With the introduction of Real Time Information (RTI) and the up and coming Auto Enrolment there is no better time to consider Outsourcing your payroll.  Below are 10 factors to consider:

1. Cost. Big businesses can afford to maintain big payroll departments. For small businesses, however, an in-house payroll service is a money burner. If your business has fewer than 20 employees, there's a very good chance that you can save money by outsourcing your payroll operations. Do the math. Figure out how many hours your employees are devoting to payroll-related activities, calculate how much you're spending and compare the amount to the plans offered by several payroll-services providers. Also, be sure to factor in the money your business spends on tasks like printing and distributing reports, creating tax documents, and the like. You'll probably be surprised by the result.

2. Productivity. Payroll management is a time-consuming activity. With this burden removed, your employees can focus on doing more productive things, and you may even be able to trim your staff's size.

3. Accuracy. Payroll mistakes can be painful, angering employees and — more ominously — the government. A good payroll-services provider is far less likely to make a serious error than your in-house staff. Furthermore, if a big mistake is made, you can seek financial restitution from the provider — something you can't do with your own employees.

4. Reliability. In-house payroll activities function as reliably as the people doing the work. With a payroll service, output speed and quality won't vary in accordance with vacations and illnesses. You also won't have to spend time helping new hires understand your business's payroll system.

5. Speed. Since payroll-services providers are specialists with vast technical resources at their disposal, they can process even the most complex payrolls at lightning-fast speed. Unlike most employers, they can also accommodate a temporary influx of seasonal workers without acquiring new systems that will remain dormant the rest of the year.

6. Insight. A good payroll-services provider will be fully trained in all the ins and outs of payroll-related legislation changes. Your employees could try to achieve the same level of understanding, but it would take a considerable investment in time and effort.

7. Accountability. If pay checks are delayed or paperwork is mishandled, it's the payroll-services provider's responsibility to fix things. If the provider can't (or won't) remedy the situation to your satisfaction, you can sue. You can also switch to another service provider in a snap — even if you have to eat a portion of an existing service contract. Try firing, hiring and training an in-house payroll staff in anything less than several weeks.

8. Flexibility. Boring, repetitive payroll work can act like an anchor on your business. Your staff, when freed of rote payroll responsibilities, will be free to focus on other, more creative work.

9. Security. Do you have the time and energy to closely supervise your business's payroll for time and rate abuses and other shady activities? Most payroll services firms have technologies that can spot and alert clients to various types of payroll fraud, such as payment manipulation and "phantom workers."

10. Worry. There's a lot to be said for the peace of mind that outsourcing payroll services can bring to a business owner or manager. No headaches, no hassles: You're left to focus on running a profitable business.

If you would like to discuss your payroll requirements please contact Simon Palmer @ the Payroll Department on 01179353500

Only a day to go before Real Time Information (RTI) is introduced, and businesses across the country will have to begin reporting payroll information to HMRC on or before each time they pay employees. 

Shockingly, almost 18% of businesses still class themselves as not being prepared for the change, and only 50% of participants class themselves as being fully prepared. The remaining 32% classify themselves as either not being required to submit RTI until October due to having over 5,000 employees, or RTI not being relevant to them for reasons such as they employ no staff (Source: The Forum of Private Businesses).

RTI is the biggest change to payroll since PAYE was introduced in 1944 and will affect over 1.4 million businesses from this Saturday (6th April). At Qtac Payroll Products we have been at the forefront of RTI for over 2 years, preparing our Payroll Software, whilst providing RTI advice, support and training. HMRC contacted all businesses in October and again in February urging them to prepare but these findings show that many are still at risk of being unprepared for the deadline.

If you still feel as though you are unprepared for RTI there are a 5 steps you can take to get ready. First you need to make sure you have RTI compliant payroll software in place at your organisation if you run your payroll in-house. You also need to make sure you educate yourself on the changes RTI will bring and prepare your data – data cleanliness will be vital in making sure your RTI submissions are accepted by HMRC.

Only a day to go before Real Time Information (RTI) is introduced, and businesses across the country will have to begin reporting payroll information to HMRC on or before each time they pay employees. 

Shockingly, almost 18% of businesses still class themselves as not being prepared for the change, and only 50% of participants class themselves as being fully prepared. The remaining 32% classify themselves as either not being required to submit RTI until October due to having over 5,000 employees, or RTI not being relevant to them for reasons such as they employ no staff (Source: The Forum of Private Businesses).

