Why is paying staff weekly a bad idea?

Weekly payroll used to be fairly common and is still popular in some trades. Why is it best to avoid it?

Written by Jen Nolan - Thu 12th Nov 2020

bookkeeping and business development services

Payrolls used to be run weekly, monthly or once a year and HMRC were only made aware of the figures at the tax year end.

Now HMRC insist on receiving a report every time an employer pays a member of staff.  Payroll calculations can not be 'rolled back' like they could before, because each time a business pays someone, there has to be an RTI submission to HMRC.

Weekly payrolls were always time consuming and expensive to process as you are fundamentally doing four times the work of a monthly (or 4 weekly) payroll run.  With all the pensions calculations and deductions lots of businesses need to pay for an outsourced service and having this weekly work carried out is not cost effective.

The other reason it would be best to avoid a weekly salary run is that most customers pay businesses on a 30 day credit term.  This means that often you are paying your wages out well before the customer has paid the business for the work.  If you can get the staff comfortable with a monthly payroll run you can shorten the gap between paying the team and getting paid by the customer.

It is not an easy transition to make (I remember personal experience of this from years ago), but with one bumpy month and perhaps an advance or two for those who will struggle the most, the change can be made.  So many of us pay our rent/mortgage and bills monthly now, the argument for weekly wages is a fairly weak one.

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