It wasn’t so long ago, monthly business administration for small and medium UK businesses was manageable with just one or two key people owning and managing end-to-end across all functions. HR, Finance and Payroll obligations could fall under one key business admin unit with team members wearing many hats. New team members and diversifying into more focused roles only happened as the business scaled.
Today, with ever-evolving legislative demands from regulatory bodies, these administration functions have split into key, narrowly defined business units, each a full-time job to manage. Payroll professionals in particularly are under intense scrutiny, holding obligations to employees, the tax man, Department of Works and Pensions (DWP) and other regulators. For payroll services, falling foul of their obligations to any of the above can be costly, and damaging to both public trust and employee relations.
At Qualitas, our primary recommendation is outsourced payroll services. It’s the fastest route to compliance and taking the pain out of payroll management. If you’re not quite ready to outsource yet, here’s a short guide to manage your internal payroll function and keep yourself compliant.
An overview of UK Payroll
All employers in the UK manage their payroll and various tax obligations via HMRC’s Pay As You Earn scheme. Businesses are responsible for calculating each individual team member’s tax obligations, collecting these taxes from wages earned each payday on behalf of the the tax man and then processing the deposits through to HMRC alongside the business contributions.
As soon as you make your first hire, your payroll responsibilities begin. Here’s our 8 steps towards effective payroll for small and medium sized businesses.
- Register as an employer with HMRC and apply for your PAYE reference: You should do this before the first payday. Note that it can take up to 5 working days to receive your PAYE reference number so allow yourself plenty of time.
- Set up systems and processes for recording payroll data: Robust record keeping and payroll administration is essential. Records should include salary or hourly rate, hours worked, deductions made, National Insurance Contributions (NICs), your NICs due and payslip information. This can of course be done via offline ledgers, online spreadsheets and so on, however we do recommend that you…
- …Consider investing in specialist payroll software: Most payroll requirements can now be automated, providing productivity gains and full transparency and auditability of the data you require to say compliant.
- Understand your additional reporting obligations: Familiarise yourself with what’s required for Full Payment Submissions to HMRC. As well as keeping these records internally, you must share these data packs with the tax man.
- Request your employee’s personal HMRC details: This includes their tax code, which can be found on existing paperwork like P45 or payslips from their previous employer; their P45 and their national insurance number.
- Calculate the employees taxes due: Make use of HMRC’s online checklist to make sure you calculate accurately.
- Set up PAYE for the new team member: this will allow you to pay their wages and calculate PAYE deductions.
- Invest in training: To avoid hefty fines, make sure your team remain up to speed on changing legislation and new obligations. The world of payroll is fast-moving and this last year has saw numerous reporting shifts and business obligations across payroll, including pension reforms, Covid-19 SSP processes (link recent article) and the pandemic job retention scheme.
Considering outsourced payroll services?
For many businesses, in this newer, legislatively heavy environment, outsourced payroll is a low-cost, high-value way to manage employee payroll. Letting payroll specialists take care of the complexities lets you focus on what you do best – running your business and generating profits.
Ready to talk to us about taking the pain out of your payroll? Speak to us today for a no obligation quote.