Payroll legislation

Payroll legislation – A little knowledge is a dangerous thing

It was Alexander Pope who coined the phrase “a little knowledge is a dangerous thing” but in terms of employing staff then just trying to “muddle through” could really cause you some issues.

As a business owner, you’re responsible for all the big decisions and probably a lot of the smaller ones too.  But the ‘stuff you need to do’ never ends.  How far up your list of priorities is keeping up to date with changing employment law and payroll legislation?  Or keeping an eye on National Minimum Wage changes?  You know it’s important but so are a lot of things you need to do.

So having followed all the correct recruitment procedures and right to work checks – what next?

  • Agree a Contract and SalaryYou need to ensure you follow minimum wage legislation for your employees and set this out in a written statement of employment with the details of their job, hours of work, holiday entitlement, sick pay, notice to be given and when they will get paid.
  • Register as an Employer – Unless you’re going to pay all your employees less than the Lower Earnings Limit for National Insurance, you must register as an employer with HMRC and set up a payroll scheme before you take on any members of staff.  You will need Government Gateway login for Online Services if you have not already got one.
  • Employers Liability InsuranceAs an employer, you are likely to have a legal requirement to have employer’s liability insurance.
  • Workplace PensionCheck if you need to automatically enrol any of your staff into a workplace pension scheme.  You need to be ready to enrol them into your employer scheme and write to all your staff about their options.
  • Employee InformationYou should get all employees to complete an HMRC starter checklist which will give you all their personal information plus details of their National Insurance number, Student Loan information.  They may also give you a P45 form from their previous employer.
  • Payroll SoftwareYou will need to choose the payroll software you are going to use to maintain the employee details, calculate the pay and deductions for your staff and report to HMRC on or before your regular pay date.
  • Set up the Software Once you have chosen your software you must make sure you are familiar with how it operates.  Your employer settings will need to be added before you process your payroll and any pension scheme information, Employment Allowance and Small Employer Relief eligibility settings are added.  You will also need to set up your government gateway ID and password to allow you to submit your information to HMRC.
  • Process the Payroll – Each employee needs their details added to your software including any year to date information from their P45 if they have had previous employment income in this tax year. You payroll needs to be processed every time you pay your employees.  When paying your employees through payroll you also need to make deductions for PAYE including income tax; National Insurance; deductions such as student loans; and any pension deductions.
  • Reporting Pay and Deductions – Through your software you need to report the pay and deductions through a full payment submission to HMRC.
  • Paying HMRC – You’ll be able to view what you owe HMRC, based on reports produced through your software. You then have to pay the amount owed, usually every month.
  • Keep Processing – and just as important, you will need to keep processing the payroll regularly and make any changes where necessary.  This will involve monitoring changes of employee’s ages which may affect the National Insurance that needs to be calculated or the pension eligibility.  You may need to calculate statutory payments such as maternity or shared parental pay.  Sickness will need to be monitored and calculated and maintaining records of holiday taken and paid will need to be undertaken.  At each year end you will need to submit a final end of year declaration to HMRC and issue P60’s to your employees.

And Finally

As mentioned earlier, there are so many things to thinks about and to keep up to date with, so it is important that you get information and assistance from a reliable source.  If you don’t know what you don’t know then this can result in ‘unconscious inability’ and you won’t know when to stop and get a second opinion.

Payroll legislation is continually changing and our bureau staff are always undertaking regular training to keep their knowledge and skills up to date.  We are here to help, so if you want to speak to one of the team regarding running a payroll scheme or if you would prefer us to process the payroll on your behalf, please do not hesitate to get in touch.

Please click here to go back to other Taxing Times stories…

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Jan 23

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