Payroll Guide for Small Businesses

The majority of businesses in the UK are one-person companies, but for those who have employees, paying them is an essential aspect. There are special laws and requirements that dictate how national insurance and tax must be deducted and how the records must be kept, and they are grouped under the heading of payroll.

Payrolls can have only one or more employees, paid with the same amount or with different amounts every month. But let’s take a look at a few general guidelines and advices for small companies regarding the payroll.

Outsourcing payroll

The easiest way a small business can organise the payroll is to outsource it to the bookkeeper or the accountant and larger companies may choose to use a specialised payroll company. If you choose to outsource your company’s payroll, you should know that communication is essential and you have to let your accountant know about every change inside your company.

Outsourcing payroll has lots of advantages, like saving time and knowing that a specialist handles the payroll, but there is also the risk of communication errors.

In-house payroll management

Depending on the size of your company, if you choose to manage the payroll in-house, you will have to decide who is responsible for this job. For small businesses, usually the director or one of the directors is in charge of the payroll, but in larger businesses one of the employees or even a small team may be in charge of the payroll.

To be in charge of the payroll, an employee or manager needs to know how the PAYE tax return system works and what tax returns need to be sent to HMRC. Also, you need to know that tax authorities must be informed every time an employee joins the company or leaves, as well as at the end of each year.

Whoever is running the system needs knowledge of the workings of the PAYE tax system, and the returns that must be sent to HMRC. Currently, the tax authorities must be informed when you start as an employee, when an employee joins or leaves.

Also, HMRC expects a return every time your employees get paid. Also, you must send them the payments for tax and national insurance monthly or quarterly, depending on your businesses size.

Payroll systems

The easiest way to calculate tax and national insurance is by a computerised payroll system, since most returns have to be sent to HMRC electronically. Most systems can help you make any calculations automatically, including tax, national insurance, sick pays or maternity pays.

Payroll systems can be installed on your computer, or used in your browser, by accessing them with a username and password. Also, remember that when it comes to payroll, rules may change fast so you have to be attentive to update your system often.

It’s important to find a payroll solution that suits your business, whether it is outsourcing or an online system, since any mistake can be penalised and may be expensive on the long run.