Angela O’Leary, AG Associates Accountants: 5 popular payroll questions for start-ups answered

Our feature last month was about PAYE Modernisation, the real-time world payroll reporting that employers will change over to, commencing January 1, 2019. Since then, we have received a number of payroll-related questions, particularly from start-ups.

Payroll is a complex accounting function. There are so many changes to the legislation on a year on year basis, not to mention the fines and penalties imposed by Revenue for getting it wrong. When you become an employer, you need to handle everything from setting up payroll to maintaining all necessary records.

Here are five of the most popular payroll questions we get from employers.

What’s the best way to run payroll?

There are a number of ways to run payroll, depending on the number of staff and the complexity of hours worked.

It really comes down to payroll software or outsourcing payroll. In terms of manual spreadsheets, this is something that we advocate against, even with one or two employees. The chance of error is high and we believe that it is good practice to start with having payroll software in place.

Here at AG Associates Accountants, we undertake some clients’ payroll for them, as it ensures accurate payroll processing and compliance. We know the business, so it’s a natural step for us to do the payroll. For other clients, they use payroll software on a monthly basis and then we will work with them on their annual return.

If you’re unsure what way is the best way to run payroll, talk to your accountant for the best advice.

What’s the process if I over-pay an employee?

Human error is generally the main cause of errors in payroll. We get asked more regularly than we’d like about the process when an employer accidentally over-pays an employee, no matter what process they use.

The first thing you should do is inform the employee. They may or may not have noticed depending on whether they’ve read their payslip.

You can ask them if it impacts them financially and if so, arrange a deduction scheme on future wages to recoup the overpayment.

Can I pay my employees in cash?

While most employers opt to pay using direct debit or cheques, some businesses, who are cash-rich can pay their employees in cash. Traditionally, paying in cash was looked on unfavourably by Revenue, as it may have been a way to avoid taxes. 

However, if you use a payroll system, which makes all the relevant deductions, an employee can receive their take home pay in cash.

What payroll week are we in?

Some new start-ups with new hires often ask what payroll week to use. Most payroll software automatically has it all set up. If you’re processing it manually, use the tax week, as the payroll week. Week one started on January 1, 2018, and it goes right the way to Week 53 on December 31, if there is payroll on that day. The number of payroll weeks will ultimately depend on when your first pay date falls at the beginning of the year.

How much can a business give as a gift to an employee?

Even though we are still enjoying the Sun, many employers are forward planning. Bonuses can be given at any time, just as long as they are recorded.

The small benefit exemption was increased to €500 from €250 in the 2016 Finance Bill. What this means is that Revenue will allow one small non-cash benefit per annum to an employee up to the value of €500. None of the usual taxes – PAYE, PRSI and USC are applied to this benefit.

Gift cards or pre-set credit cards are the usual methods by which employers share this benefit with staff. The small benefit exemption cannot be exchanged for cash.

PAYE Modernisation

Revenue will be holding seminars shortly about PAYE Modernisation. All employers will have to change to the real-time reporting come the start of next year. If you have any questions in the meantime, please get in touch with us.

We can walk you through the process and audit how your process can be managed to comply with the new real-time reporting. We are here to help.

AG Associates Accountants is an accounting practice that specialises in affordable accounting and payroll solutions for the SME business owner. Its new service, Clarity, combines online book-keeping with offline accounting to provide an instant snapshot of how a business is doing right now.

For further information, please contact Angela at Unit 11, Eastgate Way, Little Island, Cork, 021 482 4723 or angela@agassociates.ie.