Many people may of heard about ‘Payroll’ but not really know what it is or what it entails, so this blog is just going to outline the key information associated with payroll for any business.
What is Payroll?
Well in simple it’s a list of all the employees who work for a business and in-turn a list of all of the salaries, wages, bonuses and withheld taxes (National Insurance etc) for each individual employee. Simple as that!
How to setup Payroll
If your business is looking to take on employees for the first time then here is a list of things you need to do in order to setup your own Payroll:
- Register with the HMRC as an employer here – https://www.gov.uk/register-employer
- You will then be given your registration details along with your PAYE Online login details
- Choose which Payroll software you are going to use. If you have less than 10 employees then you can get free software – https://www.gov.uk/payroll-software/free-software – otherwise you’ll be looking at something like ‘Sage’ or similar – https://www.gov.uk/payroll-software/paid-for-software
- Collate all records regarding each individual employee (listed below)
- You then need to register each employee individually and inform the HMRC of all their details – https://www.gov.uk/new-employee/registering
- Now you physically run your payroll and using your software, calculate how much each employee needs to be paid, reduce any deductions and then report all figures to the HMRC on or before each payday.
- Finally, you then need to pay the HMRC all the ‘withheld taxes’ for each indivudal employee including National Insurance contributions, student loans etc etc.
And that’s it! They are the 7 steps to setting up and running your own payroll.
What records to keep
When running payroll you MUST keep records of all the following:
- What all employees are paid and what deductions are made
- Every report and payment you’ve made to the HMRC (for your tax return and in case of an audit)
- Leave and sickness absence for each employee
- Tax Code notices
- Any taxable expenses or benefits (if applicable)
What deductions are made
As standard you will always have to deduct each employee’s Tax and National Insurance contributions. These deductions will be automatically calculated by your payroll software and will depend on which tax code and national insurance number they have. To work out which Tax Code your employee should be on simply use the online service provided by HMRC here – https://www.gov.uk/new-employee-tax-code
Apart from these standard deductions you also need to be aware if any of the following apply:
- Student Loan Repayment – if an employee owes any student loans
- Pensions – if an employee opted in for a pension fund
- Payroll Giving – if an employee donates to charity directly form their pay
- Child Maintenance – if an employee pays child maintenance through their pay
And that’s pretty much everything! They are the key pieces of information you need to know about payroll – if you need any further advice then please feel free to contact me at firstname.lastname@example.org and I’ll be happy to help.