RTI is the biggest change to payroll since PAYE was introduced in 1944 and will affect over 1.4 million businesses from this Saturday (6th April). At Qtac Payroll Products we have been at the forefront of RTI for over 2 years, preparing our Payroll Software, whilst providing RTI advice, support and training. HMRC contacted all businesses in October and again in February urging them to prepare but these findings show that many are still at risk of being unprepared for the deadline.

If you still feel as though you are unprepared for RTI there are a few steps you can take to get ready. First you need to make sure you have RTI compliant payroll software in place at your organisation if you run your payroll in-house. You also need to make sure you educate yourself on the changes RTI will bring and prepare your data – data cleanliness will be vital in making sure your RTI submissions are accepted by HMRC.

1.        Don’t Panic and start preparing your business now. The majority of businesses will need to start reporting under RTI from April 2013.  HMRC will move larger companies onto RTI between May–September 2013.  It is recommended that the required changes to payroll processes and procedures, including assessing current and/or introducing new payroll software, be implemented as soon as possible.

2.        Check if you can accommodate RTI in your existing payroll procedures. You need to establish how easy it will be to slot RTI into your current payroll solution. This is where an RTI ready payroll system like Qtac Payroll, will make it really easy.

3.        Check employee details are accurate. It is really important records match up with those held by HMRC as information will be submitted much more frequently. Qtac Payroll’s RTI Data check which will allow you to detect all possible discrepancies with a single click of the mouse.

4.        RTI payroll data must now be sent to HMRC electronically. It is no longer possible for businesses to manually enter the data into the HMRC website. Qtac Payroll software can send your information directly to HMRC.

5.        When you first use RTI, HMRC will align its records of employees with the businesses’ own payroll records. This is important, because it ensures the data submitted gets recorded correctly by HMRC. Qtac Payroll software and its free experienced support will guide you through this process, helping you to identify and fix any issues quickly.

‘There are a few new terms being used in regards to RTI and need explaining what they mean’.

EAS - Employer Alignment Submission:

Larger employers will have to submit an Employer Alignment to HMRC as soon as possible after they receive the invitation to join RTI.  The EAS must be sent to HMRC before the employer can send their Full Payment Submission (FPS) for the firstpay period under RTI.Additionally, EAS employers must send extra FPSs for employees who have been paid in the tax year, and will not be paid again in the firstmonth, such as:

• Individuals who have left since the start of the tax year.
• Individuals who are irregularly paid.
• Individuals who are paid less frequently than monthly

EPS - Employer Payment Summary:

Employers will use the Employer Payment Summary (EPS) to report

·         Statutory Payments recovered

·         NIC Compensation on Statutory Payments

·         CIS Deductions suffered

·         Deductions an employer is entitled to make under the Regional Employer NICs Holiday for New Businesses

This submission will allow HMRC to offset these against any payments due. The submission will also include:

·         Employer information (HMRC office number, PAYE reference, Accounts Office reference and the income tax year to which the submission relates)

·         Scheme information - in particular where the PAYE scheme has ceased

Note: If no payments are made within a pay period and no FPS is submitted, the employer will submit an EPS to show that no return or payment is due for that pay period.

FPS - Full Payment Submission:

This is the name for the regular online submissions to HMRC, containing pay and deduction details for the employees paid as part of that submission. The firstFPS(for businesses who don’t have to submit an EAS), also contains details of all employees for that tax year, including starters, leavers and people who haven’t been paid yet that tax year.See for the data required as part of Payroll Alignment.The second and subsequent FPSs only contain the pay and deduction details for the employees paid that period.

‘Hash #’

To bring the data back together from the RTI & Bacs Submissions, HMRC will use the hash. Payroll software such as Qtac Payroll will be responsible for inserting a cross reference hashinto the FPS for employees that are paid by direct BACS. When your payroll software passes information to the Bacs Software in preparation for submission to Bacs, it will need to include the four character random string. The Bacs software will then build the random string into field 7 of the Standard 18 file. The hash is constructed from the 4 character random string, sort code of the originators bank, the sort code of the recipient’s bank, the amount of the payment in pence. A 256 bit secure hash algorithm (SHA-256) is used to produce the hash.

‘National Insurance Number Verification’

As part of the Payroll Alignment process, HMRC will be offering a new NINO verificationservice, where HMRC will confirmwhich National Insurance Number should be used for a particular individual.

‘Split Scheme’

Basically, a split scheme is the situation where “it is impossible or impracticable to consolidate the full PAYE scheme into a single submission for alignment”. Example scenarios include a single PAYE Scheme which is processed in separate payroll software, or by different payroll bureaus, or where the scheme contains employees with different pay frequencies, and where consolidation would be impracticable.There is another scenario, where the submission would exceed the maximum size attachment permitted by the Government Gateway, but this is unlikely to occur.

