Whether you are a finance director and directly responsible for year-end processes or manage just part of the financial side of a business – including payroll managers, for example – December can be a busier month. In Ireland, the modernisation of the tax system under PAYE has simplified many of the processes involved in managing the final payroll run of the financial year. However, this does not mean that CEOs and others in business leadership roles can take their eye off the ball when it comes to their December payroll. Read on to find out more about year-end accounting with respect to payroll.
Understanding PAYE Modernisation
To begin with, annual returns were the norm for Irish businesses before PAYE modernisation was brought in. Since the 1960s, P35 returns were a requirement with a P60 needing to be issued to each and every employee covering their annual earnings, income tax, pay-related social insurance and universal social charge over the course of the last twelve months. Nowadays, P60s and P35s are no longer required while, under the current system, P2Cs which are copies of a workforce’s Tax Credit Certificates held by employers, have been replaced by a simplified revenue payroll notification system.
Part of this was due to the fact that many more Irish citizens than ever before were holding one or more job down over the course of a financial year, perhaps with three or more jobs to their name in a given period. In addition, the move to a more modern system was thought to be progressive because of the take up of more advanced payroll systems in recent decades, notably managed payroll software like Quantum Bureau that is geared up to meet the demands of modern Irish enterprises, not least with respect to their end-of-year and PAYE obligations.
Revenue Payroll Notifications and Year-End Payrolls
Since 2019, all Irish businesses have been obliged to use the revenue payroll notification (RPN) system. Only with this approach is it now possible to ensure that all of the latest information from the Revenue Commission is applied properly to the year-end payroll of all members of staff. For many firms that run payroll software, this will mean downloading the necessary update prior to running December payroll. Consequently, it is highly advisable that you first back-up all of your payroll data before this is carried out. In other words, locally stored payroll data can, in some cases, face technical issues following a software update, something you will want to avoid if at all possible.
With your firm’s payroll data safely backed up – if it isn’t already stored for you by your managed payroll supplier, that is – the next thing to do is to download this year’s RPN. It should contain all of the data that is needed to process the final payroll of the year. In short, if contains the information needed to work out the correct deductions for each employee with respect to their income tax, their local property tax and their USC. After that, the end-of-year payroll run shouldn’t be dissimilar to the 11 others you have probably already run in the current financial year.
Because employers no longer need to produce P35s and P60s for every person they employ at the end of the financial year, the process of year-end payroll can be less time consuming than it used to be. The Office of Revenue Commissioners – more commonly simply referred to as Revenue – now has the responsibility for producing an end of year summary of all of the tax issues affecting individuals in the Irish tax system. In other words, it seems as though there is less for Irish employers to do these days than used to be the case.
However, this picture can be a little misleading. If you manage your payroll in-house, then there are further aspects of end-of-year payroll processing that you ought to consider. Along with backing up payroll data before downloading the RPN which is advisable in all cases, employers should also be checking to see whether an additional pay period is relevant or not. Under a managed approach run by experts in their field, this shouldn’t be needed. However, it is something that you will have to take into account if you pay members of staff weekly, fortnightly or four-weekly rather than on a given day each month. For example, employees who are paid every four weeks will expect to be paid before the end of the year in 2022 if their last payment was on or before December 3rd since this would mean their next pay packet would be due by New Year’s Eve at the latest.
In addition, employers need to think about the people they’ve employed during 2022, not just those who are currently on their books. This will include anyone who has moved on, retired or passed away during the current year, of course. In addition, year-end payroll processes also inevitably involve some set-up of the next year’s payroll system, something that shouldn’t be overlooked when focussing on the final payroll of the current year.
Deciding Whether to Keep Payroll In-House or to Outsource it
Thanks to the increasing simplicity of the modern tax system in the country, some employers understandably think that they do not need to invest in the specialist payroll and accountancy skills that used to be needed for monthly and weekly payroll runs. In short, it is tempting to think that a payroll clerk can manage the entire process for you. However, this is often something of a false economy. Indeed, it can become more apparent when an end-of-year payroll needs to be processed because the entire year needs to be finalised.
This is where outsourcing to payroll specialists often makes most sense. And it is not just among larger corporations with many employees on their books, either. Medium-sized enterprises and even ones with just a handful of employees will frequently find that the economies of scale involved in managed payroll services mean they are attractive business propositions. So, rather than deciding which payroll is best for your business, the more pertinent question to ask is which sort of approach outsourcing will be of most benefit. For many, the data accessibility, GDPR compliance and SSL-level security on offer from a third-party server-based payroll service like Quantum Bureau Cloud Payroll is the most obvious choice.
This is because it offers a great deal of flexibility from month to month – or week to week, for businesses that pay this way – while still being able to meet year-end payroll obligations in a cost-effective manner. If you would like to discuss how such a payroll system could make your firm’s financial compliance easier to manage or you would like to book a demonstration of it in action, then please feel free to get in touch.
Year-End Payroll In Summary
Whether you are looking to install your year-end update or want to better understand the responsibilities all employers have both to Revenue and their employees, it is important to take note of the key facts surrounding the final payroll of the year. These are:
– Backing up payroll data prior to processing December payments is crucial.
– You may need to consider two or more payrolls in December depending on the frequency of how employees are paid.
– PAYE modernisation hasn’t made everything to do with end-of-year payroll simpler and specialist skills are still usually required.
– Outsourcing payroll functions is the preferred choice of many Irish businesses nowadays thanks to the flexibility they afford, not least with respect to year-end processes.