One of the key things that small and medium sized businesses (SMEs) need to get right is payroll.
Not only is it a legal requirement to maintain the relevant documents and pay the correct amount of tax, getting prepared can help to reassure your employees that the business is trustworthy.
Step 1: what do you need to do before employing people?
When deciding to take on staff members and becoming an employer, you should get employers’ liability insurance, as well as register as an employer with HM Revenue and Customs (HMRC) to receive a login for PAYE Online.
You will be required to pay your employees through PAYE if they earn at least £120 per week.
You will also need to use a compliant payroll software unless you are outsourcing payroll services.
The software should be able to:
- Record employees’ details
- Work out pay and deductions
- Report the payroll information to HMRC
- Calculate tax owed to HMRC
As outlined by law, complete records relating to payroll should be maintained, including how much you pay your employees and any deductions made, employee absences, and payments to HMRC.
Find the full list of what should be covered in the records here.
Step 2: paying your employees
When preparing to pay an employee, you will need to collect their information through a starter checklist and/or P45, for example their full name, date of birth, National Insurance number, start date and whether they have a student loan to repay.
These should be collected prior to the employee’s start date, and it is essential to double check that all of the information is correct, especially the employee’s bank account details to ensure that you pay the correct person.
When inputting the information, ensure that the correct salary, as well as any bonuses or benefits are declared, these are necessary for calculating tax owed.
As accountants, we can provide in-depth knowledge on the current legislation to ensure that your business stays compliant.
If you require support with payroll, contact our experts today.