Resource  3 March 2021

Payroll compliance: top 10 tips from Sage

Payroll compliance is vital for any growing business, and it’s one of the top challenges facing any finance and HR department. So, what do you need to know?

Payroll compliance - top 10 tips from Sage

From complying with the General Data Protection Regulation (GDPR) and the National Living Wage, to correctly offering workplace pensions and making sure the right processes are in place for your payroll year end, there are lots of areas that you need to cover.

As there are legal requirements, non-compliance can be costly and can result in significant penalties with payroll errors costing the average FTSE 100 company between £10M and £30M per annum (PWC, Making Payroll Pay).

Did you know 1/3 of small businesses are penalised for incorrect payroll?

How can you stay on track and ensure you remain compliant?

Sage, the market leader for integrated accounting, payroll and payment systems, have put together their top 10 tips to help you with payroll compliance.

1. Keep accurate personal records

It’s your responsibility to maintain accurate employee records for the duration of their employment. Their personal information can change, e.g. a promotion, a salary increase after a pay review, parental leave etc. As this could impact your payroll, it needs to be thoroughly processed.

2. Manage employee expectations

For the business to remain compliant, it’s important you’re clear with employees about what is expected of them, what processes they need to follow and how they can help the business moving forward, for example, making sure they stick to your company expenses policy or keeping accurate overtime records.

You should also have a comprehensive set of policies and practices for all issues that affect the pay of your employees. This will help if they have any queries around additions or deductions to their earnings.

3. Understand workplace pensions

If you have 1 employee or hundreds, as an employer you have legal ‘duties’ regarding pensions. Under the Pensions Act 2008, every employer in the UK must put certain staff into a workplace pension scheme and contribute towards it. This is called ‘automatic enrolment’. You can find out more about workplace pensions here:

4. Use audit trails

An audit trail provides documented history of a transaction within a company, allowing the full process of a given transaction to be traced. Audit trails are a great way to protect your business and reputation, they can help guard against fraud, ensure corporate accounts are as accurate as possible and provide insights into the health of your company.

5. Stay up to date with payroll legislation

Payroll legislation can change regularly, so it’s important you keep up to date with the latest updates. The best way to ensure you’re aware of any changes is to visit the Government website, sign up for industry email newsletters, attend payroll seminars and watch on-demand webinars. Sage also have lots of content on their blog, offering advice and updates so you can keep on top of payroll legislation:

6. Understand international legislation

Does your business operate across multiple countries? If so, you’ll need to deal with the complexities of international payroll. Each country has its own rules when it comes to wages, deductions, remittances and reporting, so you’ll want to be well-versed in these requirements as well.

7. Speak to the experts

If you’re unsure or need help with payroll compliance, it’s best to speak to an expert accountant. They will have the knowledge and expertise to provide you with reliable financial information you need to make key decisions and can save you money by increasing tax efficiency and improving cash flow.

8. Get feedback from your employees

One thing that can help your business is to monitor complaints and request feedback from your employees on how processes can be improved. This counts for your payroll processes too.

Once an issue has been identified, you and your payroll team can analyse workflows to spot where errors are creeping in.

9. Switch to a self-service model

Do you find a lot of time is wasted chasing timesheets and expense forms? By using a self-service model, like online timesheets, can save you valuable time. Some responsibility for data entry shifts to the employees and it becomes easier to review and approve requests as they are entered.

10. Submit your payroll information on time

Late submissions could result in penalties, so you need to ensure you allow enough time to complete each task. You might find creating a payroll calendar that outlines the start and end dates of pay periods, as well as pay dates, helpful. Employers can use payroll calendars to determine when they need to collect employee timesheets and run payroll, as well as any other important dates for legislative changes.

The ultimate guide to payroll compliance

Staying informed with the latest legislation changes is important and it’s worth taking the time to make sure you’re on top of new outcomes. The ultimate guide to payroll compliance will help you tackle this challenge head-on.

The guide takes an in-depth look at the challenges your business faces and the payroll solutions that will help your HR or payroll department to overcome them and confidently meet any compliance requirements.

In this guide, you will find advice covering the following topics:

  • How to stay compliant
  • Workplace pensions
  • Cycle to Work scheme
  • Apprenticeship Levy
  • Gender pay gap
  • Right to work
  • Scottish Rate Income Tax
  • Tax-Free Childcare
  • Real-Time Information
  • Payroll Year End (PYE)
  • National Living Wage

Download the ultimate guide to payroll compliance from Sage now.

Get the guide

Share this article  


Prosy Computing Ltd. has been acquired by Pinnacle. For any queries, please email

To read the press release in full please follow this link