What is payroll?
Payroll is essentially a list of what everyone earns in a business. Running payroll is the process of calculating and recording the wages payments you make to employees and directors.
Any business which employs staff needs to record payroll data which shows salary calculations, the date and amount of any payments for wages, and the details of any deductions that you make for PAYE as an employer.
What is PAYE?
PAYE stands for Pay As You Earn, and it’s the process which employers use to deduct income tax and National Insurance contributions each time they pay their staff. You’ll need to register for PAYE online before the first payday, even if you’re the only employee.
As an employer you’ll need to report the details of any payments and deductions to HMRC, using Real Time Information RTI reporting, and pay on deductions that you’ve made. This means that employees don’t need to worry about paying their tax bill at the end of the year, because you, as their employer, have already done it on their behalf.
How to process payroll
Can I run payroll myself?
Yes, absolutely, just be aware that payroll calculations can be very complex, with lots of different rules and regulations to remember.
In addition to working out the correct wages each month, you’ll also need to pay attention to holiday pay, statutory sick pay (SSP), Statutory Maternity Pay (SMP) and Statutory Paternity Pay (SPP), as well as handling tax, National Insurance, and workplace pensions.
Phew! Good payroll software can help.
Can I outsource payroll to somebody else?
Rather than running payroll yourself, you can pay a payroll provider to do it for you. If you already have an accountant, they’ll often provide this as an additional service.
You’ll still be responsible for recording your employees’ details and checking their right to work, as well as keeping information about the hours they work, holidays, sickness absences, and so on.