All UK employers are obliged to set up and operate a PAYE scheme as part of their payroll. This applies whether the employer has one employee, one hundred employees, or a hundred thousand employees. ‘DIY’ payroll may seem like a good option for domestic employers, who often only have one member of staff, while this does save on the expense of outsourcing payroll, the time, expertise, and attention to detail required to ensure compliance with UK employment and payroll regulations is significant.
In this blog, we’ll be exploring 4 of the most common challenges faced by domestic employers who choose the ‘DIY’ payroll approach.
- Meeting HMRC deadlines
One of the biggest challenges employers who manage their own payroll face is adhering to deadlines and comprehending what needs to be submitted to HMRC. When liaising with HMRC, there are several deadlines that must be met, including:
- Real Time Information (RTI) Full Payment Submission (FPS), which must be sent on or before the employee’s payday.
- Real Time Information (RTI) Employer Payment Summary (EPS), which must be sent by the 18th of the following tax month (this is sent instead of an FPS when an employer has not paid any employees in a tax month).
- P11D (the employee’s expenses and benefits), which must be reported to HMRC by the 6th of July.
- P60, which must be submitted annually to HMRC and sent to the employee by the 31st of May. We recommend this is done sooner rather than later.
- When the employee leaves:
- The employer must submit the employee’s leaving date in addition to submitting the employee’s final payslip to HMRC,
- Part 1 of the P45 must be submitted to HMRC.
- The employer will need to provide a P45 to the employee, this is time sensitive and employers are expected to give the P45 to their employee on the final day of employment. Failure to provide the employee with a P45 can cause tax complications for the employee.
If an employer fails to meet these deadlines, HMRC is likely to issue a fine of up to £200 per missed submission.
- Submitting information correctly
If an employer meets the deadlines, but submits the wrong information, the employer will also face penalties. Wrong information will result in the figures HMRC hold and sums paid to HMRC to differ, leading to an underpayment of tax letter, and the employer will have to pay an increased sum with interest applied daily (based on the current interest rates). In addition, the employee may also receive an underpayment of tax letter, with the employer being at fault, resulting in the employer having to make further payments to HMRC to resolve their employee’s tax underpayment.
- Failed submissions
A further challenge for employers is when an HMRC submission fails. A failed submission will present an error code, and there are a plethora of reasons as to why your submission may have failed, including but not limited to:
- Ineligible filing period, which means HMRC are not expecting an RTI submission for the period.
- System failure, caused by issues within HMRC.
- Employer scheme has been cancelled, caused by a period of £0 RTI filings resulting in HMRC closing the employer’s payroll scheme.
- Authentication error, which means the employer’s Government Gateway details are not recognised
- Entry date is later than the 5th of the current month, which means the employer has attempted to submit an EPS on the wrong date
When a submission fails, without knowledge of the HMRC error codes, employers are often reliant on calling the HMRC helpline for support, which can be time consuming.
- No HR support
A final mention of the challenges faced by employers, is that they have no HR support. Being a domestic employer differs quite drastically to other employment industries in that, in most cases, domestic employers do not have the support of a HR team. With regular changes to legislation and employment law, employers could easily fail to meet their legal requirements, and employees can take their employer to a tribunal. Examples of where an employee may take their employer to a tribunal could include not being enrolled into a pension scheme, or where the employee has not been given enough breaks.
Due to these challenges, many domestic employers choose to outsource their payroll to a domestic payroll bureau, such as Stafftax.
At Stafftax, we offer a Payroll & HR service, which provides an end-to-end payroll solution and unlimited HR support. Employers who subscribe to Stafftax will also receive a free bespoke contract created by our specialist HR advisors to suit the needs of the employer and their employee. We further offer a pension service, as well as Stafftax Plus, in which we make the salary and HMRC payments on the employer’s behalf.
