Payroll: Basic Procedures for Employers

Setting up and running payroll is a crucial aspect of managing a business. For companies in the Nottingham area, AHACCOUNTANTS is here to assist you with establishing and maintaining your payroll, or we can manage it for you entirely. Below is a comprehensive outline of the essential steps to set up and run your payroll effectively.

1. New Employer Registration

To establish a Pay As You Earn (PAYE) scheme with HMRC, you need to:

• Contact HMRC: Call the New Employer’s Helpline at 0300 200 3211 or register online via the GOV.UK website.
• Understand Responsibilities: As an employer, you are responsible for operating PAYE and calculating National Insurance Contributions (NICs). Additionally, you may need to manage statutory payments such as:
  • Statutory Sick Pay (SSP)
  • Statutory Maternity Pay (SMP)
  • Ordinary Statutory Paternity Pay (OSPP)
  • Shared Parental Pay (ShPP)

HMRC provides extensive resources, including online calculators and booklets, to help you navigate the PAYE process.

2. Real Time Information (RTI) Reporting

Employers (or their agents) must submit regular online payroll reports for each pay period, detailing employee payments and deductions. These reports must be made on or before the payment date. For more guidance, refer to the Payroll Real Time Information factsheet or visit the HMRC website.

3. Calculating Tax and NICs

To accurately deduct tax and NICs for your employees:

• Calculate Tax:

• • Use HMRC calculators or payroll software to determine the tax due based on gross pay, considering each employee’s tax-free allowance, as indicated on their coding notice.
  • Tax is calculated cumulatively, taking into account the employee’s earnings for the entire tax year to date.

• Calculate NICs:

• • NICs are payable by both the employee and employer on the employee’s gross pay and are calculated on a non-cumulative basis. Again, this can be done using HMRC tools or payroll software.

4. Payment Deadlines for Tax and NICs

Payments for tax and NICs must be made to HMRC by the 19th of the month following the payment date. For example:

• If an employee is paid on July 25 (tax month from July 6 to August 5), payments are due by August 19.

Employers can opt for electronic payments, which extend the payment deadline to the 22nd. Employers with average monthly payments under £1,500 are allowed to pay quarterly rather than monthly. Larger employers (250+ employees) must pay electronically.

5. Required Forms and Records

Maintain the following records or complete the necessary forms:

• P11 Deductions Working Sheet: This form records each employee’s pay and deductions for the tax year.
• P60 End of Year Summary: Given to all employees at the end of the tax year, summarizing their earnings and tax deductions.
• P45 Details of Employee Leaving: Issued to employees who leave, detailing their earnings and tax paid to date.

6. Starter Checklist

When a new employee starts, you must notify HMRC to process their pay under RTI. Information from a P45 may be required if the employee has had previous employment.

7. Penalties for Non-Compliance

HMRC enforces penalties for employers who fail to:

• Submit online reports on time
• Pay liabilities on time
• Maintain necessary records
• Operate PAYE or NICs correctly
• Make correct statutory payments
• Provide relevant forms to HMRC or employees on time

8. Automatic Enrolment for Pensions

Automatic enrolment mandates that employers automatically enroll ‘workers’ into a workplace pension scheme from a specified ‘staging date.’ Key duties include:

• Assessing worker types within the business
• Providing a qualifying pension scheme
• Informing workers about their automatic enrolment
• Enrolling ‘eligible jobholders’ and contributing to their pensions
• Completing a declaration of compliance and maintaining records

For more details on Automatic Enrolment and pensions, please refer to our factsheet.

Conclusion

Effective payroll management is essential for any business, and understanding these basic procedures is vital. If you’re in the Nottingham area, AHACCOUNTANTS can help streamline your payroll process and ensure compliance with all relevant regulations. Contact us today to learn more about how we can support your payroll needs.