When you employ any member of staff, it is important that you set up payroll.
Even if you are just setting up your business or if you outsource to an accountancy firm, it is still important for you to understand how to set up payroll. This is to ensure that you are remaining compliant when doing so. In this blog, we are going to be covering what payroll is, how to set your payroll up, and how to ensure any relevant deductions are made.
What is payroll?
Put simply, payroll is the list of your employees and how much they should be paid. However, behind the scenes, it is also all about processing your employees’ pay. This can consist of different tasks such as:
- Managing any bonuses or benefits.
- Calculating every employee’s wage including any deductions such as sick leave, holiday entitlement, or maternity leave.
- Paying any National Insurance, tax, or PAYE.
All of these tasks on top of your workload might be too much, especially if you are a small to medium enterprise. You must be both accurate and precise to ensure that you do not make any mistakes, your employees are paid, and you remain compliant.
If you are a limited company with just yourself in the business, you must still run payroll.
What happens when it comes to pensions or benefits?
As an employer, you are required to offer all of your eligible employees a workplace pension but there might also be additional bonuses that you offer. This includes flexible holidays, gym memberships, discounts on insurance or savings, etc. At times, these bonuses might be taxable so you must report them either through your payroll or to HMRC directly.
If you offer these to your employees, you might do this through salary sacrifice. This means that the employee agrees to receive a lower salary in exchange for the benefits. Income tax would not need to be paid if using this method therefore, it is cheaper. This kind of deduction would need to be figured out through payroll.
How does PAYE affect payroll?
When calculating your employees’ wages for the month, certain deductions need to be made. This includes National Insurance, PAYE, and tax. If you run your payroll through accountancy software, then this is an automatic process.
However, it is still vital that all of this information still goes to HMRC no later than the payment date for your employees. So, we would always advise that you get it done sooner rather than later.
All of our pricing packages come with payroll included, depending on your number of employees. Take a look at our services page for more information.