‘RTI (Real Time Information) represents the biggest change for payroll since the introduction of Pay as You Earn (PAYE) in 1944. It affects any business operating a PAYE system for its employees and/or directors’. RTI is a move away from notifying HMRC about the payments an employer has made through a year-end return, to regular online submissions as each pay period is paid. It is essentially replacing the stressful year-end P35 submission in April/May with a submission on or before you pay your employees for a period (whether daily, weekly, fortnightly, 4 weekly monthly, quarterly, half-yearly or annually).  

Why RTI?

RTI is designed to make the PAYE process simpler for everyone, as well as it being faster and more accurate, it should reduce the number of coding notice errors and allow HMRC to chase late payments more effectively. RTI is also being introduced in parallel with the Governments flagship policy, the new single welfare payment Universal Credit. The plan is to have both fully operational from October 2013. The drive is that people who are looking for work, who are casual workers, or on a low income will receive a monthly payment that reflects their present employment circumstances.

No Need to Panic

‘Don’t panic, it’s easier than you think. RTI should make PAYE more efficient and accurate’.

There is no change to the way tax and national insurance are calculated, or to the way deductions are made. There is no need to change payment dates or payroll calculations. The only thing that's changing is how and when information is sent to HMRC.  Qtac Payroll Products can help you be RTI compliant with every payroll run. It is easy to use and makes RTI and PAYE simple.

Real Time Information -The Main Changes for Payroll?

• RTI will become part of the payroll process. Whenever a payroll run is carried out, RTI data on the payments will need to be submitted before or when employees are paid. This includes information about starters, leavers, who has been paid, what was deducted and how much they were paid.

• RTI will simplify end of year payroll paperwork as it eliminates the need for annual payroll returns, since employers will supply HMRC with up to date information each time a payroll is run. The obligation to produce a P60 for employees will remain.

• Less paperwork when employees leave or join. RTI will submit details of employees who have started or left, so P45 & P46 forms will no longer need to be submitted to HMRC. However employers will still have to pass on a P45 to leavers.

• PAYE data will need to be “aligned” with HMRC. RTI will ensure the HMRC database matches the employee information held by employers 

• PAYE payments to HMRC will need to balance to the actual amounts deducted.  HMRC will expect monthly/quarterly payments to agree to the amounts reported via FPS submissions.  Any adjustments in regard to statutory payment recoveries, CIS and/or NICs payment holiday will need to be reported via an EPS submission. (Employer Payment Summary) 

• Where you offer a payroll bureau service, you will need to ensure that your clients provide you with the new data item fields for all new starters.  You should also relay the importance of accurate data. 

Customers of Qtac Payroll products have so far submitted 7 Full Payment Submission documents and one customer has submitted and EAS containing over 8,000 employees.

At least 3 of these submissions have been made including the BACS Hash Tag field because the employees were paid through the Direct BACS channel, and two different BACSTEL-IP suppliers have been used for these submissions.

There is one further customer to be ‘on-boarded’ to RTI this month, and they will be using yet another BACSTEL-IP supplier for their BACS submissions.

These customers will continue RTI submissions for their ‘on-boarded’ clients and will increase the number of clients for whom they make RTI submissions during the year.

We have yet to have a customer submit an Employer Payment Summary.

We have two further customers joining the pilot in July who will be advising us on our support documentation in order provide all our customers with a smooth transition to RTI for the 2013-2014 tax year.

In order to facilitate your migration to RTI, which is due to come into effect from April 2013, the latest version of the QTAC Payroll software for 2012-2013 tax year has had additional fields added. Some of these will be need to be completed when you will be legally required to submit RTI information to HMRC from April 2013.

We have also provided tools in the Company>Bulk Amendments menu options to help you set these fields.

We strongly suggest that you obtain the required information and enter it into your payroll before the end of the 2012-2013 tax year.

The new fields are:-

Normal Hours Worked

You will find that all employees are set to the ‘30 hours or more’ option automatically.

You should use whichever of the four bandings is most appropriate to the individual, according to the number of hours you expect them to normally work in a week.

If your employee is on paid leave, for example annual leave or sick leave, please report the normal hours worked, given its ordinary everyday meaning of regularly, usually, typically. If you do not consider any of the first 3 options are appropriate then select ‘Other’.

In the case of a teacher who normally works 30 or more hours a week during term time then that is the selection that should be used during school holidays.

