Having a thorough understanding of your payroll needs and the various solutions available to you is essential to running an efficient enterprise. Whether you are a small retail business or a large multi-national corporation, payroll is at the heart of many of your most important processes.
How to Setup Payroll
Assuming you are not a large corporation that is able to keep all their payroll processes in house through an accountancy department, you will need to set up either payroll software or sign up for payroll services.
Companies that have payroll knowledge can often set up their own software, some of which are available to download for free, but these are better suited to small ventures with very few employees as the time it takes, even experienced staff, to process the information is generally better spent elsewhere.
Each service provider will require different things from you, but it is important to note that payroll information is sensitive, so the provider you choose should be trustworthy and well-researched.
What is a Payroll Number?
A payroll number is a set of digits assigned to each employee that provides reference towards individual wages, role within the company and other payroll related information. While names are sufficient for human resource departments, numbers are easier to process through complex software systems.
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What is RTI?
RTI is a relatively new addition to the way PAYE is calculated. Implemented in 2013, it is a more accurate method that uses real time information (RTI) and requires businesses to process all payments to employees as they are paid. Although on the face of it this requires businesses to submit information more regularly, you are no longer required to send P14, 35, 38a or 45 forms, with only P9D, P11D and P60 forms processed.
Essentially this only requires you stay on top of all payments as and when they are paid, with payroll software or service doing the work for you. It is essential that you send all data to the HMRC on time in order to prevent costly fines.
What is Give As You Earn?
Give As You Earn, as opposed to Pay As You Earn, allows you to donate to a UK charity with significant tax deductions. You must be registered to pay UK income tax and payments must occur on a regular basis in order to qualify for the scheme, but there is a large degree of flexibility.
As each donation is tax deductible, for each £1 you give, it will cost you between 60 and 80 pence, depending on the total donated. All Give As You Earn payments can be processed through payroll software or your service provider.
How do I Print Payslips?
There are various reasons as to why you may need to print payslips, so employing a software that can simply find the data you require and print it is essential. Most software is capable of doing this if the platform is well designed and simple to use, although free versions may not provide such capabilities. Payroll numbers, names or dates may be required but as all information is stored, and hopefully backed up, printing payslips can be as easy as printing any document.
What are the Responsibilities of the Payroll Department?
The payroll department is responsible for a lot more than processing the salaries of your employees. In fact payroll should provide an overview and interface for most areas of your business.
Employee habits, such as timekeeping, holiday pay and sick pay are catered for as well as data that can help your HR department. General accounting is at the heart of all payroll software and services, as is in depth record keeping, which can be beneficial for everything from tax payments to internal disputes.
What is the Responsibility of the Employee?
This will largely depend on the roll of your staff. Freelancers, for example, are required to pay their own tax and are typically required to state this on any invoice they provide you for work.
In house staff should have their own practices and records processed by the payroll software or service and it is incumbent on the business to process this in real time.
What do I Need to Process Payroll?
The basic needs for processing payroll are fairly simple but this will depend on the complexity of your business and the amount of staff you employ. Smaller businesses, particularly those employing fewer than 5 members of staff, will usually be able to make do with a free software package, as long as it is HMRC recognised. In fact the HMRC provides a stripped down software that is perfectly suited to many enterprises.
For larger ventures a more multifaceted far reaching package will be required, so it may make more sense to employ the services of a payroll provider as the time taken processing payroll data can deflect attention from other areas of your business.
Do I Need Qualifications to Process Payroll?
Unless you are providing payroll services yourself, qualifications are not required to process payroll, but that does not mean training, and subsequent qualifications, are not useful.
Many service providers offer training, both in use of their software and the basics of payroll. This helps ensure that mistakes, and possible fines, are avoided. If you plan to process your payroll in house, it is highly recommended that you undergo the right type of training, particularly if you employ multiple staff.
Is it Better to Outsource or Keep Payroll Inhouse?
For most businesses it makes sense to employ the services of professionals. This is because payroll can be quite a complex and convoluted process that prevents your staff from focusing on the role they were hired to do. There is also the risk of mistakes being made, which can be enormously problematic for businesses in the long run.
As previously alluded to, however, very small businesses may be able to keep their payroll in house, as long as they have a general understanding of the process, its requirements and the software that they are using.
Large corporations are often advised to employ an accountancy department that will take care of all payroll processes and related tasks. This, however, is the most expensive method and is only available to a small percentage of all UK businesses.