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Time for a new payroll process?

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A recent experience of a client being selected for a National Minimum Wage review by HMRC led me to recommend some changes to their payroll process.

Like many businesses this one paid its staff by the day and adjusted for absences such as unpaid sick. Some of the staff were at or just above the minimum wage for their age, so increasing the risk of an error pushing them below the minimum. HMRC conducted a check which spanned several months, with much to-ing and fro-ing over detail and found some errors which had resulted in a few staff being underpaid small amounts.

Having gone through the results with the client I suggested some changes to the payroll process:

  1. Stop basing pay on a daily rate, pay by the hour instead.
  2. Implement a simple timesheet process, where hours per day are recorded and the employee signs it at the end of the pay period as a correct record of hours worked.
  3. Where staff are on piece work, ensure the equivalent hourly rate is calculated to check it is above the minimum wage.
  4. Check each month for staff birthdays or other changes in circumstances that might change their minimum wage level.

So if you pay by the day, it is worth checking you can easily produce records of the actual hours worked. My client has only a few employees, so can manage with a paper record, if you have enough staff to warrant a computerised time recording system, this may be worth considering.

Chris Dixon, Eightoaks
chris.dixon@eightoaks.ltd.uk


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