If your business is growing, you’ll recognise the need to invest in infrastructure. And, more likely than not, you’ll be seeking out ways to optimise ROI, strengthen relationships with suppliers and increase staff morale. Payroll, historically overlooked as a tedious chore by business, is one such area of infrastructure that is taking its turn in the spotlight.
Why? Because a streamlined and intelligent payroll system has the potential to increase efficiency, assure compliance, avoid damaging tax penalties, and improve employee financial management.
Payroll: Business Owner Basics
A question we’re often asked is ‘which businesses need payroll?’
The answer is not as straight-forward at it seems, as there are several factors to consider when deciding whether you need a payroll system:
- Starting with the simplest. If you operate as a sole trader or partnership, then you do not need to run payroll. This is because legally you and the business are one and the same thing. However, once you take on employees then things change, and payroll is required.
- If you are taking advantage of the gig economy and utilising freelancer or contingent workers take care. There remains much confusion around responsibility, and many firms can unknowingly hire a freelancer for a role that looks like employment. One requires payroll and the other does not. A specialist employment solicitor can help you.
- What constitutes an employee? Anyone with a contract of employment with the business is classed as an employee. Legally a contract of employment exists as soon as a person begins working for you and you pay them (even if the contract is not written down). Take a look at this useful blog by Redwood Clarke Associate, Hockley based TM Law –Template Written Statement of Employment.
- If you operate as a limited company, company directors are considered employees and payroll is required.
My business needs payroll. Where do I start?
Once you’ve established that you have employees, you will need to set up a payroll system. If you don’t then you are not fulfilling your legal requirements.
Here’s our timeline to payroll system compliance…
- Register as an employer with HM Revenue & Customs (HMRC) and for PAYE Online.
- Choose a dedicated person who will manage PAYE; you may operate PAYE yourself, or you may opt to use the support services of an ATT qualified bookkeeper or accountant. Task your PAYE manager with generating management reports so that you can better understand staff costs, and look for ways to increase profit. Make sure they are up to the task of assuring your firm’s compliance, by staying up to date with new HMRC payroll rules.
REDWOOD CLARKE TOP TIP – Be aware of your main accounting deadlines! Then work in advance of them. This way you can optimise payroll efficiency and boost ROI. As an added benefit you’ll also keep staff and suppliers happy by paying them on time.
- Invest in appropriate software. It’ll need to be compatible with HMRC Real Time Information and you should also consider who it’ll link to your existing accounting system. HMRC has provided a list of free and paid for software on their website.
- Document your business’s main accounting deadlines. This includes supplier payments, payments to employees, employee tax and HR documents, as well as HM Revenue & Customs and year-end PAYE filings.
- Understand the legalities. Re-visit your contractual agreements, taking care to consider sick pay, maternity, paternity and adoption. As well as pension contributions and any other deductions.
- Double check employees’ data. Taking care to ensure it is 100% accurate and complete before submitting to HMRC.
- Set up systems. New employees, employees who are leaving, sickness, maternity, paternity and adoption leave. As well as calculating extra pay for bonuses and commission, and taxable perks such as company cars. Decide how your firm’s expenses will be handled.
- Comply with data protection rules, ensure adequate security measures are in place to safeguard confidentiality of payroll information and protect against fraud.
- Be pre-prepared for the worst. If your computer system fails, you still need to be confident that payroll and fillings can be managed on time.
Efficient Payroll: With Redwood Clarke you can
Throughout 2018 our #RedwoodClarkeCan campaign will seek to help business owners take-charge of bookkeeping, and driving payroll efficiency is top of the list.
It’s all about HMRC compliant payroll, minus the stress and expense. As we help businesses across Essex, Hertfordshire and London run payroll weekly, fortnightly or monthly, whatever fits their business. And, remove the worry of Real Time Information (RTI) submissions for good. Read more about our payroll services.
Stay up to date with National Insurance Rates on the government website
Understand director’s personal tax allowance rates
Your records must show you’ve reported accurately, and you need to keep them for 3 years from the end of the tax year they relate to. Learn more here.
About Redwood Clarke:
Redwood Clarke is an AAT qualified bookkeeping and accountancy practice based in Billericay, Essex. Offering a wide range of services including Annual Returns, VAT Returns, Credit Control, Payroll, Auto Enrolment Pension and Management Account services to high growth businesses across London, Essex and Hertfordshire.
Contact us today to discuss how our flexible outsourced bookkeeping and accountancy service could deliver consistent, professional help to your business >>.