As your company grows, you’ll need more employees. And those employees need to be paid.
On or before each pay date, you must provide each employee with their own unique payslip. It’s important to do this in line with government instruction so in this article we take you through everything you need to include on those payslips.
How to run a payroll
When it comes to getting your company up and running with a payroll, you have a couple of options:
- Make them yourself using payroll software
- Hire a payroll provider
Setting up payroll yourself
To begin running payroll yourself, you must complete some essential tasks before you can pay your employees for the first time:
- Register as an employer with Her Majesty’s Revenue and Customs (HMRC)
- Select payroll software
- Inform HMRC about your employees
- Pay owed tax to HMRC
Once all of the above has been completed, you can begin running payroll and choose how often and when your employees will be paid.
A payroll provider, such as an accountant, can run payroll for you with varying levels of support to suit your needs. Their role can include providing payslips to your employees, collecting employee records and making payments to HMRC.
Even if you do hire a payroll provider, as the employer you will need to keep a record of the following:
- How much your employees are paid
- Necessary reductions to pay
- Payments to be made to HMRC
- Leave and sickness absences
- Tax code notices
- Taxable expenses or benefits
- Payroll Giving Scheme documents (pension, student loans, Payroll Giving donations)
Even if you hire a payroll provider, it’s you as the employer who has a legal responsibility to pay your employees.
What to include on a payslip
There are a few bits of information that must be displayed on each and every payslip your employees receive:
- Gross wage (pay before any deductions have been made)
- Tax and National Insurance
- ‘Net’ wage (payer after deductions have been made)
- How many hours have been worked (if pay changes depending on time worked)
Payroll software is essential if you’re planning to run payroll yourself. The features of the payroll software will vary depending on the supplier but you should look out for the following:
- Recording employee details
- Calculating pay and any deductions
- Reporting payroll information to HMRC
- Let you know how much is owed to HMRC
- Working out statutory pay (e.g. maternity leave, paternity leave or sick pay)
There are several choices when it comes to selecting payroll software. If you have fewer than 10 employees, then you can select a free payroll software. However, if you have 10 or more employees then you must select software that’s been tested and approved by HMRC.
|Free Payroll Software Suppliers|
|1 2 Cloud Payroll|
|Hartigan Software Design|
All of the above – minus HMRC – also offer paid-for-software. You can find a full list of paid-for-software suppliers on gov.uk.
Payslip rule update
In April 2019, payslip rules were updated so that workers must be provided a payslip in addition to employees. If you’re unsure of the difference between an employee and worker, then while an employee holds a contract with the employer, a worker doesn’t hold the same ‘mutuality of obligation’.
Roles that are considered workers rather than employees include agency workers, freelancers, seasonal workers and those with zero-hour contracts.
Read more about these payslip updates in New Payslip Rules: What Employers Need to Know.
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