Entering the world of entrepreneurship can be a really exciting time in your life. However, as soon as you hire as much as one additional employee, you’ll need to work on setting up payroll.
Although there is plenty of free payroll software available online, it’s important that you understand this basic business management function to ensure you get it right from the start.
Underpaying, paying your staff late, or paying them incorrectly can damage the relationship you have with them and impact your company culture. In fact, over 30% of your staff may start looking for other opportunities after their salary is paid late just once.
In order to retain talent and keep your employees happy within your start-up, it’s vital that you set up payroll early and correctly.
Step 1: Inform the HMRC
When you decide to employ a new staff member, you will need them to provide you with a copy of their P45. This document details the salary, tax, and National Insurance (NI) information from their previous job.
You would need to send this information to His Majesty’s Revenue and Customs (HMRC), who will then tell you how much tax and NI you need to pay to HMRC on your employee’s behalf.
Step 2: Understand PAYE
Pay As You Earn (PAYE) tax involves communicating with HMRC regarding your payroll. If you’re going to be managing your payroll in-house, you’ll need to use software approved by HMRC that gathers PAYE information to send to the department in real-time, also known as Real Time Information (RTI).
You would need to use your software to send reports called Full Payment Submissions (FPS) to HMRC to inform them of all your payment information for each of your employees.
Step 3: Choose your payroll software
With hundreds of options to choose from, including free payroll software, you would need to decide on a platform to manage your payroll function.
You can visit this website to find a list of the payroll software approved by HMRC.
When choosing payroll software, it’s important to keep scalability in mind. You need software that will suit your start-up in its current state as well as when you grow.
Step 4: Understanding UK payroll laws
Here’s where things may get a little tricky, especially if you’ve chosen to go in-house with your payroll. The UK laws surrounding payroll are constantly evolving, and that goalposts are forever shifting.
It’s important that you keep up with any new rules and regulations by visiting the gov.uk website regularly.
If you are paying an employee minimum wage, for example, you will need to keep an eye out for changes to minimum wage as these rates are constantly updated. The law requires that you always pay your staff the correct amount, and this must be updated on your payroll software.
Step 5: Consider outsourcing your payroll to a virtual assistant
Did you know that virtual assistants can help you run your payroll function within your business? Many of our fully vetted virtual assistants have extensive backgrounds in finance and can handle every aspect of your payroll for you.
So, if the above steps sound a little intimidating and you’d like to get some (affordable) help on board, visit our website to book a free consultation. We’ll match you up with a virtual assistant who is specifically skilled in payroll so that you can sleep peacefully knowing this important function within your business is taken care of.