The Future of Payroll is RTI

HMRC are making changes with payroll in 2013, and if you have employees, it is important that you know what they are going to be. The main change will be that payroll is moving over to real time information – more commonly known as RTI. IRIS, the small business software specialist, has put together an interesting infographic about RTI and how it will affect business, entitled: Do you know how Real Time Information will change your payroll process?

All payroll tasks were carried out manually prior to the digital age, which included such tasks as calculating overtime, sickness, standard and holiday hours, and then often paying wages in cash or by cheque. The company would have to send all documents by post when HMRC needed information, and any problems had to be rectified by numerous phone calls or letters. Such a process was very time-consuming and inefficient.

Now that computer systems have become standard in most businesses, many of the tasks previously done manually have been computerised, and companies often use payroll software to automate their systems. Any information needed by the HMRC can simply be sent digitally. Whilst this has greatly improved payroll efficiency, there may still be delays when HMRC request information just once yearly. This can cause problems, especially for employees who receive certain types of benefits.

As HMRC is to begin using real time information, employers will have to provide PAYE information around the same time that they pay their staff, which has several benefits. Fewer errors will be made due to better accuracy in payments of the PAYE, meaning employees are less likely to underpay on TAX and fall into arrears. Any errors identified can be dealt with much more quickly, making life easier for the payroll department, and employees who claim work-related benefits will be paid correctly – reducing the risk of overpayment, which can cause problems for the employer and is also costly for taxpayers.

Some software companies, including IRIS, are RTI ready and have begun working with the HMRC to make sure that everything runs smoothly when the system changes over. Many finance departments are already testing their payroll software to make sure that it is future proof, which is a good idea in preparation for the changes taking place in 2013. HMRC will roll out RTI payroll from April that year, and all employers are expected to be using it by October 2013.

HMRC will be requiring employers to digitally advise them about deductions such as TAX and National Insurance as soon as they happen, and they will also need to report how many regular hours are worked each week. It will no longer be necessary to send separate p45 or p46 forms to them, as they will in future be incorporated within the new online submission process. Reporting will be carried out either through the new secure Government Gateway, or by an Electronic Data Interchange.

It is important that companies who have not yet checked their compatibility with the new RTI do so immediately, as well as considering the update of the payroll software system, to make sure that it is in accordance with HMRC’s new procedures.

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