Payroll for beginners
New to Payroll
An employer operating PAYE should complete certain tasks during each tax month. You must even tell HM Revenue and Customs (HMRC) if you haven’t paid any employees in a tax month.
On or before your employees’ payday:
- Every time you pay your employees, an employer should:
- Record employees pay – include their salary or wages and any other payment.
- Calculate deductions from their pay, like tax and National Insurance.
- Calculate the employer’s National Insurance contribution that you’ll need to pay on their earnings.
- Produce payslips for each employee.
- Report their pay and deductions under RTI (real time information reporting) to HMRC in a Full Payment Submission (FPS).
Many businesses, large and small, do not have the knowledge to handle this complex area. In addition, most businesses can often reduce costs by outsourcing their payroll function.
What we can do for you?
Our dedicated payroll team whose only role is to support our clients in dealing with payroll and all the practical issues associated with employing staff. They are extremely knowledgeable on all matters, such as:
- Payroll taxes
- Benefits
- Pension
- P11D expenses and benefits
We will ensure compliance with HM Revenue & Customs rules and regulations, including all RTI submissions.
Our services include dealing with the payroll of one person (perhaps a sole owner of a limited company) or payrolls for larger employers with many 100’s of employees. All clients receive full reports for their records.
Our costs are extremely competitive and always agreed in advance.
Do you have the time to deal with your regular payroll, new payroll legislation and manage the associated stress? Please contact us to see how Effective Payroll Solutions can assist you.
Running Payroll
You will need software to calculate the PAYE& national insurance
Once you have decided someone is an employee you have to put them on the payroll and of course you are obligated to deduct tax and national insurance from their salaries.
To do this you need to inform the government how much each employee earns on a regular basis by registering with HMRC as an employer and submitting RTI returns (Real Time Information). What this means is that however regular you pay your employees be it weekly or monthly you will have to file a return with HMRC stating the amounts paid and tax and NI incurred each time you make a payment. Therefor the chances are you will either have 12 or 52 returns to file each year.
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The only situation where you will not be required to file such regular returns is if each and every person you employ earns less than the national insurance limit which is currently £112 per week. Unfortunately, if just one person breeches this limit throughout the year then the entire payroll needs to be registered and returns filed every week or month.
You will need some sort of software to calculate the tax and national insurance for you.
Other Issues
Other issues range from Pensions, Maternity Pay, Statutory Sick Pay, Student Loan Deductions and attachment of earnings orders.
Pensions:
Over the next couple of years the government are introducing an auto enrolment pension scheme which means that employers will have to provide employees with a pension and make contributions into that of a minimum of 1% of their salary. It is something to be aware of going forward as it will eventually affect all businesses with employees.
Statutory Payments:
Sick pay is something that you are obliged to pay. It used to be that you could claim it back off the government but unfortunately that is no longer the case. The government have introduced a £3,000 a year employment allowance on the national insurance that employers have to pay. So if your employer’s NI is anything up to £3,000 you won’t pay anything and if it is more you will only pay the difference.
Maternity and Paternity pay are also unavoidable costs. Maternity pay has to be paid for 39 weeks. The first 6 weeks at 90% of their full pay with the remaining 33 weeks at £139.58 a week.
Paternity pay is much shorter with the entitlement just 2 weeks together at the same rate of £139.58 per week.
The good news is that unlike sick pay the government do subsidise the majority of maternity and paternity pay, so this is not something you will have to afford for whilst also paying for cover.
They will also give you advance funding up front to cover maternity costs, if it is likely to prove a burden on your cash flow.
Student Loan Deductions:
Under the current rules there are two plans, how much you repay depends on which plan you’re on.
Each plan has a threshold for your weekly or monthly income. You repay:
- 9% of the amount you earn over the threshold for Plan 1 and 2
- 6% of the amount you earn over the threshold for the Postgraduate Loan
You do not pay anything back if your income is under the threshold. Interest starts being added to your loan from when you get your first payment. Please refer to separate section on Student Loan Deductions.