The payroll process for bookkeepers

Once upon a time calculating pay for employees was simple.

It involved working out the period gross pay, grabbing the HMRC tables, completing the P11 and there it was, the net pay. No minimum wage to check, no worrying about whether an employee had had a birthday, no monthly automatic enrolment duties. The good old days. Unfortunately they are now long gone and the duties of the bookkeeper who runs payroll has become a lot more complicated.

Managing the process

Whether gross pay only is processed, or whether the whole process is managed in-house, the bookkeeper has the unenviable task of trying to get the correct gross pay information from the manager, or owner, in time for payday. Whether a bookkeeper or an agent, the problems are the same, so here are some ideas that may help with meeting the deadlines.

  • Set up a recurring task (in the email system) to send emails so that pay data is collected in time
  • Create an email template to send to the relevant manager/owner
  • Schedule a phone call if the email is not returned with the relevant information
  • Set up another email specifically for starter and leavers. This is an optional email, but as many people do not read all the content of an email, it may be worth doing.

The next step will depend whether the bookkeeper is in-house or an agent.

  • For in-house bookkeepers try and get an agreement that all relevant pay information should be received before an agreed date. But, regardless of any agreement, date stamp or log all pay information when received.
  • An agent bookkeeper should get a service level agreement which, if breached sets out remedial steps and responsibilities.

Date of birth

The date of birth of an employee is important due to the minimum wage, apprenticeships and automatic enrolment. What tools could a bookkeeper use to identify any significant age changes if the software used does not do it?

One way would be to set up a spreadsheet. Depending on expertise either a look-up table could be set up, with ‘what if’ functions used, or a more simple method of entering the month, year, last name, first name into separate columns and then sorting by the month. Either way will identify if an employee has had a birthday in the month, and then the year can be viewed to see if the employee has reached a ‘significant’ age.

Minimum wage and apprenticeships

The important ages within this category are:

  • Aged 21 to 24 inclusive £7.05
  • Aged 18 to 20 inclusive £5.60
  • Aged under 18 (but above compulsory school leaving age) £4.05
  • Apprentices aged under 19 £3.50
  • Apprentices aged 19 and over, but in the first year of their apprenticeship £3.50

The rate change needs to be actioned by the payday in which the employee qualifies but don’t expect the employer to be aware of the law regarding minimum wage. They are busy doing their job, and will expect the person running payroll to monitor employee ages and act upon any changes due.

Automatic enrolment

The same goes for AE (automatic enrolment). Here, not only is the age important but salary is very relevant too. An employee aged 22 with a salary of at least £10,000 must be automatically enrolled. However those aged between 16 and their state pensionable age, earning £5,876 to £10,000 may opt-in, while those earning below £5,876 may join. The employer has to contribute a percentage for those earning between £5,876 and £45,000. No-one younger than 16, or older than seventy five may join.

Software programmes will calculate all the above, but for the bookkeeper using a more basic system that does not have an AE option, The Pensions Regulator produces a spreadsheet that can be downloaded and used.

Remember to check what counts as pensionable pay. It will be basic but other pay may be included to confirm that the employer is making the minimum contributions at least.

No advice may be given regarding which pensions company to use unless a license is held allowing the bookkeeper to do so.

Budget

Finally, as the bookkeeper and financial ‘guru’, part of the service may not only be producing a ‘total employee costs analysis’ but also providing a more comprehensive cash flow that includes all financial commitments. This would be a vital tool for a manager or owner to use when planning for the next year.

The modern bookkeeper has many jobs to do, and is very much rising to the challenge. It is hoped that the above, while it may not be new information, may help identify some shortcuts and also opportunities for providing a more complete and pro-active service.

Julie Hodgskin is a fellow member of AAT, runs a licensed accounting practice and is a technical materials author for CIPP.

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