A company payroll is most commonly the single biggest expense for most businesses in the UK. In addition, it can be hard to get payrolls and their processes totally right on an efficient and consistent basis. It is very common for smaller businesses to make mistakes on their payroll each year, which can result in a fine.
Also, with the world of employment and payments transforming, with the updates to IR35 in both the Public and Private sectors, it is more important than ever that businesses have efficient payroll solutions. IR35’s introduction means that keeping your business legal and on the right side of the Criminal Finance Bill is crucial to avoid potential legal action and even prosecutions, as responsibility is held further up the employment chain.
An efficient payroll can also greatly assist businesses in ensuring they and their employees are both taxed correctly and efficiently.
A company payroll is defined as a regular process of paying all of your staff members and employees, withholding all of their employment related taxes, such as national insurance, student debt and income tax, a responsibility that many freelancers and contractors allow umbrella companies to take on.
Steps of setting up and managing an efficient payroll include:
A payroll can also refer to the company records pertinent to employee salaries, wages, tax deductions and bonuses. In a larger business, it may be what you call the Finance Department, which manages the entire process of payments and taxes and manages the budget of the company.
Most people, both employed by traditional employers as well as those drawing salaries from their own personal service company will need to set up some form of payroll which will entail receiving payslips in one way or another, for each month or payment period. Payslips will typically include the following information:
All deductions should be explained on the pay slip and should be a fixed amount. For example, a repayment from the company to you for a season ticket loan. This may be on a separate written statement in some cases, but many employers prefer everything to be in one place for clarity’s sake.
Be aware that you need to issue each and every payslip before the date of the employee’s payday. This is so they know what to expect coming into their bank and can flag up anything which looks incorrect to them before they are paid.
If you want your business to run smoothly, it is vital that you have a payroll in place. If you don’t, it can cause chaos; people not being paid, people being over or under paid and no records of your outgoings and expenses for accounting purposes. Not only is the payroll responsible for employee salaries, it also plays such a huge role in protecting the company’s reputation by ensuring compliance with various legislation including IR35, The Criminal Finance Bill and others.
Many people fail to understand the sheer importance of payrolls beyond their functioning to process payments and manage employees and the overall business and do not see the effect it has on the business overall.
A crucial aspect of payrolls is the impact it has on a company’s employees and their morale. It acts as an assurance that they will be paid consistently and in a timely manner. Having late or inaccurate payrolls can cause staff members to start questioning the financial ability and the organisation overall of the company they are working for. This could compromise the office’s ethos and cause tension which could then decrease productivity.
You can use your payroll statements to report to the Government via HMRC. You will need to report your payroll tax withholding, payments and employee statuses. To avoid the headache of having to file this yourself, make sure whoever your payroll provider is does this for you.
If you report this late, you will get a late filing notice from HMRC. They also charge you a penalty if they see it fit, unless you can provide a valid reason as to why you are reporting late. Late, missing or incorrect payroll reports can also affect your employees’ Universal Credit payments.
Payrolls are produced via payroll software such as Solutio. Through this, a company can efficiently manage all of their accounts, big or small. These processes are not manual in terms of hand writing time sheets each and every month. Technology is our friend in business, making everything a lot simpler and quicker.
With a system such as Solutio in place, you avoid making human calculation errors as frequently. Our systems can also account for insurance, taxes, paid and unpaid off and any benefits that your employees receive.
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