Learn about Payroll - What is it & Does My Business Need It?

Payroll

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Payroll is the name for the records and calculations regarding the pay and deductions of employees under the PAYE (Pay As You Earn) system.

Any company which has employees needs to run an official payroll. They also need to submit Real Time Information (RTI) to HMRC on each payday to ensure everything is in order.

This RTI essentially tells HMRC that the wage and national insurance/tax has been paid correctly. If false information was given or an RTI was not returned, it could result in fines and penalties, as well as accruing interest on any missed payments. There isn’t only the legal side of things to think about, though. You will want to ensure your employees are paid timely and correctly, so there are no issues.

Most online accounting software now provides their user with payroll ability so changes can be made easily and quickly, and if you have employees, an accountant can provide you with the best package for the job.

Auto-Enrolment

As of February 2018, it has been compulsory for every eligible UK employee to be automatically enrolled into a pension scheme. The employee can opt-out of this scheme, but if they choose to stay, then it adds some work to the payroll system.

If they choose to remain, then every employer is legally obliged to take the staff member’s pension contribution out of their wage, as well as making at least the minimum contribution to the pension themselves.

When a contribution is made, the employee receives tax relief on the payment, which further complicates the payroll system and RTI.

Having an accountant in place can put your mind at ease, as this will all be done properly and in line with HMRC guidance. Online software can automatically deduct the correct contributions from all of the relevant people, leaving you with their final salary amount.

National Insurance

As with tax, National Insurance payments depend on wage thresholds and under which category the employee falls. Both the employee and the employer must contribute.

To make sure the correct amounts are being paid by both parties, an accountant can provide you with software which can do all the working out for you through the payroll system. They can also inform you of any changes to the legislation or thresholds, automatically bringing them into force.

National Insurance is also paid on extra costs such as expenses the employee has made use of, which will be noted by the accountant and software. They will be able to tell you what qualifies.

PAYE Forms

It isn’t just the payslips and wages that need to be taken care of when you have an employee. With new starters, they must provide certain information or a P45 to get them on the correct tax code. Current employees must receive a P60 on the last day of the tax year (5 April), and anybody leaving your company must obtain a P45.

There is a whole host of other forms too, such as P46(Car) forms for company vehicle costs, and P11D forms for employees who you have provided with expenses or benefits, which all need to be included in their payroll documentation and declared to HMRC.

An accountant can take all of this into consideration, and ensure that everything is filed correctly and you owe the correct amount of tax and expenses.

How Can An Accountant Help With Payroll?

So both your staff members and HMRC are kept happy and problem-free, an accountant can:

  • Produce Payslips: So all is clear, everything will be customised, broken down and correctly stated. This can be on a weekly, fortnightly, four weekly, monthly, quarterly or ad hoc basis and payslips can be emailed to ensure speedy receipt, to either the employee or employer. They can complete these through the online accounts
  • Submit RTI: RTI Returns will be filed, completed and sent to HMRC on your behalf, as and when needed
  • Process Official Forms: Any starter/leaver/year-end forms such as P45, P46 and P60 will be filled out and sent in time, either electronically or to the company
  • Pay Deductions: Staff holiday pay, SSP (Statutory Sick Pay), SMP (Statutory Maternity Pay) and student loan/pension/National Insurance deductions will be calculated, noted and filed through the online system, so you can view at any time and correct any issues
  • HMRC Representation: If there needs to be an investigation, an accountant can represent your company and deal with any correspondence
  • Free Up Staff: There is no need to train other members of staff (or indeed yourself) in working out payroll procedures, which makes other areas of your business more productive

How Does It Work?

When you appoint an accountant to deal with your payroll, you will need to tell them how many hours your employees have worked every pay period.

Before this though, you will need to fill out a form regarding how frequently they are paid, whether there are any additional payments to be taken out of their pay (such as university fees, child maintenance, pensions etc.), and whether they receive a wage (rate per hour) or salary (set amount that doesn’t fluctuate based on hours).

When payday arrives, tell them the hours and they will calculate how much you owe every employee, plus how much you owe HMRC. You then make the appropriate payments.

Online software can now give you some of the control over this, too, as you can input the hours as they happen and it can automatically make the salary changes. Accountants can oversee any submissions before the wage slips are sent out.

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