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5 payroll related penalties and how to avoid them

21st Jun 2023
Brought to you by
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The payroll solution that provides all you need for Auto Enrolment.

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Have you found this content useful? Use the button above to save it to your profile.

Payroll is an essential process for businesses, employees and the government, touching upon sensitive areas such as tax, economic fairness, data protection and employees’ financial stability. It’s no surprise, therefore, that HMRC and other authorities keep a keen eye on how businesses are running their payroll, leading to a range of compliance risks for businesses that fall down on their payroll processing.

However, the digitisation of the payroll industry creates opportunities to mitigate these risks, building more efficient, trackable and, ultimately, compliant processes that reduce the chance of penalties. 

Here we examine five of the biggest penalties and how payroll software can help you avoid them.

  1. GDPR non-compliance

Payroll information is highly sensitive data, falling within the scope of General Data Protection Regulation (GDPR), violations for which can result in significant fines. Businesses are obliged to ensure secure and compliant data transmission at all stages of the payroll process,  minimising the risk of leaks or visibility by non-compliant third parties. This is especially important for businesses that are working across multiple locations or involve hybrid working arrangements.

BrightPay’s digital-native data transmission is built with security in mind, combining flexibility and reassurance for employers and employees.

  • When emailing payslips, BrightPay automatically password-protects each document, ensuring only authorised personnel have access. 
  • For added security and convenience, BrightPay's cloud extension, BrightPay Connect, includes a self-service mobile app, enabling employees to securely view and download payslips. 
  • BrightPay integrates via API with HMRC, twelve different accounting software packages, leading pension providers and a payment platform. This ensures that sensitive payroll information can be transferred directly to these platforms from within the payroll software, instead of relying on email or physical documentation. This gives added protection as files won't need to be emailed, downloaded or shared between systems or stakeholders.

Moving to a digital payslip process and using integrated applications enables real-time, secure payroll data exchange. Online payslips remove any worries of GDPR compliance, while streamlining collaboration for accountants, payroll bureaus and businesses.

  1. Late HMRC payments

Falling behind on money owed to HMRC can lead to stiff penalties and wasted time for businesses, but in the hustle and bustle of day to day operations, it’s easy to miss deadlines. Payroll providers and accountants have the visibility and expertise to drive this process, but manually reminding clients is time-consuming and inefficient, more likely to annoy than to enable easy compliance.

BrightPay Connect reduces risk by automating the reminder process – tracking and sharing upcoming payment dates and amounts owed and timelines, with no need for provider intervention. For clients using our online employer dashboard, the payment due date and payment amount are clearly displayed at the top of the client view, with the option of automated reminder emails as the payment date approaches.

  1. Auto-Enrolment Failures

Auto-enrolment is a mandatory process for businesses with at least one employee. As businesses scale, it can quickly become a challenge, with varying enrolment timelines, changing employee details, communication deadlines and reporting cycles. Falling behind can quickly lead to missed enrolment dates and compliance failures.

BrightPay takes the guesswork out of auto-enrolment, centralising all tasks within a single platform:

  • BrightPay automatically assesses each employee for any auto-enrolment duties that need to be performed, including re-enrolment, and provides on-screen alerts for due tasks. 
  • The platform instantly creates personalised enrolment and re-enrolment letters and monitors changes in employees' work status, closing the window for missed steps.
  • Employers can easily keep details up to date with BrightPay Connect's self-service app, enabling employees to request edits or updates to their personal  information, such as a new address or phone number.
  1. Incomplete payroll records

Managing and issuing payroll requires holding and updating large amounts of data – falling behind on this information can result in fines of up to £3,000 from HMRC. You must keep a record of certain data for 3 years from the end of the tax year they relate to, collecting and maintaining records of:

  • Payments to employees and deductions
  • HMRC reports and payments
  • Employee leave and sickness absences
  • Tax code notices
  • Taxable expenses or benefits

How to easily keep record of payroll information

As a business grows, the complexity of managing  your employee processes also increases, with changing data points like tax codes, hours worked, allowances, leave, and overtime to consider. 

BrightPay and Bright Pay Connect simplify the work on managing payroll information, bringing all essential processes onto one platform, including onboarding, reporting and data submission.

  • With BrightPay Connect, from the employer platform,  clients can add new starter information, securely enter employees' hours, and manage additions and deductions set up by the bureau or accountant. 
  • With BrightPay’s payroll entry and approval features, you and your clients can easily review and authorise payroll details for each pay period. 
  • Clients can also issue their own standardised or custom reports that you set up and tailor, keeping records up to date with minimal intervention required from their provider.
  1. Minimum wage compliance

From April 2023, the UK increased both National Living Wage and National Minimum Wage, over a range of categories, including experienced adult workers, and workers under the age of 18, with different rates applied depending on age. 

For employers, this can require a broad scale reassessment of employee wages for all categories and contracts. Working on a case-by-case basis is slow and inefficient, and any missed employees can open the business up to penalties.

  • BrightPay automates this crucial process, revising all internal rates and calculations in line with the UK’s changing rules, including up-to-date tax year codes and rates, the latest National Minimum/Living Wage rates and any relevant age bracket changes. 
  • Using BrightPay's integration with Modulr, businesses can create and send payment requests directly from BrightPay. Payee information and amounts are automatically populated using the data from your payroll, creating a simpler, faster, and more efficient way to pay employees on time and in accordance with requirements​​.

De-risk your payroll process

As payroll regulation becomes more complex, payroll penalties present a significant risk for employers at a time when they need to be focusing on their business. Accountants and payroll bureaus have the opportunity to provide valuable peace of mind and simplify clients’ processes, but this requires the right tools.

BrightPay payroll software enables you and your clients to streamline every element of your compliance, making it faster and easier for your clients to stay compliant without adding extra manual work or review. 

To find out how BrightPay can help you and your clients avoid penalties and stress, why not book a free online demo of our software. We also offer 60-day free trials if you would like to try it for yourself. There’s no cost and with no commitments, just an effortless changeover.