In 2019, Ireland introduced real-time reporting for Pay As You Earn (PAYE) systems for employers and employees. PAYE modernisation ensures Revenue Commissioners have the correct information on businesses. With real-time reporting, an employer must prepare and report the workers’ salaries and deductions. That increases the workload for employers since you must ensure the employee’s tax credit certificates are updated monthly and submit all the relevant deductions in real-time. This process is repetitive and time-consuming, especially if you don’t have payroll software. Let’s explore the modernisation of PAYE and ways to utilise payroll software to improve the payroll process.
What Is PAYE Modernisation?
PAYE modernisation led to the modification of the PAYE system to ensure businesses submit taxes and other deductions to the revenue commission in real-time. The Revenue can communicate with small and medium-scale businesses about employee pay and tax deductions. When the information is relayed in real-time, the Revenue Commission can ensure every employee has the correct tax deductions. Modernisation also includes real-time updates on information concerning employees leaving or joining the company. Some of the changes that the PAYE modernisation brought include:
• Abolishment of P30s, P60s, P46s and P45s forms.
• The P35 submissions were abolished, and employers had to return a submission file to the Revenue Commission after every payroll process.
• A new method of annual amendments and corrections.
The previous PAYE system in effect since the 1960s was no longer flexible for the changing payroll process. People are changing jobs more frequently, and their circumstances constantly change. Hence, the Revenue Commission needs to keep track of the changes and monitor companies’ deductions on their salaries. Besides, modern software systems and technologies provide greater accuracy and real-time communication opportunities.
While PAYE modernisation doesn’t change the way you calculate payroll, you have to make regular submissions to Revenue. The process increases your workload since you have to make the submissions on time to avoid non-compliance issues and penalties. However, since you manage your payroll process, you must ensure the submissions are accurate.
What Do the Changes Mean for Employees and Employers?
Employers
The changes to the PAYE system in Ireland affect both employees and employers. For instance, every time you pay an employee, you must submit a file electronically to the Revenue Commission. The file should contain all the employee deductions, payments and exit details if they leave the company. The form’s contents are similar to P35, but you have to submit it after every payroll period, which can be weekly, fortnightly or monthly.
Employers also have to submit information on new workers joining the team before receiving their first paycheck. That means Revenue can streamline tax deductions to avoid overpayment of tax if someone leaves the company months before the year-end or underpayment for failure to submit deductions in the first working month.
Since Revenue’s reporting system can be integrated into payroll software, you can avoid the time-consuming and tedious PAYE processing system. If you incorporate modernisation with payroll software, your workload will not increase.
Employees
With the modernised PAYE system, workers receive a statement detailing their tax credits and standard cut-off points for the year based on the details available at the commission. They don’t have to wait to apply for a refund for overpayment or discover the amount due to Revenue for underpayment. Adjustments can be made for over/underpayments online with a few clicks.
While P60 forms were abolished, workers can easily access their tax records online. The records are updated regularly with every payment. The availability of information allows the Revenue Commission to conduct periodic reviews and ensure employees use their tax credits and standard cut-off points, especially when they have two employments. The commission can also relocate employee tax credits and standard cut-off points.
Benefits of Using Payroll Software for Modern PAYE Calculations
Save time
Processing payroll and following the guidelines of the PAYE modernisation process manually is a monotonous task. Since you must submit electronic records directly to Revenue, manual payroll processing makes the submission process tedious and time-consuming. If you don’t invest in payroll software, you will waste valuable business time preparing payroll records and remitting taxes or deductions to Revenue every month. Integrating your PAYE system with payroll software makes it easier to submit your PAYE information electronically. For instance, the software can retrieve the Revenue Payroll Notifications (RPNs) on time and send Payroll Submission Requests with a few clicks. You can also apply cut off points and tax credits in real-time. With a seamless payroll process, you can focus on important business functions.
Minimises payroll expenses
When you have a large team of workers, you have to hire a payroll expert to handle payroll issues and prepare workers’ deductions and taxes. That means you spend more per year paying salaries and benefits for the payroll expert to maintain compliance with statutory requirements. However, investing in payroll software can minimise your expenses. The payroll software automatically prepares the deductions and submits the information in seconds. Tax credits retrieval is also automated, and you don’t need an entire team working on payroll processing.
Assists with compliance management
Integrating PAYE modernisation requirements into the payroll software promotes compliance and helps employers avoid penalties by filing the submission on time. Real-time reporting minimises employers’ costs since they don’t have to file PAYE information for an entire year. Making the submissions every payroll cycle makes it easier to trace errors and adjust.
Promotes transparency
PAYE modernisation brings transparency since employees, employers, and Revenue can access information from the same platform. Employees can check their tax credits and standard cut-off point and ensure they are paying the necessary taxes and deductions. You do not have to retain your paper-based forms when you quit since all the information is available online. Revenue also addresses errors in tax submissions timely since they receive the information in real-time.
Updates employee details
When an employee changes their marital status, gets a promotion, or quits, you must update the information in real-time. When you don’t have payroll software, you have to update the records manually, which takes time. Payroll software helps you retrieve the latest RPNs, identify changes necessary on employee details, and make the relevant adjustments. For new employees, you can easily request and create RPNs before they start working in the company.
Ease of correcting errors
When you make a mistake on your payroll records, the forms issued to employees will have errors. You couldn’t correct the mistakes until the end of the year. While PAYE modernisation promotes real-time reporting, you are bound to make errors if you manually prepare the records. Having payroll software automates the repetitive work, minimising chances of error. Besides, you can resolve any errors by sending a correction submission in the system.
Suitable for various business types
Payroll software can handle PAYE modernisation requirements for businesses of all sizes. The payroll software helps streamline your modernisation needs, whether you are a small start-up with five workers or a medium-scale enterprise with a hundred employees.
Conclusion
Modernising your PAYE allows you to review your payroll process and technology. Using payroll software integrated with Revenue helps you realise many benefits by promoting transparency and compliance in your records. You also allow employees to track their tax credits and deductions online and retrieve any information with a few clicks.