Businesses with complex payroll: Hospitality

 01 Nov 2018

Most businesses struggle with their payroll as there are annual changes which impact how the process is completed. In addition to the standardised monthly payments of most business employees, hospitality companies commonly use a combination of contracted salary and flexible hourly employees to provide its service. This flexibility in employee pay, especially with the rise of zero hour contracts can mean that performing the payroll is more complicated than most businesses.

Running any hospitality business is a difficult industry which relies on customer and employee satisfaction to keep a steady flow of business. In addition, there’s commonly an annual change in the minimum wage which can have a dramatic difference to employees on hourly contracts over the course of a year. These changes can have a significant impact on also conducting the payroll as it can initially complicate the process, especially when the minimum wage differs based on employee age.

Unfortunately, there’s been multiple example businesses which have been publically highlighted by HMRC when they were failing to conduct a fair way to pay its employees. It was also found that a large portion of these businesses were small hotels, which rather than choosing not to comply with regulations, it was their inexperience or lack of knowledge about how to properly handle their payroll that caused the problems. 

The difficulties associated with the hospitality industry is highlighted when it is common for businesses to have different payroll process for different employees, whereby some zero hour contracts are paid weekly and dependent on the shift durations required by the business. Whilst also having other employees paid on a monthly, salary basis which is slightly more straightforward. Luckily, a hospitality business can benefit from using a payroll company to assist with their process whilst using this advice.

Review your flaws

If a business is aware that there’s a problem within their payroll process or they commonly receive complaints from employees. Then it’s the perfect time to review and assess the situation, especially taking into account that most hospitality businesses have high and low seasons which can fluctuate the complexity. 

The first step to ensuring that the process is correct is paying attention to any tax obligations, especially when these are considered to have severe consequences if deadlines are missed. The following aspect is to check the national regulations to check your compliance, this will include in the future regularly checking these industry changes and updates. 

Decide how to perform payroll

There are two options to business owners within the hospitality industry to perform payroll. Initially, hospitality business can keep their process in-house which would require either the business owners to fully learn the process or to hire a qualified employee. The difficulties with this option are that the business owner must dedicate more time to the process and away from running the business. However, employing a qualified individual means an additional wage for the business to cover and a wage to pay throughout the year, including high and low seasons.

The second option is to utilise a payroll provider who can guarantee compliance, performance and reliable payroll services. These payroll companies which offer outsourcing solutions mean that at a fraction of the cost, they also offer a qualified individual undertake the payroll process for the periods when the business requires their assistance. These companies are experienced in dealing with complex payroll scenarios, especially when taking into account flexible working contracts and various employee tax obligations

The key difference between each option is whether you want the responsibility to keep the process in-house or entrust a professional service which can ensure compliance with HMRC regulations. The final decision will vary on how the owners approach business and the extent of their understanding of potential consequences.

Seek Guidance

Seeking help can be seen as the most cost-effective measure taken to put everything back on track. There’s no problem speaking to a professional payroll company for advice and how they could help the business. It might be a surprise how reasonable their fees and resulting services compare to an in-house employee.

What should hospitality businesses do?

If a hospitality business is worried about their payroll processes, they need to consider either outsourcing or handling in-house. It’s worthwhile checking the background and experience of a potential payroll company to ensure outsourcing to them is the correct decision.