Irregular Payment

HMRC will check if employees have not been paid for a specific period of time (expected to be 13 weeks) and will treat them as having left that employment. To avoid that happening for employees who do not get paid regularly, check the irregular payment indicator in the employee Pay Rates tab in Employee Maintenance. An amendment will not be classed as an irregular payment.

Passport Number

As an employer, you need to ensure that each prospective worker is eligible to work in the UK before their employment commences. When you make the necessary checks, if a prospective employee provides a passport the number should be noted and recorded in this field. Note that this is not a mandatory field and is not required for existing employees.

Payroll ID

HMRC will no longer be using the employee works/staff number to recognise employee employments within a company. Where an employee has two or more separate employments within a company these should be distinguished by providing a unique entry in the Payroll ID field.  Where an employee has two separate employment contracts with the same employer the Payroll ID will indicate to HMRC which employment a submission relates to. 

Note that within our software if a new employee is added with no NI number a random PayrollID will be generated and used to identify the employee in all future submissions to HMRC.

Existing Employee Data

We have provided a report which will be found in the menu option Reports>Employee>RTI Data Check to indicate employees where their current information may be incorrect or incomplete. This will indicate employees who do NOT have:-

full forenames, only initials

an employment start date

a date of birth, or the date of birth is over 140 years ago

an NI number 

any address where the employee has no NI number

The data for these employees should be corrected before you start submitting RTI information since this type of data is likely to cause a rejection of the RTI messages, or a query from HMRC.

The guidance from HMRC relating to this information is as follows:-

Forenames

Always provide the individual's full and official forename(s) and not just their initial(s).

Make sure that their forename(s) and surname are in the correct fields.

Check that you have spelt the names correctly. Include a middle name if the person has one, for example 'John Michael Smith'. Simply putting an initial such as 'J' makes it difficult for HMRC to trace the correct account.

Check an official document to ensure that you have spelt the name right - 'Smith' and not 'Smyth'.

Date of birth

Always provide the correct date of birth. Do not enter a default date or make up date of birth

National Insurance number

Always enter the correct National Insurance number. Do not make up a number, use a default number or use someone else's. The number must begin with two letters, followed by six digits and end with a letter which will be either A, B, C or D. No matter what the reasons are that lead to uncertainty over an employee's National Insurance number, you must take action to ensure you give HMRC the correct number.

If you have any doubts about the validity of a National Insurance number you can trace the correct number using the HMRC National Insurance tracing service by completing Form CA6855, which is available to download from the HMRC website http://www.hmrc.gov.uk/forms/ca6855.pdf

Verification

To make sure you have the correct details, wherever possible please check the information you need from an official source such as:

• HMRC and /or Department for Work and Pensions documentation

• Passport documentation

• a birth certificate

Recent Developments

P45 to be retained

After consultation with employers HMRC have decided that the P45 starter/leaver process will remain unchanged until all employers are submitting RTI information. The process will be reviewed again at that point in time.

However, note that the submission of P45(1) and P45(3) information to HMRC will not be necessary when a company is submitting RTI information, and that the paper forms are being retained to achieve constancy of information transfer between employers when employees change employments.

RTI Pilot goes live

By 11:00 am on the 11th April 2012 the first 2 RTI submissions had been made to HMRC.

In order to facilitate your migration to RTI, which is due to come into effect from April 2013, the latest version of the QTAC Payroll software for 2012-2013 tax year has had additional fields added. Some of these will be need to be completed when you will be legally required to submit RTI information to HMRC from April 2013.

We have also provided tools in the Company>Bulk Amendments menu options to help you set these fields.

We strongly suggest that you obtain the required information and enter it into your payroll before the end of the 2012-2013 tax year.

The new fields are:-

Normal Hours Worked

You will find that all employees are set to the ‘30 hours or more’ option automatically.

You should use whichever of the four bandings is most appropriate to the individual, according to the number of hours you expect them to normally work in a week.

If your employee is on paid leave, for example annual leave or sick leave, please report the normal hours worked, given its ordinary everyday meaning of regularly, usually, typically. If you do not consider any of the first 3 options are appropriate then select ‘Other’.

In the case of a teacher who normally works 30 or more hours a week during term time then that is the selection that should be used during school holidays.

Irregular Payment

HMRC will check if employees have not been paid for a specific period of time (expected to be 13 weeks) and will treat them as having left that employment. To avoid that happening for employees who do not get paid regularly, check the irregular payment indicator in the employee Pay Rates tab in Employee Maintenance. An amendment will not be classed as an irregular payment.

Passport Number

As an employer, you need to ensure that each prospective worker is eligible to work in the UK before their employment commences. When you make the necessary checks, if a prospective employee provides a passport the number should be noted and recorded in this field. Note that this is not a mandatory field and is not required for existing employees.

