16 Sep A beginners guide to payroll in business
One of the key concerns if your company employs staff is running payroll.
This is important for a number of reasons and something you must not only do on time each month but also get right. If not, your employees will not be paid on time or get the right salary. Problems with getting late or incorrect payroll details to HMRC could also see you in hot water with them.
But what if you are new to running a business and are perplexed by payroll? For those who need a beginners guide, the below should help.
What is payroll?
This is a great question for newcomers to small business accounting. In simple terms, payroll is dealt with via the PAYE system and refers to tracking the employees you have in your company, what hours they work per month and what their tax status is.
Payroll also involves working out how much Income Tax and National Insurance should be deducted from each staff members pay packet each month, taking this off and then sending the money plus the payroll details to HMRC. Other deductions to take into account when running payroll include pensions and student loan repayments. Of course, payroll also includes paying your staff each month and supplying them with a payslip.
How do you set up employee’s payroll?
As soon as you get your first employee, you need to set them up on your payroll. This involves:
– Applying to the Government for your business PAYE reference number
– Getting the staff members tax code and NI number
– Requesting the employees P45 from their last employer (if applicable)
– Completing staff member set-up on PAYE system and paying them via PAYE each month
Once the above is done, you must record each staff members pay, work out relevant deductions, calculate the employer’s NI contributions, run payslips and send a Full Payment Submission doc to HMRC so they have all the information. This FPS report needs to be with them by the 19th of each month if you pay via post or the 22nd if you pay digitally.
Payroll can be complex and time-consuming
Although the basics of how payroll works is fairly simple, running it every month is not always so easy. Not only is it time-consuming but it can soon get complex in terms of knowing what to deduct or how much. For this reason, many companies will outsource their payroll to a professional accountant. If you are based in Manchester and need payroll help, give SQK Accountancy a call today on 0161 706 0444 or contact us.