UK payroll practices are evolving to keep up with technological advancements and changes in government requirements.
One such shift is towards real-time payroll (RTP), a system that can offer significant benefits to businesses of all sizes, from streamlining HR operations to ensuring better compliance with regulatory obligations. The government’s push towards Real-Time Information (RTI) filing is aimed at providing more transparency and accuracy for both employers and employees.
This guide will explain what real-time payroll is, the advantages it offers to businesses and what HR managers need to consider for a successful implementation.
What is real-time payroll? (and why should you care?)
Real-time payroll is a system where payroll data is reported to HMRC in real time, every time employees are paid. Traditionally, payroll information was collated and sent at the end of the tax year, but RTP requires that all pay details are submitted immediately, each time a payroll is run. This means information such as employee wages, deductions and tax payments are made visible to HMRC without delay.
Real-time payroll aims to make payroll processes more transparent, accurate and up-to-date. This change, part of HMRC’s Real-Time Information initiative, is particularly useful for businesses of all sizes, from large corporations to SMEs (small and medium-sized enterprises). With RTP, employers can ensure their payroll data is always current and compliant, helping prevent discrepancies and misunderstandings.
The benefits of real-time payroll for your business
1. Stay compliant, avoid penalties
One of the most significant benefits of real-time payroll is improved compliance. With RTI, HMRC receives accurate and up-to-date information, which helps businesses avoid errors and penalties for incorrect or late submissions.
2. Gain control over cash flow
Real-time payroll allows for better forecasting and planning, giving finance teams more clarity over cash flow. By having payroll figures regularly updated, businesses can anticipate their cash requirements and plan with clarity.
3. Keep your employees happy and paid on time
An efficient payroll system contributes significantly to a positive employee experience. When payroll is managed in real time, discrepancies such as tax code changes or adjustments in pay are identified and resolved quickly. This ensures employees are paid accurately and on time as well as building trust and confidence in the company.
4. Lighten your administrative load
Real-time payroll reduces the administrative load that comes from end-of-year tax reporting. With everything being updated throughout the year, there is less need to scramble during the tax filing period. Additionally, automatic updates mean that HR teams spend less time manually entering data, reducing the likelihood of human errors.
5. Simplify benefits reporting
The up-to-date information provided by real-time payroll makes it easier for businesses to report employee earnings accurately. This is particularly helpful when employees need information for benefits, such as Universal Credit.
Key points for setting up real-time payroll
Implementing real-time payroll can bring numerous benefits, but it does require careful planning. Here are some important considerations for businesses:
- Choosing the right software: Not all payroll software is created equal. You will need HR services for SMEs that are HMRC-compliant and capable of managing the real-time reporting requirements.
- Training staff: Ensure that payroll and HR teams are adequately trained to understand how real-time submissions work and how they fit into the overall payroll process. This might involve bringing in external training or relying on your software provider’s support resources.
- Reviewing current processes: Implementing RTP will require a review of current payroll practices. It’s important to ensure that data is consistently accurate and that your payroll process is optimised to facilitate real-time updates. Reviewing your payroll timeline and ensuring appropriate checks are in place will help avoid costly mistakes.
- Data security: As payroll processes become more real-time and data-driven, securing employee information becomes more crucial. Make sure your payroll software complies with GDPR and has strong security features in place.
Why real-time payroll is worth your attention
Real-time payroll represents a significant step forward in the way payroll is managed and reported. It offers businesses the chance to enhance compliance, reduce administrative burden and improve overall efficiency. For HR managers and finance experts, implementing RTP could mean fewer headaches during tax season and happier employees to boot.
If you’re considering transitioning to real-time payroll, start by evaluating your current system and choosing software that aligns with HMRC requirements. With the right preparation and tools, RTP could be a simple and effective way to improve your company’s payroll process.
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