute towards it. There are several steps involved including employee assessment, enrolment, personalised enrolment letters, ongoing employee monitoring and re-enrolment.

5. Send payslips

By law, you must provide employees with payslips which include data such as proof of earnings, tax paid and any pension contributions. If sending payslips by email, they must be password protected. Likewise, if employees access their payslip using a self-service portal, each employee should be set up with their own unique password. By supplying payslips digitally, you are not only protecting the employee’s personal data, but you are also improving your sustainability efforts.

6. Payment deadlines

Upon each pay period, you must submit a Full Payment Submission (FPS) to HMRC. An FPS is to be sent on or before each payday and informs HMRC about the payments and deductions for each employee. If no employees are paid in a particular period, you are still required to submit a nil FPS.

7. Streamline your payment methods

Crucially, once you’ve finalised your payroll, you must transfer the money into the employee’s accounts. If paying by credit transfers, using a Bank Payment File, make sure you have approval from your bank to submit Bacs files to them. Ensure you give yourself enough time - submitting Bacs files each month can be time-consuming and the payment can take up to three days to process. A more efficient alternative is using a Faster Payments method which can settle payments in under 90 seconds. With BrightPay’s integration with Modulr, the payments platform, you have access to Faster Payments and can pay employees 24/7, 365 days a year.

8. Stay updated on payroll legislation and compliance

Payroll legislation is continuously changing. Each year, the government’s plans for spending and taxation will affect you. Other societal influences may also have an impact, which has been more than evident this year with the furlough scheme. Remain tax compliant by using a payroll software that will update and notify you of any changes to the current payroll legislation. BrightPay includes in-year payroll upgrades to cater for legislative changes at no additional cost.

9. Reporting

At the end of each tax year, you must send HMRC your final payroll report of the year. To prepare for the new tax year, you should update employee payroll records, update your payroll software, and give your employees a P60. You should also report employee expenses and benefits by July 6th. Find out more about the payroll year end process.

10. Pick the best software

You can simplify all of these payroll tasks with the right payroll software. Your payroll software should automate tasks, improve productivity and save you money. BrightPay, used by over 320,000 businesses across the UK and Ireland, automates auto-enrolment, integrates with multiple accounting software, facilitates payments directly to your employees, and provides free support to all customers.

Discover more:

Interested in learning more? Book a demo today to discover how BrightPay can improve your payroll processes. BrightPay also offers a 60-day free trial of its payroll software, an ideal way to test out the software to see if it’s the right fit for your business. The free trial version has full functionality with no limitations on any of the features.


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Karen Bennett
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