Payroll ID

HMRC will no longer be using the employee works/staff number to recognise employee employments within a company. Where an employee has two or more separate employments within a company these should be distinguished by providing a unique entry in the Payroll ID field.  Where an employee has two separate employment contracts with the same employer the Payroll ID will indicate to HMRC which employment a submission relates to. 

Note that within our software if a new employee is added with no NI number a random PayrollID will be generated and used to identify the employee in all future submissions to HMRC.

Existing Employee Data

We have provided a report which will be found in the menu option Reports>Employee>RTI Data Check to indicate employees where their current information may be incorrect or incomplete. This will indicate employees who do NOT have:-

full forenames, only initials

an employment start date

a date of birth, or the date of birth is over 140 years ago

an NI number 

any address where the employee has no NI number

The data for these employees should be corrected before you start submitting RTI information since this type of data is likely to cause a rejection of the RTI messages, or a query from HMRC.

The guidance from HMRC relating to this information is as follows:-

Forenames

Always provide the individual's full and official forename(s) and not just their initial(s).

Make sure that their forename(s) and surname are in the correct fields.

Check that you have spelt the names correctly. Include a middle name if the person has one, for example 'John Michael Smith'. Simply putting an initial such as 'J' makes it difficult for HMRC to trace the correct account.

Check an official document to ensure that you have spelt the name right - 'Smith' and not 'Smyth'.

Date of birth

Always provide the correct date of birth. Do not enter a default date or make up date of birth

National Insurance number

Always enter the correct National Insurance number. Do not make up a number, use a default number or use someone else's. The number must begin with two letters, followed by six digits and end with a letter which will be either A, B, C or D. No matter what the reasons are that lead to uncertainty over an employee's National Insurance number, you must take action to ensure you give HMRC the correct number.

If you have any doubts about the validity of a National Insurance number you can trace the correct number using the HMRC National Insurance tracing service by completing Form CA6855, which is available to download from the HMRC website http://www.hmrc.gov.uk/forms/ca6855.pdf

Verification

To make sure you have the correct details, wherever possible please check the information you need from an official source such as:

•HMRC and /or Department for Work and Pensions documentation

•Passport documentation

•a birth certificate

Recent Developments

P45 to be retained

After consultation with employers HMRC have decided that the P45 starter/leaver process will remain unchanged until all employers are submitting RTI information. The process will be reviewed again at that point in time.

However, note that the submission of P45(1) and P45(3) information to HMRC will not be necessary when a company is submitting RTI information, and that the paper forms are being retained to achieve constancy of information transfer between employers when employees change employments.

RTI Pilot goes live

By 11:00 am on the 11th April 2012 the first 2 RTI submissions had been made to HMRC.

The Pension Act 2011, entailing the automatic enrolment of eligible employees, constitutes a material change in the U.K. pension arrangement. The annual review, the objective of which is to allow for flexibility within the scheme to take account of economic or social pressures, has recently made a number of proposals.

The Government is required to review the thresholds each year to decide if any changes are required. It had been suggested that a longer period was preferable between reviews in order to maintain stability and future planning, however this was rejected and the annual review maintained.

A key thread running through the entire consultation is the overwhelming desire of all concerned to keep the process as simple as possible. The consensus favours the alignment of the automatic enrolment trigger points, with existing PAYE thresholds. 

The reasoning behind this is the widespread understanding and acceptance of these thresholds amongst employers and employees, thus making the education process easier than the apparent use of an arbitrary threshold and the consequent workload in explaining these thresholds. However, it is recognised that this link is not set in stone and is open for review depending on economic and social conditions.

The new automatic enrolment pension scheme is targeted at low to medium earners, who need to save more for their retirement. Whilst this may appear straightforward, the system has to be designed so that it does not in any way penalise certain groups of people, be that on reasons of income, sex, race, religion etc.

There was discussion around the pay reference period and it was accepted that the enrolment thresholds will be pro rata in line with the pay period, such as weekly, monthly paid. It should be noted that the regulations do not allow for a pay period of shorter than one week, even for irregular earning patterns.

The most favoured option is alignment with PAYE threshold for the automatic enrolment trigger and alignment with N.I. contributions for the qualifying earnings band.

The following is to be laid before parliament, for the 2012/2013 period.

•£8,105 for the automatic enrolment earnings band

•£5,564 for the lower limit of the qualifying earnings band.

•£42,475 for the upper limit of the qualifying earnings band.

More information can be found at: http://www.dwp.gov.uk/consultations/2011/auto-enrolment-revaluation.shtml