Switching payroll providers is a significant decision and, when done correctly, can transform your business operations. However, the payroll onboarding process is fraught with potential complications that can lead to compliance issues, financial penalties, and employee dissatisfaction.
At Ascend Payroll, we’ve seen these challenges countless times when clients come to us from previous providers, and we’ve learned exactly what to watch out for.
Here are the most common onboarding mistakes that businesses encounter when transferring their payroll, and how to avoid them.
Compliance failures – when processes go wrong
One of the most serious issues we encounter is compliance processes that weren’t handled correctly by the previous payroll provider. These failures often go unnoticed until HMRC comes knocking, by which point the damage is already done.
These commonly include;
- Incorrect RTI submissions
- Missed filing deadlines
- Improper handling of employment status determinations
- IR35 assessments were incorrectly applied, leading to significant back-tax liabilities, and instances where minimum wage calculations were flawed, resulting in underpayments that required immediate correction.
The key to avoiding these issues is conducting a thorough compliance audit during the transition period. This means reviewing all previous RTI submissions, checking employment classifications, and ensuring all regulatory requirements have been met throughout the previous provider’s tenure.
Pension scheme complications
Workplace pension administration is one of the most complex aspects of payroll, and it’s where we see frequent problems during provider transitions. Limited access to existing pension schemes can create immediate roadblocks, particularly when the previous provider hasn’t maintained proper communication channels with the pension administrator.
Auto-enrolment breaches are surprisingly common. We regularly discover employees who should have been enrolled but weren’t, or workers who were incorrectly postponed beyond the legal limits. Re-enrolment cycles are frequently missed entirely, leaving employers unknowingly non-compliant with their automatic enrolment duties.
Perhaps most concerning are the cases where pension contributions haven’t been calculated or processed correctly for months. We’ve encountered situations where employer contributions were incorrect, employee deductions were miscalculated, or contributions weren’t actually paid to the pension scheme despite appearing on payslips.
During onboarding, it’s crucial to verify pension scheme access immediately, conduct a full auto-enrolment compliance review, and ensure all contribution arrears are identified and rectified before the first new payroll run.
Year-to-date total discrepancies
YTD figures form the foundation of accurate payroll processing, but they’re often incomplete or incorrect when transferring providers. The most common issue we encounter is “ghost employees” – workers who have left the company but remain active on the payroll system, or conversely, leavers who have been removed from the live payroll but missed entirely from the company’s YTD totals.
These discrepancies can have serious knock-on effects. Incorrect YTD figures affect tax calculations, National Insurance computations, and can lead to significant year-end reconciliation problems. We’ve seen cases where missing leaver data resulted in P60s being issued with incorrect annual totals, requiring costly correction exercises.
The solution is implementing a comprehensive leaver verification process during transition. This involves cross-referencing all active employees against actual working staff, reviewing all termination dates, and ensuring YTD totals accurately reflect the complete employee lifecycle for the tax year.
Apprenticeship Levy and Employment Allowance oversights
The Apprenticeship Levy and Employment Allowance are two areas where previous providers often fail to provide complete information during handover. Without accurate historical totals, new providers can inadvertently breach levy thresholds or incorrectly claim Employment Allowance.
We’ve encountered situations where businesses unknowingly exceeded the £3 million annual pay bill threshold for Apprenticeship Levy because YTD totals weren’t properly communicated. Similarly, Employment Allowance claims have been duplicated or missed entirely due to inadequate record transfer.
During onboarding, demand comprehensive year-to-date totals for all levy calculations and allowance claims. Don’t accept partial information – insist on complete documentation that allows accurate calculation of remaining entitlements and obligations.
Statutory payment problems
Statutory sick pay, maternity pay, and other statutory payments are frequently mishandled during provider transitions. The most common issue we see is employees receiving full company sick pay without the proper SSP offset, leading to overpayments and complicated recovery processes.
We regularly discover cases where statutory payment claims haven’t been submitted to HMRC, meaning businesses have funded payments that should have been recoverable. Equally problematic are situations where statutory payments have been calculated incorrectly, particularly for employees with irregular pay patterns or multiple employments.
Maternity and paternity pay schemes are particularly vulnerable to errors. We’ve seen cases where Shared Parental Leave wasn’t administered correctly, adoption pay was miscalculated, or statutory payment periods were incorrectly applied.
The key is conducting a full statutory payment audit during transition, reviewing all current recipients, verifying calculation methods, and ensuring all outstanding HMRC claims are properly submitted.
BACS information delays
Finally, one of the most immediately disruptive issues is delayed or incomplete BACS information transfer. Employees expect to be paid on time and to the correct accounts, but this seemingly straightforward requirement often becomes complicated during provider transitions.
Net pay calculations can be affected by incomplete YTD information, leading to incorrect tax and National Insurance deductions. Third-party payment information – such as union dues, pension AVCs, or court order deductions – is frequently incomplete or delayed, causing administrative headaches and employee complaints.
We recommend establishing BACS information transfer as the highest priority during onboarding. This means obtaining complete payment files well in advance of the first pay run, verifying all bank details, and ensuring all third-party payment arrangements are properly documented and continued.
The Ascend Payroll difference
At Ascend Payroll, we’ve developed comprehensive onboarding procedures specifically designed to avoid these common pitfalls. Our systematic approach includes compliance auditing, pension scheme verification, complete YTD reconciliation, and thorough BACS setup procedures.
We understand that switching payroll providers can be daunting, but with proper planning and experienced guidance, the transition can be smooth and problem-free. Our team has the expertise to identify potential issues before they become problems, ensuring your payroll continues seamlessly while maintaining full compliance.
Don’t let payroll onboarding mistakes jeopardise your business. Contact Ascend Payroll today to learn how our proven transition process can protect your company and your employees.
