A Quality Payroll Process

 A Quality Payroll Process is Vital for Your Business

Having a quality payroll process is vital for your business. Getting it wrong can be costly for you and your employees. Getting it right saves you time and money and gives you the headspace to focus on other areas of the business.

We will look at

• What your employees want
• Is payroll difficult?
• Do you need software?
• Payroll Tips for employers
• Summary

What your employees want

They want payslips. They are legally entitled to get them, and they should. It shows them their hours worked and the pay for those hours. Plus, all the deductions that come from the gross pay to arrive at the net amount. And the number of weeks they work and the PRSI class for those weeks.

They will need payslips to apply for a loan or a mortgage. They will check that the amount that goes into the bank matches the payslip figure. Employees will see what taxes they pay and what other deductions they have.

Get paid into their bank account. They don’t want cheques. Handing a young lad a cheque is akin to giving him a suitcase and telling him that’s his new mobile phone. They haven’t seen one before and wouldn’t know what to do with it. You have given him extra unpaid work that involves a trip to the bank and lodging the bloody thing. Totally outside their comfort zone.

Holidays and public holidays must be right too. Employees know their entitlements via their contracts or the encyclopaedia of Google.

They want certainty. This is the knowledge that you do things right and you do what you said you would do when hiring them. Not doing it leads to mistrust, wasted time, and a less motivated staff member.

Is Payroll Difficult?

Without a doubt, yes it sure is. It is a mix of maths, tax and employment law. Years ago, I remember doing public holiday calculations that brought me to tears.

A payroll professional should have good knowledge of tax credits and rate bands. That’s only for starters. They must also be very familiar with

• PRSI Classes
• USC
• Expenses
• Benefit in Kind like cars, medical insurance, and other benefits
• Holiday entitlements and public holidays
• Pensions for employer and employee contributions plus construction workers schemes
• Bike-to-work schemes and travel passes
• Share-based awards
• Termination payments
• An employee starting and finishing
• Redundancy payments

There is so much other legal stuff they need to know too. Like minimum wage rates, working hours and rest periods.

Do you need software?

Yes, yes, and yes again. Payroll is now in real time with the introduction of PAYE modernisation. That means that anytime you pay wages to an employee you must report that payment to Revenue. If you pay wages weekly, you will make a weekly submission to Revenue. The same applies to bi-weekly and monthly payrolls.

Your software system will link with Revenue so you can

1. Download Revenue Payroll notifications (RPNS)
2. Import RPN information into each employee
3. Upload the payroll submission to Revenue

But that’s only the Revenue piece. Your software will take care of all the other pieces mentioned above plus much more. Apart from the calculations and getting the numbers right it will

• roll forward the information from one pay period to the next
• e-mail payslips directly to your employees
• provide security and confidentiality with passwords for payslips
• produce reports like a Gross to Net report that is important for management accounts
• produce a bank file that you can upload to your internet banking and pay employees in one go.
• deal with starters and leavers
• close off one year and set up the following year

But don’t think that the software does all that. If the person that is operating the software doesn’t know payroll it will lead to tears.

Anyone doing payroll without software is mad. I met one such person recently and had that conversation with him. In his defence, he was doing a monthly payroll for 1 person which was his daughter. I still don’t understand it though!

The software is not expensive. We use Sage Micropay and find it very good, but not perfect either. I can’t comment on the benefits of one software over the other as I wouldn’t know enough about the others. There is Bightpay, Parolla, Thesaurus and Collsoft too.

Payroll Tips for Employers

The main tip is to get a good payroll process in place. And from there you can improve the process as time goes on.

Pay employees monthly

 If you can pay employees monthly, you only have to make 12 payroll submissions to Revenue. If you pay weekly, you will have to make 52 submissions. So, it will be more expensive and time consuming to have weekly payslips than monthly ones. It would be normal in certain businesses, like hospitality, to pay weekly. For others, like financial services, monthly would be ok.

You could operate two different payrolls for the same business. Weekly for staff and monthly for the business owners.

Have timesheets in place

To make things easier for you or your payroll provider having a system of timesheets will work well. Your payroll provider will provide you with a document to populate. You can include the hours worked for each employee. Plus, other information on holidays, public holidays, expenses, etc.

The accuracy of this information will reduce interaction and speed up the service.

Get PRSI classes right

 A business owner would usually be Class S PRSI. That would mean they don’t pay employer’s PRSI. We have seen a few cases recently where some clients, who do their payroll, getting this wrong. This has cost them thousands in overpaid PRSI, but they will be able to get it back

Other cases to be aware of are where family members are working in the business. Spouses and children can have different PRSI classes depending on the business. Also, be careful with ensuring the correct PRSI class for those over 65.

What benefits can help employees?

You don’t have to know the ins and outs of every one of these, but it can help to know the basics about

• pension contributions
• company cars and new rules coming in 2023
• vouchers
• travel passes
• bike-to-work schemes
• tax-free expenses

Summary

For many businesses payroll is their largest cost. We are lucky in Ireland that we have close to full employment. It is an employee market so they can get move jobs easily.

Your employees are your greatest asset so you must look after them well. If they are happy they will have the motivation to provide your customers with top class service. Providing them with a quality payroll process will contribute to their happiness. And yours too.

Need a quality team to help with your payroll and bookkeeping? Start here