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Payroll health checks needed amidst tax cuts and minimum wage rises

Posted By:
Baker Tilly Mooney Moore

3rd Apr 2024

The ending of the tax year and the beginning of a new one brings with it an uptick in the minimum wage. While the rise in the minimum wage is welcome news for employees, it can create something of a headache for employers trying to stay on top of their payroll department, especially when paired with two recent changes to National Insurance rates.

It is imperative that companies carry out a health check of their payroll functions amidst all of these changes lest any of them slip through the net and land them in hot water. Recently, we have seen HMRC cracking down on offenders, especially when it comes to failure to pay the minimum wage. In February, 524 companies were named by HMRC for failure to pay the rate, with 172,000 workers estimated to have been out of pocket by a cumulative total of £16 million.

Payroll is simultaneously becoming one of the more complex and time-intensive aspects of running an owner-managed business. Ensuring that your business is covered – accounting for changes in pension regulation, minimum wage rates, and National Insurance rates is just a fraction of the overall function. It is thus easy to understand how mistakes happen, but with those mistakes now being monitored more than ever, and the punishments for falling foul of regulation stricter than before, it is perfectly understandable that a trend of companies outsourcing their payroll management has begun to emerge.

The accountancy market has also come through some turbulent times in recent years, with skills and knowledge gaps making it hard to attract and/or retain the right staff, meaning that outsourcing has become a trend not only in payroll services, but across accounting in areas such as bookkeeping and VAT compliance as well. With so much complexity involved in the management of any company’s payroll – with variabilities outside of tax and wage rate changes including maternity leave, sick pay, and managing pensions payments – it is perhaps no surprise that some companies have found themselves unable to meet their staffing needs in this area.

What we have seen is that this outsourcing has come at a great benefit, especially in owner-managed businesses. With the stresses and complexities of managing the payroll taken out of their hands, owner-managers become free to return to spending their time developing the actual function of their business and ensuring the smooth running of operations elsewhere within the company.

If payroll particularities continue to grow in complexity through tax, wage, and pension changes, staffing challenges persist, and owners-managers continue to testify to the benefits of outsourcing then there appears to be no reason why the outsourcing trend will slow down in the near future.