Is In House Payroll a good idea?

by | Mar 12, 2024 | News, Payroll

Is In House Payroll a good idea?

by | Mar 12, 2024 | News, Payroll

Don’t leave it to chance with in house payroll. Outsourcing button on a keyboard.

Here’s one reason why you might want to outsource to the professionals!

A client left us in May 2023 (weekly payroll week 9), because they were struggling financially and thought by taking Payroll back in house, they would be able to cut some of their costs.

Eleven months down the line, February 2024, they approached us asking if we could help them again and take over management of their payroll.

What had happened:

To facilitate the payroll in house, the Director appointed their administration manager to take on the responsibility of dealing with running the payroll. Like most administration staff, unfortunately, she had very little payroll experience, so was doing the best she could, with her limited knowledge and possibly a little help from their bookkeeper.

Once back in house (week 10) using Xero software she uploaded the *YTD (Year to Date) figures for all 6 employees. Unfortunately, the incorrect YTD figures were inputted into the system, showing that each employee had earned more than they had actually received. Obviously, meaning that each employee’s tax calculation, would be more than it should be.

*YTD Year to Date means the amount each employee had earned since the last tax year

The first week (week 10) running payroll the administrator realised that something wasn’t right as the tax calculations were too high. However, because of her lack of knowledge, after referral to the bookkeeper, she was recommended to manually amend the tax for each payroll to the correct amount, in the software, which she did, each and every week for the next 39 weeks!

A huge time-wasting exercise that did not resolve the underlying problem, because the gross earnings for each member of staff still showed higher on the system.

The issue was only taken seriously when one of the employees had looked at his HMRC portal and noticed that his recorded earnings were higher than he had actually received, which he reported to the company. Only then did they realise that this was a problem they didn’t know how to fix.

Had they reached the end of the tax year, HMRC would have looked at each member of staffs recorded earnings, which were artificially inflated in the software programme, and they would have amended their tax coding’s to recoup the tax that hadn’t been paid on the higher amount. This could have had a serious impact, not only for the staff, but also for the company and its relationship with its employees.

Luckily, having contacted us, we were able to identify the issue immediately and rerun all the payroll, from week 10, up to date. We also re-reported all 39 weeks, to HMRC, with the correct figures, ensuring that all tax payments were correct, removing the possibility of any unwarranted tax adjustments.

Overall, this change cost the company a lot of wasted man hours, not only running payroll, but also having to go back into the system to amend the tax paid, in effect double entry, plus the extra charges for the work we had to do to put it right.

So, don’t leave it to chance with in house payroll, outsourcing your payroll will save you money.
If you have any questions about payroll or would like a no-obligation quote JLP Payroll Services is happy to help.


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