Expanding your business by taking on staff? If you’re new to payroll we’ve got some useful advice to get you started.
Payroll isn’t simply about paying your staff. It’s about implementing PAYE, employee deductions (NI and tax for example) and ensuring you’re compliant with all regulations including pension contributions. Here’s what you need to know.
Payroll is essentially the process of managing your employees. As part of this you’ll calculate employee wages, tax and National Insurance processing them as a payslip. In addition to managing bonuses, benefits, time off work inc. sickness, holidays and maternity/paternity leave. You will have to keep a financial record of all these.
You’ll need to tell HMRC and register as an employer first before setting up a PAYE account. PAYE uses a coded system to process how much income tax and NI is due as well as deductions such as pensions contributions or student loan repayments. HMRC will send you a PAYE Reference and Accounts Office Reference once you’ve set up an account with them.
You can choose to handle your payroll in-house or use an accountant. If you manage it in-house you will need to invest in specific software. This will allow for real-time reporting.
- Paying employees through PAYE
You’ll need to find out each employee’s tax code before starting. This can usually be found on their P45 along with their National Insurance. HMRC also requires that you register the employee with them using a Full Payment Submission (FPS), the first time that you pay them. More information can be found on Gov.uk.
All taxes and NI must be paid by the 22nd of each month for monthly payments or the 22nd after the end of each quarter (if paying in quarterly payments). National Insurance contributions differ but are typically Class 1 and payable at 13.25% on earnings under £9,880 a year.
- What else do I need to know?
Your business will need to send a final payroll report to HMRC annually. All eligible employees must also be offered a workplace pension. Seek advice if you need help with auto-enrolment.
Top tips – choose payroll software (or accountant) that’s right for your business. One size doesn’t fit all! Go digital with your payslips and avoid complicated paper systems. Create a payroll calendar to ensure you stay ahead – avoid non-filing or late PAYE penalties and charges by keeping up to date!
If you need more advice, we’re here to help. Get in touch for advice on setting up payroll for your business: email@example.com.