Pensions and Payroll - A marriage made in heaven!

Blogs 19 Dec 2019

Thought about outsourcing your pensions or payroll admin? Here is what to look for and how to do it.

Pensions and Payroll - A marriage made in heaven!

Managing payroll is a tricky task for any company, whatever their size. Larger businesses can struggle to process high volumes of data accurately and on time. Small businesses find it difficult to stay on top of ever changing HMRC regulations, and it all costs time and money.

The scale of the challenges may vary, but the basic problems are the same. The solution? Well, that’s easy: payroll outsourcing. Easy in theory, but how do you choose from the hundreds of payroll companies in the market.

Typical payroll services should include:

  • Calculation of pay with necessary deductions (such as student loans, statutory sick pay, statutory maternity pay, statutory paternity pay and National Insurance contributions).
  • Production of electronic or sealed payslips.
  • Approved payment via BACS.
  • Ensuring compliance with HMRC regulations (Payroll companies liaise with HMRC on your behalf, submitting all necessary documentation. This includes monthly submissions and the filing of end-of-year reports).
  • Comprehensive management reports.
  • Pensions / auto enrolment.

As of April 2013, all employers in the UK have had to report their PAYE information to HMRC in real time. This is known as Real Time Information (RTI). RTI means that you must report to HMRC every time you pay an employee at the time you pay them. When you are looking for a payroll bureau, you really should choose one that provides RTI as standard to ensure compliance.

Pensions / auto enrolment

As if payroll wasn’t complicated enough, since 2013, by law, all UK businesses must now help their staff save towards retirement. For employees this means a set percentage of salary automatically paid to the pension scheme each month, along with a percentage contribution from the employer. If you’re trying to do it yourself that means a lot calculations, and a lot more chances to make errors. But, as you would hope, most payroll companies will administer auto enrolment contributions, albeit usually at an extra cost.

Along with the regular obligation to calculate employer and employee pension contributions there are also ongoing monitoring obligations placed on the employer too. One of these is a triennial review of your pension provisions. All employers must complete a triennial review where you will, amongst other duties, have to choose a re-enrolment date, assess and re-enrol certain staff, write to them to confirm your actions (keeping records of this activity) and you will also need to complete a re-declaration of compliance to tell The Pensions Regulator (TPR) how you have completed your duties. Re-enrolment and the re-declaration of compliance are legal duties and if you don’t complete them in the approved timescale you will be fined.

In addition to the basics of the triennial review you should also be reviewing if you have fallen behind in any areas or made any mistakes since the original staging date, as well as reviewing the ongoing suitability of the existing scheme.

If you think you might “get away with it”, think again. Remember the previous mentions of RTI? This makes it easy for HMRC and TPR to calculate whether you have been making the correct deductions for your employees. More than 40,000 companies were hit with fines over their failure to meet auto-enrolment obligations in 2018. TPR issued 40,301 firms with compliance penalties in 2018, while 20,298 have faced penalties so far in 2019 (to 30 September 2019).

A further 41,057 firms were sent compliance notices or unpaid contribution notices by TPR in 2018 but made the recommended amendments before their given deadline (FSB Workplace Pensions offer a Rescue Service if you find yourself in this situation), avoiding a penalty charge. This figure is already at 33,529 for 2019 (to 30 September 2019).

TPR warns employers on its website that automatic enrolment is a legal duty and failure to act in time can result in compliance notices and, following failure to correct any issues by the given deadline, penalties. Fines range from a £400 fixed penalty to an escalating penalty, which can be anywhere between £50 and £10,000 per day.

The perfect marriage?

In a perfect world a payroll service would connect directly to your pension scheme and automatically exchange data with it, so you would only need to input the data into the payroll system for each payroll run and the pension scheme would be automatically updated. It would also facilitate ongoing administration too, like covering triennial reviews. And this would all be for one simple fee.

One of the key benefits of being an FSB member is being able to access market leading services specifically designed with FSB members in mind. FSB Workplace Pensions offer a service which will accurately calculate pension contributions as just another part of payroll, using deceptively simple payroll software which fully incorporates workplace pension calculations, at no additional cost.

It creates accurate records of contributions made, documentation issued and provides prompts when employee circumstances change. This system, and the dedicated support team (it’s a service, not just software), will ensure you don’t become another statistic for HMRC or TPR.

The fees for the Pensions and Payroll solution are just £5 +vat per pay-slip, including all workplace pensions calculations and paperwork. A monthly paid workforce of four would cost just £20 +vat to administer both payroll and pensions. A much lower cost than having an administrator in the office, and significantly cheaper than the vast majority of payroll providers in the market place today. 

Their triennial review service is also available for a one-off fee of £99 +vat*. The triennial review service is a part of the Pensions and Payroll solution at no extra cost. You don’t need to be a mathematical genius to work out that the Pensions and Payroll solution is incredible value for money. All you need to take both pensions and payroll off your desk, so you can get on with running your business.


Stay in control of pensions and payroll

FSB Workplace Pensions is more than just software. Access comprehensive support for small employers including a discounted payroll service and tailored workplace pensions packages.