The moment your business takes on employees, you need to have a Pay As You Earn payroll system. There are three ways of running it - manually, on computer, or outsourcing it to an agency specialising in payroll management - such as Brewers.
You're responsible for calculating and deducting the correct amount of income tax and National Insurance Contributions (NICs) from your employees' wages and paying it, along with your own NICs, to Her Majesty's Revenue & Customs (HMRC). To do this, your payroll system must have a payroll record for each employee, including their employment details, your payments to them, the amounts you deduct for their income tax and NICs, and your NICs.
Is your system complete and correct?
Your payroll system must also cover any extra payments and benefits to your employees, such as Statutory Sick Pay, Maternity Pay, Paternity Pay, Adoption Pay, Working Tax Credits, benefits in kind and various expenses.
Doing it yourself
If you're a first-time employer or your business only has one or two employees, you might manage your payroll manually, just keeping written records of each employee's pay and tax details.
Most businesses find running a payroll on computer is more efficient and cost-effective - especially if you have more than a couple of employees. Many employers, even those with only a few workers, use a PAYE software programme to handle their PAYE calculations. This makes sense, not just because it is an efficient way of making the required calculations, but also because all employers will have to file their PAYE returns online by 2010.
Once you've entered the initial information, the payroll software system works out all the appropriate tax and NIC deductions, issues pay statements for each employee, maintains an up-to-date account of payments and deductions, and calculates the required end-of-tax-year figures.
What to look out for
When you choose a payroll software package, make sure it carries the Payroll Standard logo, which means it's approved by and meets the requirements of HMRC.
Even when your system is up and running, you need to be sure you meet all the statutory requirements and regulations for things like calculating PAYE, employees on the payroll, paying the Inland Revenue, PAYE forms, payslips, statutory pay, working tax credits and student loans.
As you can see, managing a payroll sometimes demands expert advice. If you have any doubts about complying with the regulations, you can talk to HMRC or you're always welcome to contact us for help.
Prefer to leave it to us?
Not surprisingly, many businesses prefer to outsource their payroll responsibilities. Brewers can take care of this, and many other aspects of running your business too. Please see our Outsourcing Services page or just contact us for more details.