It’s now less than a month until employers with less than 250 employees must start reporting payroll information to HMRC in real time, known as real-time information reporting (RTI).

The main issue for many small employers has been the short timescale for preparing for RTI. The reason that the turnaround time has been so tight is that the new reporting system will be linked to Universal Credit, which is being introduced nationwide later this year. A significant point about RTI that is often overlooked is that it will impact your employees, especially mistakes are made.

The easiest way to set your mind at ease about the new system is probably to outsource payroll. It is quick to check potential providers to make sure they are RTI compliant, and ask if they’ve already been processing any payrolls using RTI.

If you’re absolutely certain that you don’t want to outsource your payroll, it’s important to make sure that the software package being used is RTI compliant. This can be done by checking with software providers, and if software isn’t RTI compliant, it is important to ask them what needs to be done to upgrade and if there will be a cost.

The conscientious employer – Universal Credit and you

Universal Credit is a new benefit that’s being phased in from October 2013. It will combine benefits including Working Tax Credit and Housing Benefit, along with some others like Childcare Tax Credit. With RTI, HMRC will have an awful lot more information about individual employees than they have ever had before.

HMRC are planning to share this information on a month-to-month basis with the Department for Work and Pensions, who will then adjust Universal Credit payments to benefit claimants based on any changes in their pay. In the long term, that should be good news as it means that anyone claiming Universal Credit will always have the right amount of benefit paid into their bank account at the end of the month.

You might be wondering what this has to do with the role of employer. As an employer you don’t claim benefits, and it’s not your business if your employees do. However, the changeover to RTI means that if mistakes are made (say an overpayment) on payroll, it will impact on employee’s benefit immediately. Payroll problems could escalate much more quickly as a result, and employera could easily be branded as an unscrupulous and unsympathetic.

More on businesses and tax:

• HMRC urges firms to prepare for RTI system
• The taxing issue of company cars

So what should be done to make sure that doesn’t happen?

The best thing to do is get ready for RTI now, so prevent being caught out by rushing after the April deadline has already passed. If payroll is being run in-house, it’s necessary to check that payroll software is up to date and RTI compliant.

If plans are afoot to outsource to avoid the hassle, find a payroll provider now rather than later, and if it is already being outsourced it’s a good idea to make sure that the payroll provider is RTI compliant and fully prepared for the changeover. Furthermore, it’s important to make sure that all of personnel files are completely accurate and fully up to date.

RTI should not cause an empolyer, their business or employees a problem – just as long as preparation has been completed. Key dates for the diary are below: