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Six things every small business owner should know about payroll

Whether you handle your payroll internally or outsource it to a professional firm, there are a number of aspects that you should be aware of:

1. Not all small businesses are required to operate PAYE

Although payroll is essential for a small enterprise with one or more employees, not all businesses need to operate a PAYE (Pay As You Earn) system. While they do need to keep payroll records, only those with at least one employee who is paid £111 a week or more will need to set up PAYE.

Firms with employees who receive benefits and expenses will also need to use PAYE, as will those with staff who have pensions or other jobs.

2. Small businesses that operate PAYE can choose how they run their payrolls

If a small company has a PAYE payroll, it can decide to organise its own system using its preferred software. Alternatively, a business might choose to use the services of a payroll provider. In this case, the business generally remains responsible for keeping records regarding employees’ pay and other details but, in some cases, payroll providers offer extra support that includes record-keeping, payslip provision and taking care of payments to HM Revenue and Customs (HMRC).

3. Setting up payroll involves a number of different tasks

When a business manages its own payroll, it has to complete a series of steps. The first is to register with HMRC as an employer and to obtain PAYE Online login details.

Before keeping records about employees’ pay, the company will need to choose suitable computer software that will store information, work out payment amounts and deductions, and send regular reports to HMRC on or before paydays.

HMRC will also need to know when new employees are taken on, with all tax and insurance payments sent to them in regular instalments throughout the year.

4. There are a number of options to consider when choosing payroll software

A variety of software is available that has been tested by HMRC to ensure that it can report information concerning PAYE in real time online. For a small business with fewer than ten employees, one option is to use free software packages.

Other choices may need to be paid for, but could provide more useful functions, such as creating payslips. Some payroll software needs to be installed on a PC, while other systems exist online and are accessed via a browser.

5. It is important to keep up to date

As the rules regarding payroll can change, it is vital to make sure that any payroll system is regularly updated. Any installed software package will have to be upgraded from time to time, while online systems have the advantage of being automatically updated.

If a business is managing its own payroll, then having effective software support is crucial. That way, if problems arise help is only a phone call away.

6. Some businesses might benefit from using a payroll provider

Although using a payroll provider represents an increased expense, it could save time and administration costs, making it worthwhile in the long run. To gain the most from such an arrangement, it is important to choose a provider that can offer the right amount of support.

Posted by Peter
July 3, 2014

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