There are many areas where payroll can “go wrong”, sometimes with costly consequences.
In setting up payroll, there may be different pay elements that need to be created – common ones are basic pay, overtime pay, holiday pay, bonus etc. Sometimes reimbursed expenses or loan advances may be paid within the payroll too. There may also be different deduction elements that need to be created such as unpaid leave, loan repayments etc.
Generally, it is necessary to indicate whether those pay elements are liable to tax, national insurance or pension deductions. Pay will be, but reimbursed expenses or advance repayments will not be liable to any of these. It is not always clear from simply looking at the payslips whether the underlying elements have been correctly configured.
A recent example of an error – an advance was made and when repaid through the payroll it was treated as negative pay, but eligible for tax, NI and pension deductions! Other errors seen include negative entries being entered in the deductions section, resulting in the figure being added instead of subtracted.
Ensure you review the payroll elements and how they are treated for tax, NI and pensions on a regular basis.
Please feel free to contact us if you have any questions about how your payroll is set up.
