The first week of September marks National Payroll Week, and it is the 26th year it has been observed.
It serves as an ideal prompt to run through the payroll tasks that busy owners often let slip, and to make sure the basics are nailed down before a small oversight becomes an expensive problem.
We are going to highlight your core duties, practical record-keeping rules, the devolved differences to watch for, and the simple checks you should carry out right now to ensure that you stay compliant and engage in payroll best practice.
What are my payroll obligations?
At its simplest, your obligation is to pay staff correctly and on time.
That means complying with the National Minimum Wage (NMW) or National Living Wage (NLW) and ensuring pensions, National Insurance and other statutory deductions are calculated, paid and reported accurately.
The current rates of NWM and NLM are:
Birthday pay changes are a surprisingly common trap.
If an employee turns 18 or 21 while employed, their pay band must be changed from their birthday onwards.
If you fail to do so and you risk backpay liabilities and unhappy staff.
Likewise, automatic pension enrolment moves quickly and you need to make sure it happens when it is supposed to.
Workers aged 22–65 who earn more than £123 per week must be enrolled on the workplace pension within one month of starting.
The minimum total contribution is eight per cent of qualifying earnings, usually made up of at least three per cent from the employer and five per cent from the employee.
Employers can of course contribute more and reduce the employee element, provided the combined minimum is maintained.
If you hire graduates, don’t forget student-loan deductions.
Repayments are taken through payroll once earnings exceed plan thresholds.
These are charged based on the total annual salary that a graduate is making, at which point they will be made to pay nine per cent of the income earned over the threshold back to the Government.
The only exception is for those on a Postgraduate Loan plan, where only six per cent of income gets paid back.
Current thresholds are:
| Plan type | Yearly income threshold | Monthly income threshold | Weekly income threshold |
| Plan 1 | £26,065 | £2,172 | £501 |
| Plan 2 | £28,470 | £2,372 | £547 |
| Plan 4 | £32,745 | £2,728 | £629 |
| Plan 5 | £25,000 | £2,083 | £480 |
| Postgraduate Loan | £21,000 | £1,750 | £403 |
Interest rates also differ as undergraduate plans typically carry 3.2 per cent interest, while the Postgraduate Loan attracts 6.2 per cent.
Which plan an individual is on depends on when they began their course and the nature of their study, so always be sure to check the employee’s paperwork rather than guessing their plan type.
How to keep payroll records in good order
Record-keeping and retention is where many employers stumble.
The Chartered Institute of Payroll Professionals (CIPP) found only 65 per cent of businesses use fully digital systems, with 28 per cent relying on a mixture of digital and paper systems.
Alarmingly, only six per cent of organisations keep both physical and digital copies of all payroll information.
This stratification of information creates a real risk of data loss or gaps when an enquiry arrives.
It is also important that you keep payroll records for the current tax year and the previous six tax years.
That window gives you the ability to answer HM Revenue and Customs queries, correct mistakes, and demonstrate compliance.
The good news is improvement is underway as there’s been a 26.49 per cent rise in organisations properly retaining payroll records, but many firms still fall short of best practice.
What differs across the UK?
Payroll obligations don’t look identical in every nation of the UK as the devolved administrations introduce practical variations that employers should factor into their processes.
For businesses that operate in Wales, the Welsh Language Measure 2011 means that public bodies and some private employers must translate core employment documents into Welsh when they’re issued to multiple people or on request.
Payslips are included in that requirement, so you must be prepared to provide a Welsh version if asked.
If you operate in Wales, adopting bilingual payslips as standard is a simple way to show cultural respect and reduce the risk of later compliance issues.
The payroll difference in Scotland is also rooted in culture.
While Scottish employers follow the UK’s NMW and NLW framework, an increasing number opt to pay the Real Living Wage, which is currently £12.60 per hour rather than the statutory £12.21 NLW.
You are not obliged to adopt the Real Living Wage, but if local competitors offer higher pay, it may make recruiting and retaining staff harder.
Before committing to a higher rate, seek professional advice to ensure any uplift is affordable and sustainable.
Our team supports businesses with payroll set-up, compliance checks and on-going administration.
We’ll help you adopt processes that suit your size and sector, ensure pension enrolment and student deductions are handled correctly, and keep your record-retention practices watertight.
Keep payroll compliant wherever you operate. Speak to our team today!
