Are you a business that operates your own payroll? Do you want to be involved with paying your staff or is it because you do not want to incur payroll fees? How do you get payroll right for your small business?
Do you rely entirely on the software? Or the HMRC Basics Tools? Do you find you call the Employer Helpline for help often or even try googling for answers? Or are you quite comfortable with the process and have it covered?
You could fall into any of the above and be quite happy. It is of course entirely possible to run your own payroll, after all the software does a lot of the work or does it?
Looking at HM Revenue’s (HMRC) own PAYE Guide you would be forgiven for thinking it is a highly complex area of tax. But that it isn’t. On most occasions it goes swiftly and without too much pain but as you can see for yourself from the guide there are multiple areas to cover.
This is where it gets a bit tricky! How do you know when you don’t know something? Like other areas of tax, you can process the payroll on the HMRC Basic Tools but still not know if you are falling foul of the PAYE regulations.
Payroll can be very time consuming for someone who is not an expert often leading to lots of time wastage and errors. Time that you should be spending working on what you are good at i.e. your business.
There is also the other possibility that you don’t process your payroll yourself. You have delegated this task to someone else and it is part of their job. A job that they have been doing for years without much trouble. They are your expert.
On many occasions we also come across a business where payroll is the responsibility of a single person and there are no contingency plans for any unexpected absences. We also have experiences of a completely outdated set of rules being applied because they were simply not aware of the changes in legislation.
This would be a red flag to a bull if you had a PAYE inspection.
What do I need to cover during a payroll?
If we look at the payroll process through a simple lens, it is just a list of employees that need paying weekly or monthly. But while paying these employees you would need to:
- Calculate the PAYE tax and understand their PAYE code
- Manage the payment of bonuses and how these are taxed
- Calculate wages for the time that is not worked like holidays and sickness
- Understand that the directors can be paid and taxed differently to provide a cashflow and tax advantage.
- Keep up with Minimum Wage regulations and changes each year
- Manage the taxation of employee benefits and establish whether to complete a form p11d
- Understand the rules around trivial benefits so as not to tax these.
- Deal with the requirements as set out by the Workplace Pensions regulations
- Make payments of wages to all the staff and pay the tax liabilities to HMRC
The list could go on.
The point is there are a lot of fiddly processes to tackle and many rules to consider which keep changing. That’s why we have experts inhouse and only a few would get involved in the payroll work.
How do you keep on top of changes in Payroll rules?
If you are running your own payroll, how do you get the payroll right for your small business?
Do you read up technical on guidance from HMRC? Or do you rely on your accountant to pick up any discrepancies? When we prepare the year end Accounts it is outside our scope to look at the payroll calculations in detail. Of course, if a client specifically asked us to or an error was obvious then we would investigate it further, possibly involving the payroll team.
At times it is simply just being aware of all the changing rules.
For example, there are certain schemes in place that are designed to encourage you as the Employer to employ more people with the added bonus of keeping your staff motivated. One such example is the salary sacrifice scheme. The rules have changed multiple times and unless you keep tabs on the changes it is easy to apply the old set of rules for a particular employee.
For salary sacrifice the rules around Child Care for example changed in April 2017 so if you had a new joiner after that date wanting childcare vouchers they would not qualify.
Even worse what if you were not aware of these rules at all so both you and the employee lost out on the National Insurance and PAYE tax. Now that would have been a total shame.
Salary sacrifice and child care vouchers is only one such example and there are plenty more. As Alexander Pope said a long time ago “a little knowledge is a dangerous thing”
Getting payroll right for your small business is key. It keeps HMRC satisfied and your employees happy!
Remember we are here and ready to help. We can be the business partner you didn’t know you could have.
We have been running payrolls for our clients for many years now. The expertise and the service are part of what we offer. We can offer a bespoke service wrapped up with advice. You also have the opportunity to speak to someone over the phone.
We can come out and check your payroll process to make sure you are on the right path. If you want to explore further email Priya at firstname.lastname@example.org.