When small businesses grow, they often have to operate PAYE as part of their payroll and certain tasks need to be carried out each tax month. We thought now was a good time to explain how payroll works.
Payroll systems manage everything there is to do with the process of paying employees and filing employment taxes.
How Payroll Works
Payroll systems are put in place:
- to keep track of worked hours,
- calculate wages,
- withhold taxes and other deductions,
- print and deliver payslips,
- pay government employment taxes
In larger companies, there is usually a dedicated accounts team tasked with payroll management. However, with small businesses they typically outsource this task to a company like ourselves, Cloud Bookkeeping Warwick, as part of an ongoing monthly accounting package.
Before you start to pay your employees, you will first have to register your company as an employer with HMRC. You will then need to work out how much you are going to pay yourself and your employees. Then you will need to decide how frequently you pay yourself and your staff, many opt for a monthly payroll.
In addition to salaries, employees may be entitled to a wide array or additional types of pay such as sick pay or maternity pay. Deductions may also need to be made for items such as student loan payments or pensions.
Ongoing payroll tasks
There are a number of ongoing payroll tasks that need to also be completed each year. These include:
- paying payroll tax liabilities to HMRC by the 22nd day of the following month
- you must report if an employee leaves or joins your company payroll
- you must provide your employees with a P60 following the end of each tax year
- by the 6th July each year, employers must report any expenses and benefits received by employees during the previous tax year. Further National Insurance Contributions may then be payable via the P11D form.
We can offer payroll support for your business on either a weekly or monthly basis depending on the size of your business and as we are a small team, we have the flexibility to be able to tailor a service to suit your needs. We are Xero certified partners and also use other cloud-based accounting software such as QuickBooks, FreeAgent and Sage.
If you are thinking about outsourcing your payroll then please get in touch and we can discuss how we can support you.