Things to consider for payroll

TAs an employer, you need to register and meet the Pay As You Earn (PAYE) tax requirements. This means paying your employees the right amount at the right time and making accurate deductions from their pay. This must include things like tips, bonuses, statutory sick pay or maternity pay. You must also give your employee detailed payslips that show what you’ve deducted. This depends on their individual tax code and should include their National Insurance contributions (NICs). 

 

You must also file your employer tax returns and pay taxes and NICs on time and make other deductions such as pension contributions. Your payroll reports tell you what you must pay to HM Revenues and Customs (HMRC), normally every month. If you’re a small employer and expect to pay less than £1,500 a month, you can arrange to pay quarterly. 

 

You must also keep your payroll records for at least three years. 

 

You must deduct certain things from your employees’ earnings before paying them. These include: 

 

Your employees might also agree to other deductions such as payments for healthcare insurance, pension contributions or charitable donations. 

 

You must provide a full payment submission (FPS) payroll report using your payroll software after every pay day. This shows details of the payments you’ve made to your employees and the deductions you’ve made. You can also report employee expenses and benefits through your payroll or make a separate submission at the end of the financial year. 

 

Generally, the more employees you have, the more complex your payroll becomes. If different employees receive hourly or weekly wages or salaries, it can be a detailed and time-consuming job. You will also need to include contractors, staff commission, overtime, expense claims, allowances, and leave. In effect, this means that every time you run your payroll the figures are different. 

 

You can keep your records manually in a spreadsheet. This might work if you have just a few employees. However, HMRC prefers records submitted digitally using approved software. 

 

There are also apps that can calculate pay and deductions and can even fill out tax forms for you like IRIS and Shape. If you use these options you must still pay HMRC directly. You can also outsource your payroll to a payroll bureau or professional bookkeeper.