Let’s start with the simple stuff. Payroll is the process of paying employees. It can include tracking hours worked, calculating pay, and distributing payments. Most firms will do this with a system. A payroll system can calculate gross and net pay of all company employees, after the relevant deductions for taxes, pensions, maintenance etc have been calculated.
Payroll is one of the most important tasks for any business owner, large or small. It goes without saying that its main purpose it to ensure that employees get paid correctly and on time. Problems with payroll can have a lasting effect on your business reputation so it is important that you get it right.
So, with that in mind, any business needs to have some sort of payroll management system in place. That could be something you organise yourself, or to save any unwanted stress it might be something you outsource to a local accounting firm like Instant Insight.
Let’s look at what you need to do as an employee if you are completing payroll yourself. Remember not to leave these things to the last minute, in case you run into any unexpected issues. Most employers in the UK process payroll using PAYE: HMRC’s system to make National Insurance and Income Tax deductions from employee wages.
First step if you are going to look after payroll for your small business yourself is to find a payroll software that works for you. Do a little research and find one that works for the needs of your business.
Now, it’s time to pay. Every time you pay your employees, use your payroll software to:
Record each employees pay. This include their salary or wages and then any other compensation they are entitled to.
Calculate deductions. Look at tax, National Insurance, pension contributions and anything else.
Calculate National Insurance contributions. Make calculations on NI that you need to pay on their earnings about £242 a week.
Produce payslips. Payslips are a legal requirement as of the Employment Rights Act 1996 so make sure this step isn’t missed.
Report pay and deductions. Head to HMRC to report the information on each employee in a Full Payment Submission (FPS).
Managing payroll isn’t for the faint hearted. It is a repetitive and complex process, so ensuring you use a software that serves you in the best way possible is key. It is going to take some planning is order for payroll management to be completed correctly and efficiently. If this doesn’t sound like something you wish to waste your time with, get in touch with our team today!