3 Payroll Mistakes & How Recruitment Agencies Can Avoid Them

November 30, 2022

With the complexity of a recruitment agency’s payroll, it’s natural that some errors will crop up now and again.

However, three mistakes are commonly made by recruitment agencies and by taking steps to avoid them, you can minimise errors and ensure that your recruitment payroll runs smoothly.

Mistake #1: Inaccurately Tracking Employee Hours

Not only can incorrectly logging employee hours worked lead to your business overpaying employees, but it can also lead to tax for both you and your employee being messed up, thus causing a headache for everyone involved.

On top of that, agency payroll services incorrectly logging employee hours can also lead to your employees being underpaid, which can cause major issues for them in terms of paying bills and their cost of living. Once the recruitment payroll has made this error once, it leads to lower staff morale and trust in the company.

Things to look out for when logging employee hours are:

Employees working through breaks
Logging the correct overtime rate
Employees travelling between different work sites
Employees taking part in extra activities related to work, such as training

If a recruitment agency payroll makes a mistake with employee wages being overpaid or underpaid, rectifying it as soon as possible is essential. If you owe an employee money, it is vital to pay them as quickly as possible and be upfront with communication.

You must also rectify any issues regarding contributions to HMRC as soon as possible, as continued problems can lead to penalties. Employing agency payroll services means you will have a fresh set of expert eyes to look at your processes, identify the weak points and rectify them to ensure maximum efficiency.

Mistake #2: Gaps In Records

Agency payroll services require a lot of paperwork, and finding gaps in records can be a common problem, although it is easily avoided. The finer details really are most important, and it is the responsibility of the recruitment agency payroll team to ensure that all documentation and files are organised and entirely up to date.

You must also store your past documents for three years, commencing from the end of the tax year that they’re from.

Don’t forget – HMRC can audit you at any time, which is why agency payroll services must stay on the ball regarding records. Fines of up to £3,000 for poorly kept records can be easily avoided if your recruitment agency payroll is thorough and efficient.

Records that HMRC expects recruitment payroll to keep are:

Reports made to HMRC
Tax code notices
Employee deductions and payments
Payments made to HMRC
Employee leave and sickness
Payroll Giving Scheme documents
Taxable expenses or benefits

If you find a gap in your records, you must tell HMRC immediately. Businesses can also avoid fines by outsourcing recruitment agency payroll; a specialised payroll outsourcing company like Hive360 will have technology and programmes that keep on top of everything semi-automatically, as well as a fully dedicated expert team, meaning your business is assured of being 100% compliant.

Mistake #3: HMRC Underpayments

It is vital to ensure that your recruitment agency stays on top of all HMRC payments.

Failure to pay HMRC correctly can result in hefty fines that your business will not have accounted for.

The fix for underpayments is quite simple, but when you have a million other jobs to run your business, it can become another task that gets filed on the ‘I’ll do it soon’ pile.

A straightforward way to stay on top of HMRC payments and deadlines is to have a physical and digital calendar marked with all the necessary dates.

Recruitment agency payroll services can easily stay on top of all HMRC payments and deadlines as they specialise in the payroll niche specifically.

Suppose your business does end up making a payment error to HMRC. In that case, agency payroll services can rectify this by correcting the issues in the following report, and HMRC will then adjust your next PAYE bill accordingly.

Each PAYE bill must be correctly analysed to ensure that all of the information is correct — when you outsource recruitment payroll to an agency payroll service like Hive360, our expert team will ensure information is accurate and you stay compliant.

At Hive360, we can easily take on all your recruitment agency payroll requirements. Find out how recruitment agencies can benefit from outsourcing their payroll, and get in touch with us to see how much you can save with payroll services from Hive360.