Avoid Common Mistakes When Paying Employees – Don’t Get Named & Shamed!

In July 2018, the UK Government’s Department for Business, Energy & Industrial Strategy suspended the it’s naming and shaming regime.  However, the list has returned on 31st December 2020 and includes 139 employers that have failed to pay £6.7 million to over 95,000 workers.

The headline starters ‘Rogue employers named…’ and includes well-known household named such as Tesco, Pizza Hut and Costco.

Whilst it’s difficult to establish whether this was intentional or not, many of these employers will have made genuine mistakes and got caught up in complex changes of legislation.  However, the damage that such as headline does (with local newspapers picking up smaller companies and employees sharing via social media to family/friends) is undisputed.

Talk Staff’s Payroll Division supports clients with outsourced payroll and regularly prevents obvious mistakes from being made.  Nevertheless, we work hard to educate clients and support them to rectify any problems that arise, which we are very proud of… including clients that are new to us.

Common Payroll Mistakes to Avoid

1. Working Time

Monitor all hours and don’t rely on contract working.  Employees may often work through breaks, arrive early to tackle a project to achieve a deadline or stay late to ensure PPE is dealt with.

For remote workers; answering emails outside of core hours may also be included within the calculation completed by HMRC and may result in their overall pay (whether paid as a salary or hourly rate) being reduced below the minimum thresholds.

Often employees that are paid daily rates can be caught out by simply working ‘more than usual’ hours and we would always recommend tracking hours to ensure a clear record is kept to prove otherwise if a dispute was to arise.

2. Employee Birthdays

If you have employees below the highest bracket of National Living Wage (23+ from April 2021), then you should have a process in place to track changes to employee ages.

Be careful though, if you have a written list of all employee date of birth’s then this should be stored in a compliant way as it contains sensitive information and subject to the General Data Protection Regulations (GDPR).

We recommend the use of a Cloud-Based HR System, which often also gives you the ability to track holidays and changes to employee information too.

Get in touch if you’d like Talk Staff to introduce you to our trusted software partner!

3. Salary Deductions

Increasing Pension Contributions or choosing Childcare Vouchers are the most common types of deductions that we see with employers that we support.  However, this must not take the employees average hourly pay down below the National Minimum Wage (NMW) / National Living Wage (NLW).

Making these mistakes alone, as an isolated issue, may not result in a fine but will likely see your name added to a published list of employers.

4. Keep Records

You must keep records of all pay for a minimum of 3 years (plus the current year) and considered a criminal offence if you do not do so.

If you were subject to HMRC’s investigations, if you’re unable to present this information and prove that NMW has been achieved then you will likely be assumed to have underpaid employees.

5. Payslip Breakdown

By law, a payslip must show a breakdown of hours worked e.g. if paid an hourly rate and where elements are paid such as overtime or different shifts.

You may need to issue a statement if fixed deductions are to be taken and should consult a payroll professional if you are unsure of any elements not listed in this article.  As this is written in short form, it should not be relied upon in its entirety.

Author: Gary Parsons
Gary is MD & Co-Founder at Talk Staff, passionate about the role that people play in helping build long-term and sustainable businesses. He sits on local business advisory boards and has been key in leading the growth of Talk Staff from inception in 2009.
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