Payroll looks simple from the outside. Log the hours, run the numbers, pay the people. In reality, it’s one of the most rule-heavy parts of running a business, and the rules change constantly. As head of our payroll bureau, I see the same five issues catch out well-meaning business owners again and again.
By Emma Simmonds – Payroll Manager
1. National Minimum Wage traps that catch even careful employers out
Most business owners know the current NMW rates. Far fewer know how easily an employee can fall below them without anyone noticing.
Salary sacrifice is one of the biggest culprits. If an employee sacrifices salary for pension contributions or a cycle-to-work scheme, that can pull their pay below NMW even though their contractual salary looks compliant on paper. The same applies to unpaid training time, or travel time for mobile workers. HMRC calculates NMW based on hours actually worked and pay actually received, not the number on the offer letter, and it only takes one underpaid pay period to trigger a penalty and back pay for every affected employee.
2. What changes when an employee hits a milestone birthday
Turning 22 or reaching State Pension age doesn’t just mean a card in the office. It changes how that employee should be processed on payroll.
At 22, an employee typically becomes eligible for auto-enrolment into your workplace pension, assuming they meet the earnings threshold. Miss the assessment and you risk a compliance breach with The Pensions Regulator. At State Pension age, an employee’s National Insurance category changes, they stop paying employee NI, but you as the employer still need to apply the correct category letter and continue paying employer NI where due. These changes are date-specific and easy to miss if nobody is tracking them every period.
3. Statutory payments: the rules nobody reads until they need them
Statutory Sick Pay, Statutory Maternity Pay, and Statutory Paternity Pay all sound straightforward. In practice, eligibility and calculation have quirks that trip up even experienced in-house teams.
Take average weekly earnings for SMP. It isn’t simply “what they usually earn,” it’s calculated over a specific relevant period, and getting the reference dates wrong changes the entitlement, sometimes significantly. Get SSP wrong and you might pay someone who hasn’t met the qualifying conditions, or fail to pay someone who has. A due date entered a few days out can shift a whole SMP entitlement. It’s a small detail with a large financial consequence.
4. The auto-enrolment re-declaration nobody remembers
Every employer with staff in a workplace pension has to re-declare compliance to The Pensions Regulator roughly every three years, on a date tied to their original staging date, not a date that’s obvious or intuitive.
This isn’t a reminder that shows up in most business owners’ diaries. It’s a standalone obligation, and missing it results in a fine regardless of whether your pension scheme has been running compliantly the whole time. We’ve seen businesses penalised purely for missing the paperwork, not for any underlying pension failure. A payroll bureau tracks this date automatically, if you’re running payroll in-house, it’s worth putting a recurring reminder in now.
5. Claiming the Employers’ Allowance, and why so many businesses miss out
This one costs businesses real money every year, simply because nobody claims it.
The Employers’ Allowance lets eligible employers reduce their employer Class 1 National Insurance bill by up to £10,500 per tax year, more than double what it used to be. Eligibility widened too, the old rule excluding businesses with an employer NIC bill above £100,000 in the previous year has been scrapped, so more employers now qualify than ever. It still isn’t applied automatically though, you have to actively claim it through your payroll software or HMRC online account, and re-confirm eligibility each tax year.
Single-director companies with no other employees paid above the secondary NIC threshold are usually excluded. But plenty of eligible businesses simply never tick the box, either because nobody told them it existed, or it fell through the cracks at the start of the tax year. At up to £10,500 a year, that’s not a small oversight, and it’s worth five minutes to check.
If you’re ready for top Payroll advice, get in touch and find out how we can help.
