Mitigating Payroll Risks: Proactive Steps for Ensuring Accuracy and Compliance
by on July 4, 2023
Compliance is at the very bedrock of the services that umbrella companies provide. Without it, contractors can’t be sure that they’re not involved with a disguised remuneration scheme, and recruitment agencies are at risk of legal and financial consequences. When it comes to payslips, it’s the responsibility of the umbrella company to be accurate and transparent. Recently, however, some umbrella companies have allegedly contravened payslip standards. Here we look at what’s going on and how you can ensure that your payslip provider is accurate and compliant.
Identifying the problem
The FCSA’s Code of Compliance features a mandatory questionnaire that all applicants for its Accreditation must complete as part of their supporting evidence, before they are approved.
It’s come to light that recently two umbrella companies have allegedly breached sections of the organisation’s strict code, namely:
Section A: Take on procedures
A3: Confirm that your financial illustration provided to every potential employee:
C: If it includes expenses in the calculation they are representative of the usual level of expenses claimed and reflect the individual’s actual circumstances;
A17: Confirm the pay reconciliation you provide to the employee transparently show an itemised breakdown of all employer costs?
Allegations have arisen that some payslips are ‘generic’ and do not provide an itemised breakdown of deductions, and questions are being raised as to their compliance.
For clarity, every deduction made by an umbrella company must be itemised on a contractor’s payslip.
What can you do?
As a payroll provider working closely and compliantly with recruitment agencies around the UK, Payme strives to uphold the highest and most rigorous standards possible. We are accredited members of the FCSA and as such we have demonstrated our commitment not only to compliance but also to our high levels of accuracy when processing payrolls.
Here’s what we think is important that agencies ask themselves when choosing a payroll partner in order to mitigate their own risks and those of the contractors which they deal with.
Does your payroll provider accurately calculate your contractors’ taxes?
Each payslip should contain a complete and accurate breakdown of exactly what tax and NI contributions your contractors will pay. Their tax code determines exactly how much. It should also detail any workplace pension contributions and student loan repayments.
Does your payroll provider accurately report back to HMRC?
On each pay run your provider must report all deductions to HMRC detailing each contractors’ pay, tax and NI. If there are any PAYE reduction claims these must also be reported to HMRC. If these submissions are late, penalties may be charged, so it’s important to get it right first time.
Does your payroll provider keep accurate records?
It’s vital that your payroll provider keeps accurate records in order that compliance is recorded. Do they keep details of contractors’ pay and deductions as well as any NI contributions they make?
Does your payroll provider keep up-to-date with tax legislation?
Tax legislation is complex and constantly changing and it can be difficult for agencies to keep up-to-date with the latest developments. That’s why a compliant payroll provider will pride themselves in keeping on top of each and every change and alter their policies and procedures accordingly.
Does your payroll provider detail each and every deduction on its payslip?
Payroll providers are under an obligation, both legally and morally, to itemise each and every deduction made on their payrolls, so that generic ‘charges’ cannot be hidden away. Every cost should be itemised and listed to avoid over charging or to hide illegal charges.
At Payme we take payroll provision seriously. We partner with over 250 UK recruitment agencies and organise payment for over 4,000 contractors each week, providing each and every one of them with a clear, itemised payslip which details every transaction, so they have the peace of mind that comes from legally maximising their income while staying on the right side of the tax man.
If you’re a recruiter and would like more information about how you can mitigate your payroll risks by partnering with Payme, call us on 0333 200 0845, email us at firstname.lastname@example.org or fill in the contact form here.