We explore the biggest problem with running a UK payroll, together with the required functions of payroll calculations and net salary.
One of the biggest problems with running a UK payroll is staying compliant with constantly changing employment laws and tax regulations. Keeping track of these changes and ensuring that the payroll processes are updated accordingly can be challenging and time-consuming. Additionally, ensuring that all employee data is accurate and up-to-date, and correctly calculating and deducting the correct amount of taxes, national insurance contributions, and other deductions can also pose difficulties.
It remains obvious that the employee should be paid on-time and to their designated bank account of their selection per the Contract of Employment while adhering to the Employment Rights Act 1996.
Yet, this isn’t the main hurdle we have found in our experience which causes issues when running a UK payroll. Often overlooked is the pension requirement for employees to be automatically enrolled into a company pension scheme.
The Kiwi’s call it ‘Kiwisaver’, the Aussies call it ‘Superannuation’, and in the UK we call it ‘auto-enrolment’.
The name gives it away, but many overseas companies employing UK employees overlook the pension requirement. Employees must be “auto-enrolled” it the company pension scheme. As a concept, this is fine, except the pension deductions from payroll, together with the company contribution, can only be paid over by direct-debit from a UK based bank account that is Bacs Direct Debit compliant and registered.
The contribution basis varies depending on what the company has opted to cover, basic earnings, or basic plus any commission or bonus incentive, for example.
Then the employees must be re-enrolled into a scheme every three years if the employees opt-out of the scheme. If the employees opt-out of the scheme, then any collected contributions are refunded on the following payroll and returned to both employee, and employer alike.
If the employee opts out, the company also stops contributing.
In addition to ensuring the company pension is collected by direct-debit, the company must also complete a Declaration of Compliance to the Pension Regulator to confirm that the obligations have been met.
There are strict fines in place for non-compliance of auto-enrolment responsibilities for companies. The Pension Regulator is the governing body for this, to protect the employees interests.
As part of our setup and on-going payroll offering, we ensure the pension scheme is registered at the same time as running the first payroll for our clients. We then ensure the declaration of compliance is filed with The Pension Regulator and employees are re-enrolled when required. For support with your UK employees, please get in touch here.