Payroll Everything Small Businesses Need To Know



Payroll is an important part of any business but it can be a daunting prospect for the uninitiated. Choosing the right system, ensuring compliance and making best use of technology are key to success.

Payroll is an important part of any business, large or small – after all, if your staff are not paid correctly and on time, they are unlikely to remain your staff for very long. However, with the wealth of regulations surrounding the process, setting up an effective payroll system can be a daunting prospect, particularly for small business owners who may not have experience or expertise in this area.

So, as a small business, what do you need to know when it comes to setting up and administering an effective payroll system?


Back to basics

To start off, let’s take things back to basics. If you have paid employees, you need to set up a payroll. In larger organisations, the payroll is usually managed by the accounts department, but in smaller companies, this responsibility often falls to the business owner.

If this is the case for you, there are certain steps you will need to take before paying your employees for the first time. Firstly you will need to register with HMRC as an employer and register for PAYE online. You will also need to choose a payroll software or system, tell HMRC about your employees, start collecting records, pay tax and National Insurance to HMRC, and report your employees’ pay and deductions to HMRC before your first payday.

The tax month runs from the 6th of one month to the 5th of the next. As an employer operating PAYE, you are required to complete certain tasks during the month. These include recording your employees’ pay, calculating any deductions such as tax or student loan repayments, calculating your own National Insurance contribution as an employer, producing payslips, and reporting to HMRC.
Compliance

When it comes to administering your payroll, compliance is key.
Payroll is complicated and companies are subject to lots of regulations around tax deduction, pension schemes, and payments to HMRC, to name just a few. Businesses are also expected to collect and keep records of how much they pay employees, any taxable benefits and expenses, employee leave and sickness, any reports or payments to HMRC, tax code notices, and any Payroll Giving Scheme documentation.

Understanding these regulations and keeping abreast of any changes is hugely important, as any incidences of non-compliance can lead to costly penalties for your business - for example, failing to keep full and accurate payroll records could result in a £3,000 penalty for your company.
Choose the right system

In order to avoid costly mistakes, it’s important to choose the right payroll system for your organisation.

Typically you will need to decide whether you want to manage the payroll yourself using specialist software, or whether you would prefer to outsource it to an accountant or professional payroll provider.

Many small businesses shy away from outsourcing this function due to the (often misplaced) belief that it is more cost-effective to keep it in-house, or due to a nervousness about sharing personal data with an external company.

However, placing your payroll in the hands of a professional can be advantageous, particularly if you don’t have sufficient resources or expertise within your business. By using external services, your payroll will be in the hands of a professional accountant who is an expert on payroll legislation, leaving you less open to non-compliances - and any costs incurred as a result.

Having said that, different businesses have different needs, and you need to choose the system that best fits your organisation. Carrying out research can help you to better understand your options - try speaking with business owners of similar organisations to find out which method has worked for them.


Leverage technology

When it comes to managing your payroll, technology is your friend - and it is becoming increasingly important as HMRC requirements and working practices continue to evolve.
There is a general business trend towards more flexible working practices. Freelancing, part-time work, contracting and job sharing are all on the rise - and people are switching both jobs and careers are a lot more often than they used to.

This can all impact on your payroll. Luckily, there is a choice of payroll software out there to help you manage these situations. Choosing the right payroll software from the very start - one that is flexible enough to adapt to your changing business needs - will help eliminate unnecessary problems in the future. However, if you are expecting your business to grow, start speaking to professional accountants who will be able to manage your payroll for you.

Getting your payroll right is hugely important for your business. Putting an effective payroll system in place can help you to meet your legal responsibilities as an employer and avoid HMRC penalties, as well as helping to streamline your processes, saving you both time and money.


Author bio:
Linda Carr is the Founder of Linda Carr Accountants, a Chartered Certified Firm of accountants based in Peterborough, which was established in 2009. Linda recognises the need for SME’s to be able to access a reliable accountant for an affordable price.

Image credit: Featured images: License: Image author owned

No comments:

Powered by Blogger.